As filed with the Securities and Exchange Commission on April 30, 2008
Registration No. 333-140929
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 3 ON FORM S-1/A TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
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ENVIRO VORAXIAL TECHNOLOGY, INC.
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(Name of Small Business Issuer in Its Charter)
Idaho 3559 82-0266517
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
821 NW 57th Place
Fort Lauderdale, FL 33309
(954) 958-9968
(Address and Telephone Number of Principal Executive Offices)
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A. DiBella, Chief Executive Officer
821 NW 57th Place
Fort Lauderdale, FL 33309
(954) 958-9968
(Name, Address and Telephone Number of Agent for Service)
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Copies of all communications to:
Brian A. Pearlman, Esq.
Arnstein & Lehr LLP
200 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, Florida 33301
Telephone: (954) 713-7600
Facsimile No. (954) 713-7700
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Approximate Date of Proposed Sale to the Public: As soon as practicable
after the effective date of this Registration Statement.
We hereby amend this Registration Statement on such date or dates as
may be necessary to delay its effective date until we file a further amendment
which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933,
as amended, or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting under Section 8(a), may
determine.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated file, a non-accelerated file, or a smaller reporting
company. See the definitions of "large accelerated file," "accelerated file" and
"smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a Smaller reporting company [X]
smaller reporting
company
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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Securities Amount to be Offering Price Aggregate Registration
to be Registered Registered Per Security Offering Price Fee
---------------- ---------- ------------ -------------- ---
Common stock, par value $0.001 per share(1)...... 265,250 $0.75 $198,937.50 6.11
4,213,581 $1.00 $4,213,581.00 129.36
516,666 $1.25 $645,832.50 19.83
100,000 $3.00 $300,000.00 9.21
100,000 $4.00 $400,000.00 12.28
121,600 $6.00 $729,600.00 22.40
121,600 $9.00 $1,094,400.00 33.60
697,333 $0.60 $418,399.80 12.84
30,000 $0.71 $21,300.00 0.65
200,000 $0.77 $154,000.00 4.73
150,000 $0.80 $120,000.00 3.68
225,000 $0.80 $180,000.00 5.53
757,333 $1.00 $757,333.00 23.25
Common stock, par value $0.001 per share(2)...... 2,000,000 $0.15 $300,000.00(2) 9.21
45,000 $0.30 $13,500.00(2) 0.41
Total Registration Fee $9,546,883.80 $ 293.09(3)
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(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(g). Shares issuable upon exercise of warrants and
options based upon the exercise price of the respective option or
warrant, which is higher than the closing price for the common stock on
February 23, 2007.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(g). Shares issuable upon exercise of warrants and
options. Based upon the closing price for the common stock on February
23, 2007 ($0.54 as reported on the OTCBB), which is higher than the
exercise price of the respective option or warrant.
(3) Fee paid.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Registrant initially filed this registration statement on Form SB-2.
Pursuant to SEC Release No. 33-8876 this amendment to the registration statement
is filed on Form S-1; however, the Registrant elects to keep the Form SB-2
disclosure format in the amendment for up to six months from the effective date
of the new rules.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell the securities and it is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION: DATED APRIL 30, 2008
PROSPECTUS
ENVIRO VORAXIAL TECHNOLOGY, INC.
9,543,363 SHARES
This prospectus covers 9,543,363 shares of common stock of Enviro
Voraxial Technology, Inc. being offered for resale by certain selling
shareholders. All of these shares represent shares underlying outstanding
options and warrants. We are paying the expenses incurred in registering the
shares, which may be offered by the selling shareholders, but all selling and
other expenses incurred by the shareholders will be borne by the selling
shareholders.
The securities may be sold by the shareholders to or through
underwriters or dealers, directly to purchasers or through agents designated
from time to time. For additional information on the methods of sale, you should
refer to the section entitled "Plan of Distribution" in this prospectus.
Our common stock is quoted on the OTCBB under the trading symbol
"EVTN". Prior to the date of this prospectus there has been limited trading
activity for our common stock and the market for our shares has been illiquid.
On April 19, 2008, the closing price for our common stock was $0.43.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY
IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS SUMMARY
This summary contains what we believe is the most important information
about us and the offering. You should read the entire document for a complete
understanding of our business and the transactions in which we are involved. The
purchase of the securities offered by this prospectus involves a high degree of
risk. See the "Risk Factors" section of this prospectus for risk factors. Unless
otherwise indicated, information in this prospectus (excluding our financial
statements) gives effect to our recent offerings.
INDUSTRY DATA
Information contained in this prospectus concerning our industry, the
markets for our products and the historic growth rate of, and our position in,
those markets, is based on estimates that we prepared using data from various
sources (including industry publications, surveys and forecasts and our internal
research), on assumptions that we have made that are based on that data and
other similar sources and our knowledge of the markets for our products. We take
responsibility for compiling and extracting, but have not independently
verified, market and industry data provided by third parties, or by industry or
general publications. Similarly, while we believe our internal estimates are
reliable, our estimates have not been verified by any independent sources, and
we cannot assure you as to their accuracy.
DESCRIPTION OF BUSINESS
Enviro Voraxial Technology, Inc. (the "Company") was incorporated in
Idaho on October 19, 1964. In May of 1996, we entered into an agreement and plan
of reorganization with a privately held Florida corporation, Florida Precision
Aerospace, Inc. ("FPA"), and its shareholders. FPA was incorporated on February
26, 1993. We exchanged approximately 97% of our shares then issued and
outstanding for all of the issued and outstanding shares of FPA. As a result of
this reorganization, the shareholders of FPA gained control of our company and
FPA became our wholly owned subsidiary. At the close of the transaction, we
changed our name to Enviro Voraxial Technology, Inc. Our executive offices are
located at 821 N.W. 57th Place, Fort Lauderdale, Florida 33309. Our telephone
number is 954-958-9968.
The Voraxial(R) Separator is a continuous flow turbo machine that
generates a strong centrifugal force, a vortex, capable of separating light and
heavy liquids, such as oil and water, or any other combination of liquids and
solids at extremely high flow rates. As the fluid passes through the machine,
the Voraxial(R) Separator accomplishes this separation through the creation of a
vortex. In liquid/liquid and liquid/solid mixtures, this vortex causes the
heavier compounds to gravitate to the outside of the flow and the lighter
elements to move to the center where an inner core is formed. The liquid stream
processed by the machine is divided into separate streams of heavier and lighter
liquids and solids. As a result of this process, separation is achieved.
To date we have had limited revenues and have an accumulated deficit at
December 31, 2007 of $8,637,316. However, we believe we are emerging as a
potential leader in the rapidly growing environmental and industrial separation
industries. The Company has developed and patented the Voraxial(R) Separator; a
proprietary technology that efficiently separates large volumes of
liquid/liquid, liquid/solids or liquid/liquid/solids with distinct specific
gravities. Management believes this superior separation quality is achieved in
real-time, and in much greater volumes, with a more compact, cost efficient and
1
energy efficient machine than any comparable product on the market today. The
Voraxial(R) Separator operates in-line and is scaleable.
The Company is presently researching and developing Voraxial(R)
solutions for various applications and markets including oil-water separation
and oil exploration and production.
THE OFFERING
This prospectus covers up to 9,543,363 shares of our common stock,
which may be sold by the selling shareholders identified in this prospectus. Of
these shares, 5,438,698 shares are underlying warrants exercisable at the
following prices:
265,250 shares are underlying warrants exercisable at $0.75 per share,
4,213,582 shares are underlying warrants exercisable at $1.00 per share,
516,666 shares are underlying warrants exercisable at $1.25 per share,
100,000 shares are underlying warrants exercisable at $3.00 per share,
100,000 shares are underlying warrants exercisable at $4.00 per share,
121,600 shares are underlying warrants exercisable at $6.00 per share, and
121,600 shares are underlying warrants exercisable at $9.00 per share.
The remaining 4,104,666 shares are underlying options exercisable at the
following prices:
2,000,000 shares are underlying options exercisable at $0.15 per share,
45,000 shares are underlying options exercisable at $0.30 per share,
697,333 shares are underlying options exercisable at $0.60 per share,
30,000 shares are underlying options exercisable at $0.71 per share,
200,000 shares are underlying options exercisable at $0.77 per share,
150,000 shares are underlying options exercisable at $0.80 per share,
225,000 shares are underlying options exercisable at $0.80 per share, and
757,333 shares are underlying options exercisable at $1.00 per share.
While we will not receive any proceeds from sales of shares of our common
stock by the selling shareholders, the Company will receive up to $11,166,883.80
from shares issued upon exercise of any warrants or options. The proceeds from
the exercise of warrants and options will be used for general working capital
purposes. The warrants and options expire on various dates between February 2007
and June 2009. In addition, the warrants are callable at a closing bid price of
$0.001 per underlying Common Share provided the Company's Common Stock trades at
or above $2.00 per share based for twenty consecutive trading days within 30
days of the Company's written notice of the Company's intention to call this
warrant. In the event this warrant has not been exercised by written notice
within 30 days of such notice, this warrant will cease to exist.
As of December 31, 2007, there are 23,122,135 shares of our common
stock outstanding. This number of outstanding shares excludes: 5,438,698 shares
of our common stock underlying warrants and 4,104,666 shares of common stock
underlying stock options issued to our employees and consultants.
2
SUMMARY FINANCIAL AND STATISTICAL DATA
The financial data set forth below under the captions "Results of
Operations Data" and "Balance Sheet Data" as of December 31, 2007 and for the
year ended December 31, 2007 are derived from our audited financial statements,
included elsewhere in this Prospectus, by Jewett, Schwartz & Associates & Co.,
LLP independent public accountants. The financial data set forth below should be
read in conjunction with the financial statements and notes thereto included
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RESULTS OF OPERATIONS DATA
For the Year Ended
December 31, December 31,
2007 2006
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Net sales..................... $ 288,431 $ 310,376
Cost of sales................. $ 77,246 $ 134,499
Gross profit.................. $ 211,185 $ 175,877
Operating expenses............ $2,129,189 $1,014,156
Net loss...................... ($1,921,780) ($ 838,279)
Weighted average number of
common shares outstanding:
Basic & Diluted............ 18,282,808 18,257,808
Net loss per common share:
Basic & Diluted ($0.11) ($0.05)
BALANCE SHEET DATA
December 31, 2007
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Working capital (deficit).......................... ($ 191,322)
Total assets....................................... $ 736,270
Total liabilities.................................. $ 829,608
Shareholders' equity............................... ($ 93,338)
3
FORWARD LOOKING STATEMENTS
The discussion in this Prospectus regarding our business and operations
includes "forward-looking statements" which 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 the negative thereof or other variations thereon or comparable
terminology. The reader is cautioned that all forward-looking statements are
speculative, and there are certain risks and uncertainties that could cause
actual events or results to differ from those referred to in such
forward-looking statements. This disclosure highlights some of the important
risks regarding our business. The risks included should not be assumed to be the
only things that could affect future performance. Additional risks and
uncertainties include the potential loss of contractual relationships,
fluctuations in the volume of sales we make or transactions processed by our
customers, as well as uncertainty about the ability to collect the appropriate
amounts due to us.
RISK FACTORS
OUR INDEPENDENT AUDITORS HAVE RAISED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
Although we operated as a precision machine shop for a number of years,
we have only recently completed the development of the Voraxial Separator, and
we have not yet generated significant revenues from that product. As a result,
we have limited operating history in our planned business upon which you may
evaluate our business and prospects. The revenues and income potential of our
business and the markets of our separation technology are unproven. Our business
plan must be considered in light of risks, expenses, delays, problems, and
difficulties frequently encountered by development stage companies.
We have incurred operating losses since our inception, and we will
continue to incur net losses until we can produce sufficient revenues to cover
our costs. At December 31, 2007, we had an accumulated deficit of $8,637,316,
including a net loss of $1,921,780 for the year ended December 31, 2007. Even if
we achieve profitability, we may not be able to sustain or increase our
profitability on a quarterly or annual basis.
Our ability to generate future revenues will depend on a number of
factors, many of which are beyond our control. These factors include the rate of
market acceptance of our products, competitive efforts, and general economic
trends. Due to these factors, we cannot anticipate with any degree of certainty
what our revenues will be in future periods. You have limited historical
financial data and operating results with which to evaluate our business and our
prospects. As a result, you should consider our prospects in light of the early
stage of our business in a new and rapidly evolving market.
Our independent auditors have included in their audit report an
explanatory paragraph that states that our continuing losses from operations
raises substantial doubt about our ability to continue as a going concern.
4
WE HAVE BEEN LIMITED BY INSUFFICIENT CAPITAL, AND WE MAY CONTINUE TO BE SO
LIMITED.
In the past, we have lacked the required capital to market the Voraxial
Separator. Our inability to raise the funding or to otherwise finance our
capital needs could adversely affect our financial condition and our results of
operations, and could prevent us from implementing our business plan.
We may seek to raise capital through public and private equity
offerings, debt financing or collaboration, and strategic alliances. Such
financing may not be available when we need it or may not be available on terms
that are favorable to us. If we raise additional capital through the sale of our
equity securities, your ownership interest will be diluted and the terms of the
financing may adversely affect your holdings or rights as a stockholder.
OUR BUSINESS MODEL IS UNPROVEN AND IF IT IS NOT SUCCESSFULLY IMPLEMENTED, OUR
BUSINESS WILL FAIL.
Our business model is currently unproven and in the early stages of
development and we have not yet undertaken any substantial marketing activities.
The technological, marketing, and other aspects of our business will require
substantial resources and will undergo constant developmental change. Our
ability to develop a successful business model will be dependent upon the
relative success or failure of these respective aspects of our operations and
how effectively they work in concert with one another. If we expend significant
financial and management resources attempting to market the Voraxial Separator
to a specific industry segment, and we subsequently are unsuccessful in
generating sales from that segment, we may not have enough resources to market
to other industry segments. There are no assurances that we will successfully
develop our business model from the standpoint of successfully implementing an
efficient and effective marketing plan.
IF OUR PRODUCTS DO NOT ACHIEVE AND MAINTAIN MARKET ACCEPTANCE, OUR BUSINESS
WILL NOT BE SUCCESSFUL.
Even though we believe our product is successfully developed, our
success and growth will depend upon its acceptance by various potential users of
our product. Acceptance will be a function of our product being more cost
effective as compared to currently existing or future technologies. If our
product does not achieve market acceptance, our business will not be successful.
In addition, even if our product achieves market acceptance, we may not be able
to maintain that market acceptance over time if new products or technologies are
introduced that are more favorably received than our product or render our
products obsolete.
IF WE DO NOT DEVELOP SALES AND MARKETING CAPABILITIES OR ARRANGEMENTS
SUCCESSFULLY, WE WILL NOT BE ABLE TO COMMERCIALIZE OUR PRODUCT SUCCESSFULLY.
We have limited sales and marketing experience. We may market and sell
our product through a direct sales force or through other arrangements with
third parties, including co-promotion arrangements. Since we may market and sell
any product we successfully develop through a direct sales force, we will need
to hire and train qualified sales personnel.
5
OUR MARKET IS SUBJECT TO INTENSE COMPETITION. IF WE ARE UNABLE TO COMPETE
EFFECTIVELY, OUR PRODUCT MAY BE RENDERED NON-COMPETITIVE OR OBSOLETE.
We are engaged in a segment of the water filtration industry that is
highly competitive and rapidly changing. Many large companies, academic
institutions, governmental agencies, and other public and private research
organizations are pursuing the development of technology that can be used for
the same purposes as our product. We face, and expect to continue to face,
intense and increasing competition, as new products enter the market and
advanced technologies become available. We believe that a significant number of
products are currently under development and will become available in the future
that may address the water filtration segment of the market. If other products
are successfully developed, it may be marketed before our product.
Our competitors' products may be more effective, or more effectively
marketed and sold, than any of our products. Many of our competitors have:
o significantly greater financial, technical and human resources
than we have and may be better equipped to discover, develop,
manufacture and commercialize products; and
o more extensive experience in marketing water treatment products.
Competitive products may render our products obsolete or noncompetitive
before we can recover the expenses of developing and commercializing our
product. Furthermore, the development of new technologies and products could
render our product noncompetitive, obsolete, or uneconomical.
AS WE EVOLVE FROM A COMPANY PRIMARILY INVOLVED IN DESIGN AND DEVELOPMENT TO ONE
ALSO INVOLVED IN COMMERCIALIZATION, WE MAY ENCOUNTER DIFFICULTIES IN MANAGING
OUR GROWTH AND EXPANDING OUR OPERATIONS SUCCESSFULLY.
We may experience a period of rapid and substantial growth that may
place a strain on our administrative and operational infrastructure, and we
anticipate that continued growth could have a similar impact. As our product
continues to enter and advance in the market, we will need to expand our
development, regulatory, manufacturing, marketing and sales capabilities or
contract with third parties to provide these capabilities for us. As our
operations expand, we expect that we will need to manage additional
relationships with various collaborative partners, suppliers, and other third
parties.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR TECHNOLOGY, OR IF WE INFRINGE THE
RIGHTS OF OTHERS, WE MAY NOT BE ABLE TO DEFEND OUR MARKETS OR TO SELL OUR
PRODUCT.
Our success may depend in part on our ability to continue and expand
our patent protection both in the United States and in other countries for our
product. Due to evolving legal standards relating to the patentability,
validity, and enforceability of patents covering our product and the scope of
claims made under these patents, our ability to obtain and enforce patents is
uncertain and involves complex legal and factual questions. Accordingly, rights
under any issued patents may not provide us with sufficient protection for our
6
product or provide sufficient protection to afford us a commercial advantage
against competitive products or processes.
Our success may also depend in part on our ability to operate without
infringing the proprietary rights of third parties. The manufacture, use, or
sale of our product may infringe on the patent rights of others. Likewise, third
parties may challenge or infringe upon our existing or future patents.
Proceedings involving our patents or patent applications or those of others
could result in adverse decisions regarding:
o the patentability of our inventions relating to our product;
and/or
o the enforceability, validity, or scope of protection offered by
our patents relating to our product.
Litigation may be necessary to enforce the patents we own and have
applied for (if they are awarded), copyrights, or other intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement. This
type of litigation could result in the expenditure of significant financial and
managerial resources and could result in injunctions preventing us from
distributing certain products. Such claims could materially adversely affect our
business, financial condition, and results of operations.
WE ARE DEPENDENT ON KEY PERSONNEL AND THE LOSS OF THE SERVICES OF ANY SUCH
PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
We are dependent upon the availability and the continued performance of
the services of Alberto DiBella and John DiBella. The loss of the services of
any such personnel could have a material adverse effect on us. In addition, the
availability of skilled personnel is extremely important to our growth strategy
and our failure to attract and retain such personnel could have a material,
adverse effect on us. We do not currently maintain any key man life insurance
covering these persons.
OUR OPERATIONS ARE SUBJECT TO GOVERNMENTAL APPROVALS AND REGULATIONS AND
ENVIRONMENTAL COMPLIANCE, WHICH MAY SUBJECT US TO INCREASING OPERATIONAL COSTS.
Our operations are subject to extensive and frequently changing
federal, state, and local laws and substantial regulation by government
agencies, including the United States Environmental Protection Agency (EPA), the
United States Occupational Safety and Health administration (OSHA) and the
Federal Aviation Administration (FAA). Among other matters, these agencies
regulate the operation, handling, transportation and disposal of hazardous
materials used by us during the normal course of our operations, govern the
health and safety of our employees and certain standards and licensing
requirements for our aerospace components that we contract manufacture. We are
subject to significant compliance burden from this extensive regulatory
framework, which may substantially increase our operational costs.
We believe that we have been and are in compliance with environmental
requirements and believe that we have no liabilities under environmental
requirements. Further, we have not spent any funds specifically on compliance
7
with environmental laws. However, some risk of environmental liability is
inherent in the nature of our business, and we might incur substantial costs to
meet current or more stringent compliance, cleanup, or other obligations
pursuant to environmental requirements in the future. This could result in a
material adverse effect to our results of operations and financial condition.
OUR BUSINESS HAS A SUBSTANTIAL RISK OF PRODUCT LIABILITY CLAIMS. IF WE ARE
UNABLE TO OBTAIN APPROPRIATE LEVELS OF INSURANCE, A PRODUCT LIABILITY CLAIM
AGAINST US COULD AVERSELY AFFECT OUR BUSINESS.
Our business exposes us to possible claims of personal injury, death,
or property damage, which may result from the failure, or malfunction of any
component or subassembly manufactured or assembled by us. While we have product
liability insurance, any product liability claim made against us may have a
material adverse effect on our business, financial condition, or results of
operations in light of our poor financial condition, losses and limited
revenues.
OUR SHARES OF COMMON STOCK HAVE TRADED ON A LIMITED BASIS AND YOU MAY FIND IT
DIFFICULT TO DISPOSE OF YOUR SHARES OF OUR STOCK, WHICH COULD CAUSE YOU TO LOSE
ALL OR A PORTION OF YOUR INVESTMENT IN OUR COMPANY.
Our shares of common stock are currently quoted on the OTC Bulletin
Board. The trading in shares of our common stock has been limited and we
anticipate the trading market in the foreseeable future will continue to be
limited. As a result, you may find it difficult to dispose of shares of our
common stock and you may suffer a loss of all or a substantial portion of your
investment in our common stock.
OUR COMMON STOCK IS COVERED BY SEC "PENNY STOCK" RULES WHICH MAY MAKE IT MORE
DIFFICULT FOR YOU TO SELL OR DISPOSE OF OUR COMMON STOCK, WHICH COULD CAUSE YOU
TO LOSE ALL OR A PORTION OF YOUR INVESTMENT IN OUR COMPANY.
Our common stock is covered by an SEC rule that imposes additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors, which are
generally institutions with assets in excess of $5,000,000, or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and transaction prior to the sale. Consequently, the rule may affect the ability
of broker-dealers to sell our securities, and also may affect the ability of
purchasers of our stock to sell their shares in the secondary market. It may
also diminish the number of broker-dealers that may be willing to make a market
in our common stock, and it may affect the level of news coverage we receive.
FUTURE SALES BY OUR STOCKHOLDERS MAY NEGATIVELY AFFECT OUR STOCK PRICE AND OUR
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.
Sales of our common stock in the public market following this offering
could lower the market price of our common stock due to the additional shares in
the market. Sales may also make it more difficult for us to sell equity
securities or equity-related securities in the future at a time and price that
our management deems acceptable or at all.
THE EXERCISE OF THE WARRANTS AND OPTIONS COULD NEGATIVELY AFFECT THE MARKET
PRICE FOR OUR COMMON STOCK.
To the extent that holders of the options or warrants exercise such
convertible securities and then sell the underlying shares of common stock in
the open market, our common stock price may decrease due to the additional
shares in the market.
8
CAPITALIZATION
The following tables set forth our capitalization as of December 31,
2007. The tables should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus.
December 31, 2007
------------------
Long-term debt................................................................................... $ 141,953
Current Liabilities ............................................................................. 687,655
Shareholders' equity:
Preferred Stock; 7,250,000 authorized;
Shares authorized, 0 Shares issued and outstanding.......................................... 0
Common stock; $0.001 par value; 42,750,000
Shares authorized; 23,122,135 shares issued and outstanding................................. 23,121
Additional paid-in capital.................................................................... 8,520,857
Accumulated deficit........................................................................... (8,637,316)
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Total shareholders' equity....................................................................... $ (93,338)
=============
Total liabilities and shareholders equity........................................................ $ 736,270
=============
9
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is quoted on the NASDAQ Over-The-Counter Bulletin
Board ("OTCBB") under the symbol EVTN. There is no assurance that an active
trading market will develop which will provide liquidity for our existing
shareholders or for persons who may acquire common stock through the exercise of
warrants and options. On April 24, 2008, the closing price for our common
stock was $0.43. The quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission, and may not represent actual transactions.
BID QUOTATIONS
Quarter Ended High Low
------------- ---- ---
March 31, 2006 $0.70 $0.50
June 30, 2006 $0.79 $0.48
September 30, 2006 $0.60 $0.46
December 31, 2006 $0.61 $0.46
March 31, 2007 $0.69 $.045
June 30, 2007 $0.84 $0.58
September 30, 2007 $0.94 $0.70
December 31, 2007 $0.72 $0.44
March 31, 2008 $0.79 $0.39
HOLDERS
As of December 31, 2007, there were over 775 holders of record of our
common stock outstanding. Our transfer agent is Jersey Transfer & Trust Company,
Inc., Post Office Box 36, Verona, New Jersey 07044.
No prediction can be made as to the effect, if any, that future sales
of shares of common stock or the availability of common stock for future sale
will have on the market price of the common stock prevailing from time-to-time.
Sales of substantial amounts of common stock on the public market could
adversely affect the prevailing market price of the common stock.
DIVIDENDS
We have not paid a cash dividend on the common stock since our
acquisition of FPA. The payment of dividends may be made at the discretion of
our board of directors and will depend upon, among other things, our operations,
our capital requirements and our overall financial condition. As of the date of
this prospectus, we have no intention to declare dividends.
10
A SPECIAL NOTE ABOUT PENNY STOCK RULES
Our common stock is covered by an SEC rule that imposes additional
sales practice requirements on broker-dealers who sell such securities to
persons other than established customers and accredited investors, which are
generally institutions with assets in excess of $5,000,000, or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse. For transactions covered by the rule, the
broker-dealer must make a special suitability determination for the purchaser
and transaction prior to the sale. Consequently, the rule may affect the ability
of broker-dealers to sell our securities, and also may affect the ability of
purchasers of our stock to sell their shares in the secondary market. It may
also cause less broker- dealers to be willing to make a market in our common
stock, and it may affect the level of news coverage we receive.
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by
the selling shareholders. However, we may receive up to $11,166,883.80 of
proceeds from the options and warrants exercisable to acquire the shares of
common stock we are registering under this prospectus. Any proceeds from the
exercise of options and warrants will be used for working capital.
11
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.
OVERVIEW
The Company has developed and patented the Voraxial Separator; a
proprietary technology that efficiently separates large volumes of
liquid/liquid, liquid/solids or liquid/liquid/solids with distinct specific
gravities. We have had limited sales and have shipped units of the Voraxial
Separator on a trial and rental basis to a number of different companies that
include a wide range of industrial applications, including produced water
applications for the oil industry (both offshore oil rigs and onland production
facilities), liquid/liquid and liquid/solid applications for the food processing
industry and the uranium industry. We have installed several Voraxial
Separators to date including units to the Alaska Department of Environmental
Conservation, the US Navy and to a leading uranium producing company in Canada
for oil/water separation. During 2006, we sold a Voraxial 4000 Separator to
ConocoPhillips for produced water separation. The Company is presently marketing
the developing Voraxial Separator as a potential solution for various
applications and markets including oil-water separation and oil exploration and
production.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED
DECEMBER 31, 2006
REVENUE
We continued to focus our efforts and resources to the manufacturing,
assembling, marketing and selling of the Voraxial(R) Separator. Revenues
remained fairly constant for year ended December 31, 2007 as compared to
December 31, 2006. Revenues for the year ended December 31, 2007 were $288,431
compared to $310,376 for the year ended December 31, 2006. Although we didn't
see a significant change in revenues in 2007, we experienced more deployments,
which management believes will contribute to an increase in 2008 revenues.
Revenues in 2007 were a result of sale of the Voraxial Separator and auxiliary
parts, lease orders and trials for customers interested in buying the Voraxial
Separator. Management believes the interest for the Voraxial Separator for
liquid/liquid, liquid/solid and liquid/liquid/solid separation is increasing in
the oil exploration and production industry. We conducted more trials in 2007
than 2006 and believe deployments will increase by approximately 300% in 2008.
We forecast that the increase in deployments will increase revenues. We believe
that the relationships we are building will also lead to increase Voraxial
deployments. We believe we have increased the exposure and awareness of the
Voraxial Separator through our marketing programs and expect to increase
revenues from the sale and lease of the Voraxial Separator in 2008.
12
COSTS AND EXPENSES
Costs and expenses increased by 109% or $1,115,033 to $2,129,189 for
the year ended December 31, 2007 as compared to $1,014,156 for the year ended
December 31, 2006. The increase was primarily due to (i) non-cash expenses
relating to the issuance of options to employees and consultants; (ii)
consulting fees; and (iii) increased professional fees and a decrease in
research and development during the year ended December 31, 2007. Research and
development was primarily due to activities in the oil industry. We continue to
focus our efforts on marketing of the Voraxial(R) Separator.
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative expenses increased by 262% or $1,103,926 to
$1,525,901 for the year ended December 31, 2007 from $421,975 for the year ended
December 31, 2006. The increase was primarily due to (i) non-cash expenses of
approximately $186,676 relating to the issuance of options and warrants to
employees and consultants; (ii) non-cash expenses of $697,500 relating to the
extension of previously issued options; (iii) consulting fees; and (iv)
increased professional fees during the year ended December 31, 2007.
RESEARCH AND DEVELOPMENT EXPENSES
Research and Development expenses increased 2% or $11,107 to $603,288
for the year ended December 31, 2007 from $592,181 for the year ended December
31, 2006. The R&D conducted by the Company resulted with the Company upgrading
the Voraxial Separator and filing additional patents. The upgraded Voraxial
Separator now produces 300% more "g" forces, processes more liquids and utilizes
less energy. An increase in "g" forces increases separation efficiency. These
are significant upgrades as it allows the Voraxial to operate in more locations
in the oil exploration & production sector. These upgrades are receiving a
favorable response from the industry. The upgraded Voraxial 4000 Separator has
already been shipped to a customer and been in operation for several months.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2007, we had working capital deficit $191,322, cash of
$201,066 and an accumulated deficit of $8,637,316. For the year ended December
31, 2007, we had a net loss from operations of $1,918,004, which included
non-cash expenses of $884,176 relating to (i) the issuance of warrants and
options to employees and consultants and (ii) extension of previously issued
options and warrants. Operating at a loss for the year negatively impacted our
cash position; however, funds received from the private placements completed
during 2007 improved our working capital position.
During the year ended December 31, 2007, we issued 1,030,000 shares of
the Company's restricted common stock to five investors, including a Water
Investment Fund at $0.60 per share for gross proceeds of $618,000.
We believe that including our current cash resources and anticipated
revenue to be generated by our Voraxial(R) Separators, we will have sufficient
resources to continue business operations for the next twelve months. To the
extent that these resources are not sufficient to sustain current operating
activities, we may need to seek additional capital, or adjust our operating plan
accordingly.
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
13
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.
We believe current funding will satisfy our working capital needs for
the next 6 months, as our current monthly cash burn rate is approximately
$70,000 per month. Historically the Company has funded working capital
requirements under private offerings facilitated by its management and the
Company intends to continue to fund current working capital requirements through
such private placements 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. 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.
The Company has experienced net losses, has a working capital deficit
and sustained cash outflows from operating activities and had to raise capital
to sustain operations. There is no assurance that the Company's developmental
and marketing efforts will be successful, that the Company will ever have
commercially accepted products, or that the Company will achieve significant
revenues. If the Company is unable to successfully commercialize its Voraxial
Separator, it is unlikely that the Company could continue its business. The
Company will continue to require the infusion of capital until operations become
profitable. During 2008, the Company anticipates seeking additional capital,
increasing sales of the Voraxial Separator and continuing to restrict expenses.
However, substantial doubt exists about the ability of the Company to continue
as a going concern.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting changes and error corrections
- ----------------------------------------
In May 2005, the Financial Accounting Standards Board (FASB) issued
SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS 154), which
replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes,"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements -
An Amendment of APB Opinion No. 28." SFAS 154 provides guidance on the
accounting for and reporting of accounting changes and error corrections, and it
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company had adopted SFAS 154 in the first quarter of fiscal year 2006 and
does not expect it to have a material impact on its consolidated results of
operations and financial condition.
14
Fair value measurements
- -----------------------
In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements" (SFAS 157). SFAS 157 provides guidance for using fair value to
measure assets and liabilities. SFAS 157 addresses the requests from investors
for expanded disclosure about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value and the
effect of fair value measurements on earnings. SFAS 157 applies whenever other
standards require (or permit) assets or liabilities to be measured at fair
value, and does not expand the use of fair value in any new circumstances. SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2006 and was be adopted by the Company in the first quarter
of fiscal year 2007. The Company does not expect that its adoption of SFAS 157
will have a material impact on its consolidated results of operations and
financial condition.
Accounting for uncertainty in income taxes
- ------------------------------------------
In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109"
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing the recognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The cumulative effects, if any, of applying
FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption. FIN 48 is effective for fiscal years
beginning after December 15, 2006, and the Company adopted this in the first
quarter of fiscal year 2007. The Company does not expect that its adoption of
FIN 48 will have a material impact on its consolidated results of operations and
financial condition.
Taxes collected from customer and remitted to governmental authorities
- ----------------------------------------------------------------------
In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue
No. 06-3 (EITF 06-3), "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That Is,
Gross versus Net Presentation)." EITF 06-3 applies to any tax assessed by a
governmental authority that is directly imposed on a revenue producing
transaction between a seller and a customer. EITF 06-3 allows companies to
present taxes either gross within revenue and expense or net. If taxes subject
to this issue are significant, a company is required to disclose its accounting
policy for presenting taxes and the amount of such taxes that are recognized on
a gross basis. The Company currently presents such taxes net. EITF 06-3 is
required to be adopted during the first quarter of fiscal year 2008. These taxes
are currently not material to the Company's consolidated financial statements.
Accounting for rental costs incurred during a construction period
- -----------------------------------------------------------------
In September 2006, the FASB issued FASB Staff Position No. FAS 13-1 (As
Amended), "Accounting for Rental Costs Incurred during a Construction Period"
(FAS 13-1). This position requires a company to recognize as rental expense the
rental costs associated with a ground or building operating lease during a
construction period, except for costs associated with projects accounted for
under SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects." FAS 13-1 is effective for reporting periods beginning after
15
December 15, 2005 and was adopted by the Company in the first quarter of fiscal
year 2006. The Company's adoption of FAS 13-1 will not materially affect its
consolidated results of operations and financial position.
Effects of Prior Year Misstatements when Quantifying Misstatements in the
- -------------------------------------------------------------------------
Current Year Financial Statements
- ---------------------------------
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006, and has been adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect the adoption of SAB 108 to have a material
impact on its consolidated results of operations and financial condition.
FSP FAS 123(R)-5
- ----------------
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that
instruments that were originally issued as employee compensation and then
modified, and that modification is made to the terms of the instrument solely to
reflect an equity restructuring that occurs when the holders are no longer
employees, then no change in the recognition or the measurement (due to a change
in classification) of those instruments will result if both of the following
conditions are met: (a) There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b) All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. The Company does not expect the adoption of FSP FAS 123(R)-5 to have a
material impact on its consolidated results of operations and financial
condition.
Business Combinations
- ---------------------
In December, 2007, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised
2007), "Business Combinations" (hereinafter "SFAS No. 141 (revised 2007)"). This
statement establishes principles and requirements for how an acquirer a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree, b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and c) determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The scope of SFAS No. 141
(revised 2007) is broader than the scope of SFAS No. 141, which it replaces. The
effective date of SFAS No. 141 (revised 2007) is for all acquisitions in which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The adoption of this statement
16
has no immediate material effect on the Company's consolidated financial
condition or results of operations.
Noncontrolling Interests in Consolidated Financial Statements - an amendment of
- -------------------------------------------------------------------------------
ARB 51
- ------
In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51"
(hereinafter "SFAS No. 160"). This statement establishes accounting and
reporting standards that require a) the ownership interests in subsidiaries held
by parties other than the parent be clearly identified, labeled and presented in
the consolidated statement of financial position with equity, but separate from
the parent's equity, b) the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, c) changes in a
parent's ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, d) when a subsidiary
is deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The
effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Company's consolidated financial condition or
results of operations.
Management does not expect these statements to have a material impact
on the consolidated financial statements.
17
BUSINESS
OUR HISTORY
Enviro Voraxial Technology, Inc. was incorporated in Idaho on October
19, 1964, under the name Idaho Silver, Inc. From our inception through 1994, we
were engaged in acquiring mining claims and exploring for silver and lead in
Idaho. In May of 1996, we entered into an agreement and plan of reorganization
with a privately held Florida corporation, Florida Precision Aerospace, Inc.
("FPA"), and its shareholders. FPA was incorporated on February 26, 1993. We
exchanged 10,000,000 newly issued post-split shares of our common stock, or
approximately 97% of our shares then issued and outstanding for all of the
issued and outstanding shares of FPA. As a result of this reorganization, the
shareholders of FPA gained control of our company and FPA became our wholly
owned subsidiary. Because FPA's management was more qualified to focus our
business on that of FPA, our officers and directors resigned and were replaced
by FPA's designees. At the close of the transaction, we changed our name to
Enviro Voraxial Technology, Inc.
GENERAL
We believe we are emerging as a potential leader in the rapidly growing
environmental and industrial separation industries. The Company has developed
and patented the Voraxial(R) Separator; a proprietary technology that
efficiently separates large volumes of liquid/liquid, liquid/solids or
liquid/liquid/solids with distinct specific gravities. Management believes its
high separation quality is achieved in real-time, and in much greater volumes,
with a more compact, cost efficient and energy efficient machine than any
comparable product on the market today. The Voraxial(R) Separator operates
in-line and is scaleable.
The size and efficiency advantages provided by the Voraxial(R)
Separator to the end-user have provided us with a variety of market
opportunities. We have generated limited revenues to date partially because of
insufficient funds to adequately market our product; however, we have received
inquiries from parties in various industries, including oil exploration and
production.
We have had limited sales and have shipped units of the Voraxial(R)
Separator on a trial and rental basis to a number of different companies that
include a wide range of industrial applications, including produced water
applications for the oil industry (both offshore oil rigs and onland production
facilities), liquid/liquid and liquid/solid applications for the food processing
industry and the uranium industry. We have installed several Voraxial(R)
Separators to date including units to the Alaska Department of Environmental
Conservation, the US Navy and to a leading uranium producing company in Canada
for oil/water separation. During 2006, we sold a Voraxial(R) 4000 Separator to
ConocoPhillips for produced water separation.
VORAXIAL(R) SEPARATOR
The Voraxial(R) Separator is a continuous flow turbo machine that
generates a strong centrifugal force, a vortex, capable of separating light and
heavy liquids, such as oil and water, or any other combination of liquids and
solids at extremely high flow rates. As the fluid passes through the machine,
the Voraxial(R) Separator accomplishes this separation through the creation of a
vortex. In liquid/liquid and liquid/solid mixtures, this vortex causes the
18
heavier compounds to gravitate to the outside of the flow and the lighter
elements to move to the center where an inner core is formed. The liquid stream
processed by the machine is divided into separate streams of heavier and lighter
liquids and solids. As a result of this process, separation is achieved.
The Voraxial(R) Separator is a self-contained, non-clogging device that
can be powered by an electric motor, diesel engine or by hydraulic power
generation. Further, the Voraxial(R) Separator's scalability allows it to be
utilized in a variety of industries and to process various amounts of liquid.
The following are the various sizes and the corresponding capacity range:
PRODUCT AND CAPACITY RANGE
Model Diameter Capacity Range
Number Size Gallons Per Minute
------ ---------- ------------------
Voraxial(R)1000 1 inch 3 - 5
Voraxial(R)2000 2 inches 25 - 80
Voraxial(R)4000 4 inches 250 - 600
Voraxial(R)8000 8 inches 2,000 - 6,000
We currently maintain an inventory of various models of the Voraxial(R)
Separator. During fiscal year 2006, we further tested, demonstrated and
delivered on a trial and rental basis the Voraxial(R) Separator units to
companies within various industries including energy production, wastewater,
manufacturing and mining. During 2006 the Company provided Voraxial(R)
Separators to several firms and is engaged in discussions to deliver additional
Voraxial(R) Separators on an income-producing basis.
Management believes that our Voraxial(R) Separator offers substantial
applications on a cost-effective basis, including: oil exploration & production,
oil remediation services, municipal wastewater treatment, bilge water
purification, food processing waste treatment and numerous other industrial
production and environmental remediation processes. We also believe that the
quality of the water separated from the contaminant is good enough to recycle
back into the process stream (back into the plant) or discharge to the
environment. As clean water becomes less available to the ever-increasing world
population, this technology may become more valuable.
VORAXIAL(R) SEPARATOR MARKET
The need for effective and cost efficient wastewater treatment and
separation technology is global in scale. Moreover, virtually every industry
requires some type of separation process either during the manufacturing
process, prior to treatment or discharge of wastewater into the environment, for
general clean up, or emergency response capability. Separation processes,
however, are largely unknown to the average consumer. These processes are deeply
integrated in almost all industrial processes from oil to wastewater to
manufacturing. Management believes that the Voraxial(R) technology has
applications in most, if not all major separation industries. The unique
characteristics of the Voraxial(R) allow it to be utilized either as a
stand-alone unit or within an existing system to provide a more efficient and
cost effective way to handle the separation needs of the customer.
19
We believe that we are the only front-end solution for the separation
industry that can offer increased productivity while reducing the physical space
and energy required to operate the unit. These advantages translate into the
potential for substantial operating cost efficiencies that may increase the
profitability of the solution's end user.
If environmental regulations, both domestically and internationally,
become more stringent, companies may be required to more effectively treat their
wastewater prior to discharge. We believe this offers a good opportunity for the
Company as the Voraxial(R) Separator can be utilized in most separation
applications to significantly increase the efficiency of the separation
processes while simultaneously reduce the cost to the end-user.
Management believes that the oil industry, and more specifically the
produced water market within this industry, represents a good opportunity for
significant sales growth for the Voraxial Separator. The produced water market
is worldwide and the need for effective produced water (oil/water) separation is
a major issue for both offshore and land-based oil production facilities. The
ability to efficiently separate produced water waste streams (oil and water) has
enormous economical and environmental consequences for the oil production
industry. Produced water comprises over 98% of the total waste volume generated
by the oil and gas industry, making it the largest volume waste stream
associated with oil and gas production.
Oil reservoirs frequently contain large volumes of water and as oil
wells mature (the oil field becomes depleted), the amount of produced water
increases. In the continental US, it is estimated that 7-10 barrels of water is
produced for each barrel of recovered oil. According to the Argonne National
Laboratory 2007 White Paper, "approximately 15 to 20 billion bbl (barrels; 1 bbl
= 42 U.S. gallons) of produced water are generated each year in the United
States. This is equivalent to a volume of 1.7 to 2.3 billion gallons per day."
Worldwide, the total amount of produced water generated, excluding the United
States, is approximately 50 billon barrels (approximately 6 billion gallons per
day). Produced water volumes will continue to increase as oil wells mature.
We believe that the necessity to process and efficiently separate high
volumes of liquids coupled with the more stringent environmental regulations
worldwide will continue to increase the demand for the Voraxial(R) Separator.
The Voraxial(R) provides efficient separation while decreasing the amount of
space, energy and weight to conduct the separation. In addition to oil
separation, the Voraxial can also perform solid (sand and grit) extraction,
which prevents production damage by increasing the life of the well.
INVENTORY
Other than our Voraxial(R) Separators, we maintain no inventory of
finished parts until we receive a customer order. We currently have various
models of the Voraxial(R) Separator in inventory, which includes certain models
located at third party facilities on a trial basis.
COMPETITION
We are subject to competition from a number of companies who have
greater experience, research abilities, engineering capability and financial
resources than we have. Although we believe our Voraxial(R) Separator offers
applications which accomplish better or similar results on a more cost-effective
basis than existing products, other products have, in some instances, attained
greater market and regulatory acceptance. These competitors include, but are not
limited to Westfalia and AlfaLaval.
20
MARKETING
We have presented the Voraxial(R) Separator at several prominent trade
shows in the past fiscal year. In April 2007, the Company was a featured
exhibitor at the Advanced Produced Water Handling & OSPAR Compliance 2007
Conference, which was held in Aberdeen, Scotland. In late May 2007, the Company
was selected by Tuv Nel to be a guest speaker at Tuv Nel's Produced Water
Workshop in Aberdeen, Scotland. The Workshop was attended by guests from
government bodies, offshore operators, technology and equipment suppliers as
well as consultancy and R&D organizations. As stated on Tuv Nel's website, the
Workshop "provides an excellent platform for delegates to keep abreast of the
latest technological and legislative developments." The Company also displayed
its Voraxial Separator at the OTC tradeshow in Houston and the OE 2007 Tradeshow
in Aberdeen, Scotland. Both tradeshows were well attended by oil E&P companies.
The Company believes it has received a great response from potential
clients and manufacturers representatives from the above-mentioned tradeshows
and is still pursuing some of these opportunities. We anticipate presenting the
Voraxial(R) Separator at additional tradeshows in 2008.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Voraxial(R) Separator is currently manufactured and assembled at
our Fort Lauderdale, Florida facilities.
The materials needed to manufacture our Voraxial(R) Separator have been
provided by Baldor Electric Co., Hughes Supply Inc. and SKF USA Inc., among
other suppliers. We have no written agreements with suppliers. We do not
anticipate any shortage of component parts.
INTELLECTUAL PROPERTY
We currently hold several patents pertaining to the Voraxial(R)
Separator and are continually working on developing other patents. The Company
owns United States Patent #6,248,231, #5,904,840 and #5,084,189. The latest
patent, Patent #6,248,231 was registered in 2001 for Apparatus with Voraxial(R)
Separator and Analyzer. Patent #5,904,840 is for Apparatus for Accurate
Centrifugal Separation of Miscible and Immiscible Media, which is for technology
invented by our president and sole director, Alberto DiBella, and registered in
1999. The other is for the Method and Apparatus for Separating Fluids having
Different Specific Gravities. This is for technology invented by Harvey Richter
and registered in 1992 to Richter Systems, Inc. In 1996, we acquired assets,
including this patent from Richter Systems, Inc. The method and apparatus for
each of these is applied in our Voraxial(R) Separator. The Company has filed for
additional patents pertaining to the Voraxial(R) Separator. These patents are
still pending.
In addition, on December 16, 2003, we received trademark protection for
the word "Voraxial".
21
PRODUCT LIABILITY
Our business exposes us to possible claims of personal injury, death or
property damage, which may result from the failure, or malfunction of any
component or subassembly manufactured or assembled by us. We have product
liability insurance up to $1,000,000 per incident. However, any product
liability claim made against us may have a material adverse effect on our
business, financial condition or results of operations in light of our poor
financial condition, losses and limited revenues.
We obtained directors and officers, and general insurance coverage in
2004. We obtained product liability insurance in 2005.
RESEARCH AND DEVELOPMENT
In our past two fiscal years, we have spent approximately $1,115,500 on
product research and development. The Company has finalized the development of
the Voraxial(R) Separator. Although we will continually work on advancing the
technology and applications whereby the technology can be used, we do not
anticipate devoting a significant portion of any future funds to this area of
the business.
EMPLOYEES
We have 6 employees. All of our employees work full-time. None of our
employees are members of a union. We believe that our relationship with our
employees is favorable. We intend to add additional employees in the upcoming
year, including managers, sales representatives and engineers.
PROPERTIES
During September 2007, the Company entered into a one (1) year lease
for an office and manufacturing facility located at 821 NW 57th Place, Fort
Lauderdale, FL 33309. The lease is approximately $6,100 per month. The Company
has the option to renew the lease at the end of the term. We believe this
facility is adequate to maintain our operations for the next 24 months.
22
MANAGEMENT
Directors and executive officers
The following sets forth the names and ages of our officers and
directors. Our directors are elected annually by our shareholders, and the
officers are appointed annually by our board of directors.
Name Age Position
---- --- --------
Alberto DiBella 77 President and Director
John A. DiBella 36 Executive Vice President and Director
ALBERTO DIBELLA is a graduate of the Florence Technical Institute,
Italy, where he obtained a degree in mechanical engineering in 1952. After
immigrating to the United States in 1962, Mr. DiBella worked in New Jersey for a
major tool manufacturer. From 1988 to 1993, he was the President of E.T.P., Inc,
a machining business, where he was responsible for day-to-day operations of the
company. In 1993, he relocated to Florida and founded FPA, our wholly owned
subsidiary. Since our inception he has worked in the day-to-day operations of
FPA. He has been our president and chairman since June 1996 and president and
chairman of our subsidiary, FPA, since its organization in February 1993.
JOHN A. DIBELLA has served as an employee of our Company since January
2002. In August 2006 the Company expanded its board of directors to two members.
John DiBella was appointed by the board to fill the vacancy created by the
additional board seat. From 2000 through January 2002 Mr. DiBella provided
consulting services to our Company. Mr. DiBella currently serves as the
Company's Vice President of Business Development. Mr. DiBella co-founded and
served as President of PBCM, a financial management company located in New
Jersey from 1997 to 1999. While at PBCM, Mr. DiBella was involved in various
consulting services regarding the development of publicly traded companies,
including establishing a management team, negotiating partnerships, licensing
agreements and investigating merger and acquisition opportunities. Prior to
co-founding PBCM, Mr. DiBella served as a Securities Analyst in the Equities and
Derivatives Department for Donaldson, Lufkin and Jenrette, a NYSE member firm.
Mr. DiBella holds a Bachelor of Science Degree in Finance and Economics from
Rutgers University. Mr. DiBella is the nephew of Alberto DiBella.
COMMITTEES
To date, we have not established an audit committee. Due to our
financial position, we have been unable to attract qualified independent
directors to serve on our board. Our board of directors, solely consisting of
Alberto DiBella and John DiBella, reviews the professional services provided by
our independent auditors, the independence of our auditors from our management,
our annual financial statements and our system of internal accounting controls.
None of the directors are considered a "financial expert."
Because the board of directors consists of only two members, the board
has not delegated any of its functions to committees. The entire board of
directors acts as our audit committee as permitted under Section 3(a)(58)(B) of
the Exchange Act. We do not have any independent directors who would qualify as
an audit committee financial expert. We believe that it has been, and may
continue to be, impractical to recruit such a director unless and until we are
significantly larger.
23
ADVISORY COMMITTEE
We have established an Advisory Committee. The purpose of the Advisory
Committee is to provide business advice and recommendations to management of the
Company. The Advisory Committee consists of J. John Combs, Barry Gafner, Kevin
Mulshine and Henry Schlesinger. These individuals serve for a 2-year term.
On February 18, 2004, we issued options to purchase an aggregate of
30,000 shares of our common stock exercisable at $0.71 per share to three of the
individuals as consideration for joining our advisory committee. The options are
exercisable until February 18, 2009.
INDEMNIFICATION
The Idaho Statutes permit the indemnification of directors, employees,
officers and agents of Idaho corporations. Our Articles of Incorporation and
Bylaws provide that we shall indemnify its directors and officers to the fullest
extent permitted by the Idaho Statutes.
The provisions of the Idaho Statutes that authorize indemnification do
not eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Idaho. In addition, each director will continue to be
subject to liability for (a) violations of criminal laws, unless the director
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for our best
interests in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the Idaho
securities laws.
The effect of the foregoing is to require us to indemnify our officers
and directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers or persons in control
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the act and is therefore unenforceable.
EXECUTIVE COMPENSATION
The table below sets forth compensation for the past two years
awarded to, earned by or paid to our chief executive officer and each executive
officer whose compensation exceeded $100,000 for the year ended December 31,
2007.
24
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Stock Option Plan Compensation All Other
Name and Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------
Alberto DiBella, 2007 $250,000(1) -- -- $30,000(7) -- -- -- $280,000
CEO and Principal 2006 $175,000(2) -- -- -- -- -- -- $175,000
Financial Officer 2005 $165,000(3) -- -- -- -- -- -- $165,000
- ------------------------------------------------------------------------------------------------------------------------------
John A. DiBella, 2007 $250,000(4) -- -- $30,000(7) -- -- -- $280,000
Executive Vice 2006 $175,000(5) -- -- -- -- -- -- $175,000
President 2005 $150,000(6) -- -- -- -- -- -- $165,000
- ------------------------------------------------------------------------------------------------------------------------------
(1) $130,000 was deferred in 2007.
(2) $74,785 was paid out during the year ended December 31, 2006 and
$28,000 was paid out during the year ended December 31, 2007.
Unpaid balance was included in accrued expenses as of December 31,
2007.
(3) $43,000 was paid out during the year ended December 31, 2005.
Remaining balance was paid out during the year ended December 31,
2007 through the issuance of options (see footnote 7).
(4) $181,000 was deferred in 2007.
(5) $129,000 was deferred in 2006. $50,000 was paid out during the year
ended December 31, 2007 through the issuance of options (see
footnote 7). The unpaid balance has been included in accrued
expenses as of December 31, 2007.
(6) $145,000 was deferred as of December 31, 2005 and was paid
during the year ended December 31, 2007 through the issuance of
options (see footnote 7).
(7) Options to purchase 1,000,000 shares of common stock exercisable at
$0.40 pr share. 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 25%; risk-free
interest rate of 5% and an expected life of five years. This
results in a fair value of approximately $180,000, of which
$150,000 was previously recorded as compensation expense. The
remaining $30,000 has been recorded as compensation expense for the
year ended December 31, 2007.
25
2007 Outstanding Equity Awards At Fiscal Year-End Table
- ----------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
- ----------------------------------------------------------------------------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market
Awards: or
Equity Number Payout
Incentive of Value of
Plan Number Market Unearned Unearned
Number of Number of Awards: of Value of Shares, Shares,
Securities Securities Number of Shares Shares Units or Units or
Underlying Underlying Securities or Units or Units Other Other
Unexercised Unexercised Underlying of Stock of Stock rights rights
Options Options Unexercised Option That That That That
(#) (#) Unearned Exercise Option Have Not Have Not Have Not Have Not
- ------------------------------------------- Options Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable (#) ($) Date (#) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------------------------
Alberto DiBella 110,000 -- -- $0.60 2009 -- -- -- --
110,000 -- -- $1.00 2009 -- -- -- --
1,000,000 -- -- $0.40 2012 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
John DiBella 2,000,000 -- -- $0.15 2012 -- -- -- --
516,666 -- -- $0.60 2009 -- -- -- --
516,666 -- -- $1.00 2009 -- -- -- --
1,000,000 -- -- $0.40 2012 -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------
2006 Option and Stock Grants
None.
EMPLOYMENT AGREEMENTS
Neither of our executive officers has a written employment agreement
with the Company. However the Company intends to enter into an employment
agreement with John A. DiBella. We currently pay the CEO and Executive Vice
President approximately $250,000 per annum.
DIRECTOR COMPENSATION
Directors are not compensated by our Company.
CERTAIN TRANSACTIONS
None
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 15, 2008, there were 23,122,135 shares of our common
stock outstanding. The table below sets forth information with respect to the
beneficial ownership of our securities as of March 15, 2008 by:
1) each person known by us to be the beneficial owner of five percent
or more of our outstanding securities, and
2) executive officers and directors, individually and as a group.
Unless otherwise indicated, we believe that the beneficial owner has
sole voting and investment power over such shares.
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned Ownership
---------------- ------------------ ---------
Alberto DiBella 4,266,666(1) 17.5%
3500 Bayview Drive
Fort Lauderdale, FL 33308
John A. DiBella 5,033,333(2) 18.5%
821 N.W. 57th Place
Fort Lauderdale, FL 33309
Robert Weinberg 2,000,000(3) 8.7%
11338 Clover Leaf Circle
Boca Raton, FL 33428
Peter Chiappetta 3,000,000(3) 13.0%
2299 NW 62nd Drive
Boca Raton, FL 33487
All officers and directors 9,299,999 32.8%
as a group (2 persons)
(1) Alberto DiBella's beneficial share ownership includes 10,000 shares of
common stock owned by his wife. Also includes 110,000 shares of common
stock underlying options exercisable at $0.60 per share and 110,000
shares of common stock underlying options exercisable at $1.00 per share.
Also includes 1,000,000 shares underlying options exercisdable at $0.40
per share.
(2) Includes 2,000,000 shares of common stock underlying options exercisable
at $0.15 per share, 516,666 shares of common stock underlying options
exercisable at $0.60 per share and 516,666 shares of common stock
underlying options exercisable at $1.00 per share. Also includes
1,000,000 shares underlying options exercisdable at $0.40 per share.
Excludes shares, which Mr. DiBella holds voting control, but does not
hold any power to dispose of such shares. See footnote 3.
(3) Voting rights of said shares were granted to John A. DiBella until such
time the percentage ownership is less than 3% of the Company.
27
DESCRIPTION OF SECURITIES
As of the date of this prospectus, we had authorized 42,750,000 shares
of par value $0.001 common stock, with 23,538,801 shares issued and outstanding.
Additionally, we have authorized 7,250,000 shares of preferred stock, with no
shares issued and outstanding.
COMMON STOCK
The holders of common stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voted for the election of
directors can elect all of the directors. The holders of common stock are
entitled to receive dividends when, as and if declared by the board of directors
out of funds legally available therefor. In the event of our liquidation,
dissolution or winding up, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities and after provision has been made for each class of stock, if
any, having preference over the common stock. Holders of shares of common stock,
as such, have no conversion, preemptive or other subscription rights, and there
are no redemption provisions applicable to common stock. All of the outstanding
shares of common stock are, and the shares of common stock offered hereby, will
be duly authorized, validly issued, fully paid and nonassessable.
PREFERRED STOCK
We are authorized to issue shares of preferred stock with such
designation, rights and preferences as may be determined from time to time by
the board of directors. Accordingly, the board of directors is empowered,
without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the common stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control. As of the
date of this Prospectus we have no outstanding shares of preferred stock.
WARRANTS
As of the date of this prospectus, we had outstanding warrants to
purchase 5,589,637 shares of our common stock exercisable at prices ranging from
$0.75 to $9.00 per share:
As of the date of this prospectus we had outstanding options to
purchase 6,335,666 shares of our common stock exercisable at the following
prices:
28
The warrants and options expire on various dates from late 2008 to
January, 2012. The warrants may be called or repurchased at $0.001 per
underlying share of common stock provided the closing bid price for the
Company's Common Stock is at or above $2.00 per share for twenty consecutive
trading days within 30 days of the Company's written notice of the Company's
intention to call this warrant. In the event this warrant has not been exercised
by written notice within 30 days of such notice, the warrant will cease to
exist.
TRANSFER AGENT
The Transfer Agent for our shares of common stock is Jersey Transfer &
Trust, Inc., 201 Bloomfield Ave., Verona, NJ 07044. The telephone number for
Jersey Transfer & Trust, Inc is (973) 239-2712.
SELLING SHAREHOLDERS
This prospectus relates to the registration of 9,543,363 shares of our
common stock underlying certain warrants and options held by various parties
listed below. We will not receive any proceeds from the sale our common stock by
the selling shareholders. However, we may receive up to $11,166,883.80 of
proceeds from the options and warrants exercisable to acquire the shares of
common stock we are registering under this prospectus. Any proceeds from the
exercise of options and warrants will be used for working capital. The selling
shareholders may resell the shares they acquire by means of this prospectus from
time to time in the public market. The costs of registering the shares offered
by the selling shareholders are being paid by us. The selling shareholders will
pay all other costs of the sale of the shares offered by them.
The following table sets forth the name of the selling shareholders,
the number of common shares that may be offered by the selling shareholders and
the number of common shares to be owned by the selling shareholders after the
offering. The table also assumes that each selling shareholder sells all common
shares listed by its name. The table below sets forth information as of the date
of this prospectus. The percentage calculations for the selling shareholders do
not include any common shares issuable upon the exercise of any currently
outstanding warrants, options or other rights to acquire common shares, other
than those that the selling shareholders beneficially own. Unless otherwise
noted below, the address for the selling shareholder is 821 N.W. 57th Place,
Fort Lauderdale, Florida 33309.
29
Common Shares Common Shares Common Shares
Owned Prior Offered Owned After
to Offering in the Offering the Offering
Name of Shareholder Number Percentage Number Number Percentage
- ------------------- ------ ---------- ------ ------ ----------
John M. and Gail S. Antonakos, JTWROS 20,000 * 20,000(1) 0 *
1079 Route 523
Flemington, NJ 08822
Glen B. Bagnall 6,000 * 6,000(1) 0 0
24111 Meridian Rd #117
Grosse, Lle MI 48138
Paul Bendigo 4,000 * 4,000(1) 0 0
250 Dickinson Drive
Reading, PA 19605
Thomas W. Bilowus 2,000 * 2,000(1) 0 0
4553 Lake Ave
Blasdell, NY 14219-1303
Ruth Butler 124,000 * 16,000(1) 108,000 *
207 Sharon Pkwy
Lackawanna, NY 14218
Agatino Cintorrino 72,600 * 38,400(1)(4) 34,200 *
37 W. Main Street
Somerville, NJ 08876
Kenneth G. Conrad 66,334 * 38,667(1)(4) 27,667 *
2935 Rising Sun Road
Slatington, PA 18080
James Dahme 39,334 * 22,667(1)(4) 16,667 *
1237 Yellow Springs Road
Chester Springs, PA 19425
Joseph Di Bella 70,000 * 35,000(1)(4) 35,000 *
10 Sandy Hill Rd.
Westfield, NJ 07090
Rita DiPalo 18,100 * 8,933(1)(4) 9,167 *
1008 Featherbed Lane
Edison, NJ 08820
Paul J. and Linda A. Fischl 2,000 * 2,000 0 *
760 Point Phillips Road
Bath, PA 18014
Donald Hughes 4,000 * 4,000 0 *
2101 Springhouse Road
Broomal, PA 19008
Hal P. Johnson 6,000 * 6,000 0 *
P.O. Box 2557
West Lawn, PA 19609
30
Ralph Liloia 2,000 * 2,000 0 *
11 Liverpool Ct.
Toms River, NJ 08753
Paul J. Mueller 6,000 * 6,000 0 *
3045 Van Alstyne
Wyandotte, MI 48192
Joseph E. Mueller 8,000 * 8,000 0 0
28437 Balmoral
Garden City, MI 48135
Linda Rammage 10,000 * 10,000 0 0
8112 W Six Mile Rd
Northville, MI 48167
John L. Rowe 57,334 * 28,667(1)(4) 22,667 *
356 Magnolia Road
Warminster, PA 18974
Paul J. and Marie Sharga, JTWROS 30,000 * 20,000 10,000 *
1515 Newport Avenue
Northampton, PA 18067
Edward G. Brown and
Janet M. Nickerson 2,000 * 2,000 0 *
RR 2 Box 2440
Leeds, ME 04263
Arnold J. Solof 8,000 * 8,000 0 *
1816 Redwood Drive
Vineland, NJ 08361-6750
Jeffrey P. Szackas 2,000 * 2,000 0 *
23G Greentop Road
Sellersville, PA 18960
Susan V Timmreck 4,000 * 4,000 0 *
901 Cedar Street
Millville, NJ 08332
Michael & Antoinetta Ulisse 17,700 * 8,533(1)(2) 9,167 *
17 Lynwood Road
Edison, NJ 08820
Ellen Van Embden 2,000 * 2,000 0 0
3312 Sherwood Road
Easton, PA 18045
Nathan Van Embden 4,000 * 4,000 0 0
787 Hogbin Road, P.O. Box 1641
Millville, NJ 08332
Karen Van Embden 4,000 * 4,000 0 0
807 South Fountain
Wichita, KS 67218
31
Paul Van Embden 2,000 * 2,000 0 0
1007 Cedar
Millville, NJ 08332
Laura Van Embden 4,000 * 4,000 0 *
1007 Cedar Street
Millville, NJ 08332
Julie Van Embden 4,000 * 4,000 0 *
4132 Garfield Avenue
Pennsauken, NJ 08109
Phillip S. Van Embden 6,000 * 6,000 0 *
P.O. Box 863
Millville, NJ 08332
Richard Williams 2,000 * 2,000 0 *
998 Newichawnoe Lane
Bath, PA 18014
Roland W. and Dianne S. Woodall 4,000 * 4,000 0 *
R.D. #3 Box 609C
Charleroi, PA 15022
William Lanzana 30,000 * 20,000 10,000 *
577 Chestnut Ridge Road
Woodcliff Lake, NJ 07675
Kevin Johnson 300,000 200,000(2) 100,000 *
7106 Matthews Rd.
Durham, NC 27712
Joan Rich Baer, Inc. (14)
Pension Plan & Trust 330,000 * 140,000(3)(4) 0 *
199 Concord Drive
Madison, CT 06443
RBG Residuary Trust (15) 950,000 3.2% 600,000(3)(4) 350,000 *
8 North Rohallion Drive
Rumson, NJ 07760
Richard Goodwyn 150,000 * 100,000 50,000 *
8 North Rohallion Drive
Rumson, NJ 07760
The Whittier Trust Company (16) 249,999 * 166,666 83,333 *
of Nevada, Inc.
Trustee of the Haldan
Grandchildren's Trust
fbo Seth H. Casden
100 West Liberty Street, Suite 890
Reno, NV 89501
32
The Whittier Trust Company (17)
of Nevada, Inc.
Trustee of the Haldan
Grandchildren's Trust
fbo Graham S. Casden 333,333 * 208,333(3)(4) 125,000 *
100 West Liberty Street, Suite 890
Reno, NV 89501
Harrichand Persaud 333,332 * 166,666(4) 166,000 *
264 Airmont Ave.
Mahwah, NJ 07430
Barbara J. Drew TTEE for the
Barbara J. Drew Revocable
Living Trust (22) 166,666 * 83,333(4) 83,333 *
302 Carl Lane
Capitola, CA 95010
Robert Agriogianis 41,666 * 41,666(4) 0 *
16 Harvale Drive
Florham Park, NJ 07932
Michael H. Lambert 16,667 * 16,667(4) 0 *
2020 Pintail Drive
Longmont, CO 80504
Richard Zimmer 41,667 * 41,667(4) 0 *
136 Locktown-Flemington Road
Flemington, NJ 08822
Dominic Spinosa 83,332 * 83,332(4) 0 *
1766 Roland Ave.
Wantagh, NY 11793-2856
Peter Maciak 250,000 * 125,000(4) 125,000 *
125 Krager Road
Binghamton, NY 13904
Keys Family Trust (18) 100,000 * 50,000(4) 50,000 *
1024 Glorietta
Coronado, CA 92118
William Dorfman 83,334 * 41,667(4) 41,667 *
Century Park East- Suite 1601
LA, CA 90067
Barry Gafner 180,000 * 95,000(4)(13) 85,000 *
4560 St. Vrain Road
Longmont, CO, 80503
Donald Cameron Rodee 333,332 * 166,666(4) 166,666 *
1510 Wilshire Road
Fallbrook, CA 92028
Kevin Mulshine 80,000 (3)(14) * 45,000(4)(13) 35,000 *
4097 St. Lucia Street
Boulder, CO 80301
Mustafa Chike-Obi 83,334 * 41,667(4) 41,667 *
175 Brooklake Road
Florham Park, NJ 07932
33
James P. Kearney 83,334 * 41,667(4) 41,667 *
59 Union Hill Road
Madison, NJ 07940
Paul J. Sharga 16,667 * 16,667(4) 0 *
1515 Newport Ave.
Northampton, PA 18067
John W. & Barbara B. Hemmer 41,667 * 16,667(4) 25,000 *
88 Meadow Road
Briarcliff Manor, NY 10510
Frank J. DeMicco 200,000 (5) * 200,000(5) 0 *
1000 Williams Island Blvd. Ste 3102
Aventura, FL 33160
Kim J. Gloystein 33,333 * 33,333(6) 0 0
7430 S Indian Lake Drive
Vicksburg, MI 49097
Richard T. Huebner IRA 80,000 * 80,000(6) 0 0
16318 E. Berry Ave.
Centennial, CO 80015
Steven M. Bathgate IRA 665,071 2.2% 366,667(6) 298,404 *
6376 E. Tufts Ave.
Englewood, CO 80111
Michael J. Beaudoin 40,000 * 20,000(6) 20,000 *
2915 Miwall Ct.
Castlerock, CO 80109
David W. Beaudoin 40,000 * 20,000(6) 20,000 *
21544 Tullman Drive
Parker, CO 80111
John R. Cohagen 66,666 * 33,333(6) 33,333 *
3939 95th St.
Boulder, CO 80301
John David Kucera IRA 26,666 * 13,333(6) 13,333 *
6178 S. Alton Way
Greenwood Village, CO 80111
Pamela M. Kelsall IRA 33,334 * 16,667(6) 16,667 *
6117 E. Princeton Ave.
Englewood, CO 80111
Douglas H. Kelsall IRA 66,666 * 33,333(6) 33,333 *
6117 E. Princeton Ave.
Englewood, CO 80111
Eugene C. McColley IRA 50,000 * 50,000(6) 0 0
3900 Garden Ave.
Greenwood Village, CO 80121
Greg Fulton IRA 33,334 * 16,667(6) 16,667 *
5520 South Newport Street
Greenwood Village, CO 81111
34
Ann Fulton IRA 33,334 * 16,667(6) 16,667 *
5520 South Newport Street
Greenwood Village, CO 81111
Sandra Garnet C/F Colin Garnett 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Sandra Garnet C/F Aaron Garnett 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Sandra Garnett C/F Benjamin Garnett 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Lee E. Schlessman 266,666 * 133,333(6) 133,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Rodney Garnett, Lee Schlessman POA 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Sandra L. Garnett,
Lee E. Schlessman POA 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Gary L. Schlessman
C/F Margaret Schlessman 33,334 * 16,667(6) 16,667 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Gary Schlessman
C/F Jennifer Schlessman 33,334 * 16,667(6) 16,667 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Cheryl S. Bennett C/F Eric Bennett 33,334 * 16,667(6) 16,667 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Cheryl S. Bennett,
Lee Schlessman POACO 66,666 * 33,333(6) 33,333 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
Cheryl S. Bennett
C/F Lauren M. Bennett 33,334 * 16,667(6) 16,667 *
1301 Pennsylvania Street, Suite 800
Denver, CO 80203
George Johnson IRA 40,000 * 40,000(6) 0 0
6 Churchill Dr.
Englewood, CO 80113
35
Kent J. Lund 17,000 * 17,000(6) 0 0
203 S Pontiac St.
Denver, CO 80230
George Irwin Lind III IRA 66,667 * 66,667(6) 0 0
#2 Drive Lane
Littleton, CO 80123
Steven D. Plissey IRA 34,000 * 17,000(6) 17,000 *
2225 Witter Gulch
Evergreen, CO 80439
Frederic Duboc IRA 200,000 * 100,000(6) 100,000 *
5500 Pemberton Drive
Greenwood Village, CO 80121
Keysten Investments Ltd. (19) 333,333 * 333,333(6) 0 0
Suite 5050, Commerce Court West 199 Bay Street
Toronto, ON 5ML-1E2
James Edgar McDonald Revocable
Living Trust Dated 6/30/95 (20) 60,000 * 30,000(6) 30,000 *
6044 E Briarwood Dr
Centennial, CO 80112
Virginia Stevens McDonald Revocable
Living Trust Dated 6/30/95 (21) 30,000 * 30,000(6) 0 0
6044 E Briarwood Dr.
Centennial, CO 80112
Robert H. Aukerman 30,000 * 20,000(6) 10,000 *
6077 S. Cathay Ct.
Aurora, CO 80016
Thomas D. Wolf 40,000 * 20,000(6) 20,000 0
5751 E Nassau Place
Englewood, CO 80111
Christopher J. Koenigs/
Jeanne F. Collopy JTWRDS 34,000 * 17,000(6) 17,000 *
2433 E 7th Ave
Denver, CO 80206
Roger Conan 120,000 * 60,000(6) 60,000 *
14 Oaklay Rd
Dublin 6, Ireland
Richard Vernon Wilsey 68,000 * 34,000(6) 34,000 *
P.O. Box 432
Morrison, CO 80465
David L. Gertz 68,000 * 34,000(6) 34,000 *
7120 E Orchard Rd, Suite 300
Centennial, CO 80111
Vicki D.E. Barone IRA 16,000 * 16,000(6) 0 0
7854 S Harrison Cir.
Littleton, CO 80122
36
Bathgate Capital Partners (22) 530,500 * 530,500(7) 0 0
5350 South Roslyn St., Ste 400
Greenwood Village, CO 80111
John A. DiBella 4,033,333 17.9% 3,066,666(9)(12) 966,667 3.3%
821 NW 57th Place
Fort Lauderdale, FL 33309
Daniel Samela 45,000 * 45,000(8) 0 0
4072 Oxbow Dr.
Coconut Creek, FL, 33073
Laura DiBella 200,000 * 200,000(10) 0 0
3500 Bayview Dr.
Ft. Lauderdale, FL 33301
Dan Leon 10,000 * 10,000(11) 0 0
4940 NW 85 Ave
Lauderhill, FL 33351
Alberto DiBella 3,266,666 11% 220,000(12) 3,046,666 10%
3500 Bayview Dr.
Ft. Lauderdale, FL 33301
J. John Combs 483,000 * 483,000(12) 0 0
6494 Nelson Rd
Longmont CO 80503
Henry Schlesinger 10,000 * 10,000(13) 0 0
18802 Pheasant Lane
Tomball, TX 77377
Total: 9,543,363
* Denotes ownership of less than 1%. Percentage ownership assumes complete sale
of securities into the open market after exercise of warrants or options. Some
investors have invested on more than 1 occasion. Their total ownership is shown
only once in Column A.
(1) Includes warrants issued through a private placement conducted in
February 2000. In the first half of 2000, we raised $364,800 through
the private placement of our securities. We sold 1,216 units to 34
accredited investors. Each unit was comprised of one hundred shares of
restricted common stock and 200 warrants, one hundred exercisable at
$6.00 and one hundred exercisable at $9.00. A total of 243,200 warrants
were issued in this Offering, which includes 121,600 warrants
exercisable at $6.00 and 121,600 warrants exercisable at $9.00. The
issuances were exempt from registration under Section 4(2) of the
Securities Act. The investors received information concerning the
Company and had the opportunity to ask questions concerning the
viability of the Company. The shares contain legends restricting their
transferability absent registration or applicable exemption.
(2) Includes warrants issued through a private offering in April 2001. In
April 2001, we raised $100,000 through the private placement of our
securities. We sold 1,000 units containing share of our common stock
and warrants to one accredited investor. Each unit was comprised of 100
shares of restricted common stock and 200 common stock purchase
warrants, of which 100 warrants are exercisable at $3.00 per share and
100 warrants are exercisable at $4.00 per share. A total of 200,000
warrants were issued in this Offering, which includes 100,000 warrants
37
exercisable at $3.00 and 100,000 warrants exercisable at $4.00. The
issuances were exempt from registration under Section 4(2) of the
Securities Act. The investors received information concerning the
Company and had the opportunity to ask questions concerning the
viability of the Company. The shares contain legends restricting their
transferability absent registration or applicable exemption.
(3) Includes warrants issued through a private placement in fiscal year
2002. During the year ended December 31, 2002, we sold 5.17 units of
securities at $60,000 per unit in a private placement to 5 investors.
Each unit consisted of 100,000 shares of common stock, 100,000 warrants
to purchase 100,000 shares of common stock at an exercise price of
$1.00 per share and 100,000 warrants to purchase 100,000 shares of
common stock at an exercise price of $1.25 per share. The warrants
issued at $1 per share are callable at par value provided the stock
trades above $1.50 per share for 20 consecutive trading days. The
warrants issued at $1.25 per share are callable at par value provided
the stock trades above $2 per share for 20 consecutive trading days.
Net proceeds received by our Company aggregated $286,000. The warrants
are exercisable from the date of issuance through December 2007. A
total of 1,033,332 warrants were issued in this Offering, which
includes 516,666 warrants exercisable at $1.00 and 516,666 warrants
exercisable at $1.25. The issuances were exempt from registration under
Section 4(2) of the Securities Act. The investors received information
concerning the Company and had the opportunity to ask questions
concerning the viability of the Company. The shares contain legends
restricting their transferability absent registration or applicable
exemption.
(4) Includes warrants issued through a private placement, which commenced
in 2003 and was closed in January 2004. Under the private placement we
sold an aggregate of 8.08 units of securities to 30 investors for
proceeds of $808,000. Each unit consisted of 166,666 shares of
restricted common stock at $0.60 per share and 166,666 warrants to
purchase 166,666 shares of common stock at $1.00 per share. The
warrants are exercisable for a period of five years from the date of
closing. The investors received information concerning our company and
had the opportunity to ask questions to the viability of our company. A
total of 1,346,665 warrants were issued in this Offering. The issuances
were exempt from registration under Section 4(2) of the Securities Act.
The investors received information concerning the Company and had the
opportunity to ask questions concerning the viability of the Company.
The shares contain legends restricting their transferability absent
registration or applicable exemption.
(5) Effective January 1, 2003, we issued warrants to purchase 300,000
shares of our common stock exercisable at $1.00 per share to Frank
DeMicco pursuant to Mr. DeMicco's five-year employment contract with
our company. Warrants to purchase 100,000 shares vested during year
ended December 31, 2003 and the remaining warrants vest periodically
over the term of the agreement. The balance 150,000 warrants were
cancelled due to the mutual termination of DeMicco's employment
contract. In January 2005, the Company entered into a one-year
consulting agreement with Mr. DeMicco for engineering design, marketing
and sales of Company products and services. Pursuant to this agreement,
the Company granted 50,000 options to Mr. DeMicco exercisable at $1.00
per share. These options vest equally in 12 traunches over a period of
one year commencing in January, 2005 and expire in January 2008. The
options and warrants issued to Mr. DeMicco were exempt from
registration under Section 4(2) of the Securities Act. The options and
warrants contain the appropriate restrictive legend restricting their
38
transferability absent registration or applicable exemption. Mr.
DeMicco received information concerning our company and had the
opportunity to ask questions about the viability of our company.
(6) Includes warrants issued through a private placement in fiscal year
2004. From May 2004 through August 2004, the Company sold an aggregate
of 1,935,000 units of securities to 38 accredited investors for gross
proceeds of $1,451,250 under the private placement (Schedule D). The
Company paid Bathgate Capital Partners, a placement agent, a commission
of 10% of the gross proceeds and a non-accountable expense allowance of
3% of the gross proceeds and issued the placement agent warrants to
purchase six shares of common stock (three shares at $0.75 and three
shares at $1.00) for each 20 units sold in the offering. Each unit
consisted of one share of restricted common stock at $0.75 per share
and one warrant to purchase one share of common stock at $1.00 per
share. The warrants are exercisable for a period of five years from the
date of closing. A total of 1,935,000 warrants were issued in this
offering. The issuances were exempt from registration under Section
4(2) of the Securities Act. The investors received information
concerning the Company and had the opportunity to ask questions
concerning the viability of the Company. The shares contain legends
restricting their transferability absent registration or applicable
exemption.
(7) Includes the number of warrants issued to Bathgate Capital Partners as
commissions for the private placement discussed above. The Company has
paid Bathgate Capital Partners, a placement agent, a commission of 10%
of the gross proceeds and a non-accountable expense allowance of 3% of
the gross proceeds and issued the placement agent warrants to purchase
six shares of common stock (three shares at $0.75 and three shares at
$1.00) for each 20 units sold in the offering. Each unit consisted of
one share of restricted common stock at $0.75 per share and one warrant
to purchase one share of common stock at $1.00 per share. The warrants
are exercisable for a period of five years from the date of closing.
The transactions were exempt from registration under Section 4(2) of
the Securities Act. Bathgate Capital Partners was deemed accredited.
The investors received information concerning the Company and had the
opportunity to ask questions concerning the viability of the Company.
The shares and warrants contain legends restricting their
transferability absent registration or applicable exemption. A total of
530,000 warrants were issued to Bathgate Capital Partners, which
includes 265,250 warrants exercisable at $0.75 and 265,250 warrants
exercisable at $1.00.
(8) During November 2001 we issued options to purchase 45,000 shares of our
common stock exercisable at $0.30 per share to an individual pursuant
to an employment agreement with our company. The options vest
periodically over the term of the agreement. The options issued to the
employee were exempt from registration under Section 4(2) of the
Securities Act. The options contain the appropriate restrictive legend
restricting their transferability absent registration or applicable
exemption. The employee received information concerning our company and
had the opportunity to ask questions about the viability of our
company.
(9) On January 17, 2002, we issued options to purchase 2,000,000 shares of
our common stock at an exercise price of $0.15 per share. The market
price at the date of the grant was $0.12 per share. These options were
issued pursuant to an employment agreement. The options vest
periodically over the term of the agreement. The options issued to the
employee were exempt from registration under Section 4(2) of the
Securities Act. The options contain the appropriate restrictive legend
39
restricting their transferability absent registration or applicable
exemption. The employee received information concerning our company and
had the opportunity to ask questions about the viability of our
company.
(10) During year ended December 31, 2002, we issued stock options to
purchase 200,000 shares of common stock to an additional employee of
our Company. These options have an exercise price of $0.77 per share.
The options vest periodically over the term of the agreement. The
options issued to the employee were exempt from registration under
Section 4(2) of the Securities Act. The options contain the appropriate
restrictive legend restricting their transferability absent
registration or applicable exemption. The employee received information
concerning our company and had the opportunity to ask questions about
the viability of our company.
(11) During January of 2003 we issued options to purchase 10,000 shares of
our common stock exercisable at $1.00 per share to an employee pursuant
to a two-year employment agreement with our company. The options vest
periodically over the term of the agreement, of which options to
purchase 5,000 shares vested during year ended December 31, 2003. The
options issued to the employee were exempt from registration under
Section 4(2) of the Securities Act. The options contain the appropriate
restrictive legend restricting their transferability absent
registration or applicable exemption. The employee received information
concerning our company and had the opportunity to ask questions about
the viability of our company.
(12) During the 2004 fiscal year, we issued options to purchase an aggregate
of 1,394,666 shares of our common stock to our chief executive officer,
an employee and a consultant in consideration for such individuals
converting accrued salaries and consulting fees in the aggregate amount
of $370,000 to equity in our Company. Options to purchase 697,333
shares of our common stock are exercisable at $0.60 and options to
purchase 697,333 shares of our common stock are exercisable at $1.00.
The options are exercisable for a period of five years commencing
January 15, 2004. Options to purchase 220,000 shares of our common
stock were issued to Alberto DiBella. Options to purchase 1,066,666
shares of our common stock were issued to John A. DiBella. Options to
purchase 108,000 shares of our common stock were issued to John Combs.
The issuance of the options to our employees was exempt from
registration under Section 4(2) of the Securities Act. The employees
had access to information concerning our Company and had the
opportunity to ask questions concerning the viability of our Company.
The options issued to our employees contain legends restricting their
transferability absent registration or applicable exemption.
(13) On February 18, 2004, we issued options to purchase an aggregate of
30,000 shares of our common stock exercisable at $0.71 per share to
three individuals as consideration for joining our advisory committee.
The options are exercisable until February 18, 2009. The options were
issued pursuant to the exemption from registration under Section 4(2)
of the Securities Act. The advisors received information concerning our
Company and had the opportunity to ask questions concerning the
viability of our Company. The options contain legends restricting their
transferability absent registration or applicable exemption.
(14) Dispostive control held by Joan Rich Baer, 199 Concord Dr., Madison CT
06443.
(15) Dispostive control held by Richard Goodwyn, 8 North Rahallion Dr.,
Rumson, NJ 07760.
40
(16) Dispostive control held by Robert Levy, 100 West Liberty St., Reno,
NV 85901.
(17) Dispostive control held by Robert Levy, 100 West Liberty St., Reno,
NV 85901.
(18) Dispostive control held by Richard Keyes, 1024 Glorietta, Coronado,
CA 92118.
(19) Dispostive control held by Bryce Carter, Suite 5050 Commerce Court
West 199 Bay Street, Toronto, ON 5ML-1E2.
(20) Dispostive control held by James Edgar McDonald, 6044 East Briarwood
Dr., Centennial, CO 80112.
(21) Dispostive control held by Virginia Stevens McDonald, 6044 East
Briarwood Dr., Centennial, CO 80112.
(22) Dispostive control held by Barbara J. Drew, 302 Carl Lane, Capitola,
CA 95010.
PLAN OF DISTRIBUTION
The shares of common stock owned, or which may be acquired, by the
selling shareholders may be offered and sold by means of this prospectus from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. These shares may be
sold by one or more of the following methods, without limitation:
o a block trade in which a broker or dealer so engaged will attempt
to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
o face-to-face transactions between sellers and purchasers without
a broker/dealer.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from selling
shareholders in amounts to be negotiated.
The selling shareholders and any broker/dealers who act in connection
with the sale of the shares hereunder may be deemed to be "underwriters" within
the meaning of section 2(11) of the Securities Acts of 1933, and any commissions
received by them and profit on any resale of the shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act. We
have agreed to indemnify the selling shareholders, and any securities
broker/dealers who may be deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters or otherwise.
We have advised the selling shareholders that they and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the prospectus delivery requirements under the Securities Act. We
have also advised each selling shareholder that in the event of a "distribution"
of the shares owned by the selling shareholder, such selling shareholder, any
"affiliated purchasers", and any broker/dealer or other person who participates
in such distribution, may be subject to Rule 102 under the Securities Exchange
Act of 1934 until their participation in that distribution is completed. Rule
102 makes it unlawful for any person who is participating in a distribution to
bid for or purchase stock of the same class as is the subject of the
41
distribution. A "distribution" is defined in Rule 102 as an offering of
securities "that is distinguished from ordinary trading transactions by the
magnitude of the offering and the presence of special selling efforts and
selling methods". We have also advised the selling shareholders that Rule 101
under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the common stock in
connection with this offering.
We do not intend to distribute or deliver the prospectus by means other
than by hand or mail.
During such time as the selling shareholders may be engaged in a
distribution of the securities covered by this prospectus, the selling
shareholders are required to comply with Regulation M promulgated under the
Exchange Act. With certain exceptions, Regulation M precludes the selling
shareholders, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject to the distribution until the entire distribution is complete.
Regulation M also restricts bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, we have 23,538,801 shares of common
stock issued and outstanding. This does not include shares that may be issued
upon exercise of options or warrants.
We cannot predict the effect, if any, that market sales of common stock
or the availability of these shares for sale will have on the market price of
our shares from time to time. Nevertheless, the possibility that substantial
amounts of common stock may be sold in the public market could negatively damage
and affect market prices for our common stock and could damage our ability to
raise capital through the sale of our equity securities.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be
passed upon for us by Arnstein & Lehr LLP, 200 East Las Olas Boulevard, Suite
1700, Fort Lauderdale, Florida 33301.
EXPERTS
Our consolidated financial statements as of December 31, 2007 are
included herein in reliance on the reports Jewett, Schwartz, Wolfe & Associates
& Co., LLP independent accountants, given on the authority of that firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC the registration statement on Form SB-2
under the Securities Act for the common stock offered by this prospectus. This
prospectus, which is a part of the registration statement, does not contain all
of the information in the registration statement and the exhibits filed with it,
portions of which have been omitted as permitted by SEC rules and regulations.
For further information concerning us and the securities offered by this
42
prospectus, we refer to the registration statement and to the exhibits filed
with it. Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily complete. In each
instance, we refer you to the copy of the contracts and/or other documents filed
as exhibits to the registration statement, and these statements are qualified in
their entirety by reference to the contract or document.
The registration statement, including all exhibits, may be inspected
without charge at the SEC's Public Reference Room at 450 Fifth Street, N.W.
Washington, D.C. 20549, and at the SEC's regional offices located at the
Woolworth Building, 233 Broadway, New York, New York 10279 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials may also be obtained from the SEC's Public Reference at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549, upon the payment of prescribed
fees. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.
The registration statement, including all exhibits and schedules and
amendments, has been filed with the SEC through the Electronic Data Gathering,
Analysis and Retrieval system, and are publicly available through the SEC's Web
site located at http://www.sec.gov.
43
ENVIRO VORAXIAL TECHNOLOGY, INC.
AND SUBSIDIARY
FINANCIAL STATEMENTS
DECEMBER 31, 2007
Table of Contents
Report of Independent Registered Public Accounting Firm................................. F - 2
Balance Sheet ......................................................................... F - 3
Statements of Operations ............................................................... F - 4
Statements of Changes in Shareholders' Deficiency....................................... F - 5
Statements of Cash Flows ............................................................... F - 6
Notes to Financial Statements........................................................... F - 7 - 21
F-1
Report of Independent Registered Public Accounting Firm
To The Shareholders and Board of Directors of
Enviro Voraxial Technology, Inc.
We have audited the accompanying consolidated balance sheet of Enviro Voraxial
Technology, Inc and Subsidiary as of December 31, 2007 and the related
consolidated statements of operations, changes in shareholders' deficiency and
cash flows for years end December 31, 2007 and 2006. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enviro Voraxial Technology, Inc
and Subsidiary as of December 31, 2007 and 2006, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming
that Enviro Voraxial Technology, Inc and Subsidiary will continue as a going
concern. As discussed in Note B to the financial statements, Enviro Voraxial
Technology, Inc and Subsidiary has suffered recurring losses from operations,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Jewett, Schwartz, Wolfe & Associates
Hollywood, Florida
March 27, 2008
F-2
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31,
2007
------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 201,066
Inventory, net 295,267
-----------
Total current assets 496,333
FIXED ASSETS, NET 226,242
OTHER ASSETS 13,695
-----------
Total assets $ 736,270
===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 656,819
Current portion of note payable 30,836
-----------
Total current liabilities 687,655
LONG TERM NOTE PAYABLE 141,953
-----------
Total liabilities 829,608
-----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Common stock, $.001 par value, 42,750,000 shares authorized
23,122,135 shares issued and oustanding 23,121
Additional paid-in capital 8,520,857
Accumulated deficit (8,637,316)
-----------
Total shareholders' deficiency (93,338)
-----------
Total liabilities and shareholders' deficiency $ 736,270
===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
------------------------------
2007 2006
------------ -------------
Revenues, net $ 288,431 $ 310,376
Cost of goods sold 77,246 134,499
------------ ------------
Gross profit 211,185 175,877
Costs and expenses:
General and administrative 641,725 301,975
Consulting services paid in
stock in lieu of cash 884,176 120,000
Research and development 603,288 592,181
------------ ------------
Total costs and expenses 2,129,189 1,014,156
------------ ------------
Loss from operations (1,918,004) (838,279)
------------ ------------
Other expenses (incomes):
Interest expense (3,776) (4,748)
------------ ------------
Total other expense (3,776) (4,748)
------------ ------------
NET LOSS $ (1,921,780) $ (833,531)
============ ============
Weighted average number of common shares
outstanding-basic & diluted 18,282,808 18,257,808
============ ============
Basic and diluted loss per common share $ (0.11) $ (0.05)
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
Common Stock Additional
------------------------ Paid-in Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- --------- ----------- ------------ ------------ -----------
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 options for services - - - - - -
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
Issuance of common stock 780,000 780 467,220 - - 468,000
Amortization of deferred compensation - - - 13,333 - 13,333
Issuance of common stock 250,000 250 149,750 - - 150,000
Net loss - - - - (1,921,780) (1,921,780)
----------- --------- ----------- ---------- ------------ -----------
Balance - December 31, 2007 23,122,235 $ 23,121 $ 8,520,857 $ - $ (8,637,316) $ (93,338)
=========== ========= =========== ========== ============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
--------------------------------
2007 2006
----------- ------------
Cash Flows From Operating Activities:
Net loss $(1,921,780) $ (833,531)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 11,880 583
Common stock issued for services 40,000 120,000
Amortization of deferred compensation - 53,437
Deferred compensation 13,333 (13,333)
Common stock options issued for accrued salary 60,000
Issuance of common stock consulting services 86,676 -
Extension of stock options issued 697,500 -
Changes in assets and liabilities:
Accounts receivable 61,341 (61,341)
Inventory (97,121) (72,112)
Accounts payable and accrued expenses 305,117 226,999
----------- -----------
Net cash used in operating activities (743,054) (579,298)
----------- -----------
Cash Flows From Investing Activities:
Purchase of equipment (233,367) -
Purchase of other assets (3,695)
----------- -----------
Net cash provided by investing activities (237,062) -
----------- -----------
Cash Flows From Financing Activities:
Proceeds from issuance of notes payable, net 172,789 -
Proceeds from sales of common stock 618,000 893,000
----------- -----------
Net cash provided by financing activities 790,789 893,000
----------- -----------
Net increase (decrease) in cash and cash equivalents (189,327) 313,702
Cash and cash equivalents, beginning of period 390,393 76,691
----------- -----------
Cash and cash equivalents, end of period $ 201,066 $ 390,393
=========== ===========
Supplemental Disclosures
Cash paid during the year for interest $ - $ -
=========== ===========
Cash paid during the year for taxes $ - $ -
=========== ===========
Common stock options issued for conversion of accrued salary $ 360,000 $ -
=========== ===========
Common stock options issued for services $ 86,676 $ -
=========== ===========
Common stock issued for consulting services $ 40,000 $ 120,000
=========== ===========
Extension of common stock options $ 697,500 $ -
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 refineries, mining,
manufacturing and municipal wastewater industry.
The Company currently operates within one segment, which is the manufacture and
sale of the Voraxial(R) Separator.
Florida Precision Aerospace, Inc. (FPA) is the wholly-owned subsidiary of the
Company and is used to manufacture, assemble and test the Voraxial Separator.
NOTE B - GOING CONCERN
The Company has experienced net losses, has negative cash flows from operating
activities, and has to raise capital to sustain operations. There is no
assurance that the Company's developmental and marketing efforts will be
successful, that the Company will ever have commercially accepted products, or
that the Company 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 2008, 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
Principles of Consolidation
- ---------------------------
The consolidated financial statements 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.
Estimates
- ---------
The preparation of consolidated 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 reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results may differ.
F-7
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Revenue Recognition
- -------------------
The Company derives its revenue from the sale and short-term rental of the
Voraxial (R) Separator. The Company presents revenue in accordance with Staff
Accounting Bulletin (SAB) No. 104 "Revenue Recognition in Financial Statements".
Under SAB 104, revenue is realized when persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or determinable and
collectability is reasonably assured.
Revenues that are generated from sales of equipment are typically recognized
upon shipment. Our standard agreements generally do not include customer
acceptance or post shipment installation provisions. However, if such provisions
have been included or there is an uncertainty about customer acceptance, revenue
is deferred until we have evidence of customer acceptance and all terms of the
agreement have been complied with. There were no agreements with such provisions
as of December 31, 2007.
The Company recognizes revenue from the short term rental of equipment, ratably
over the life of the agreement, which is usually three to six months.
Fair Value of Instruments
- -------------------------
The carrying amounts of the Company's financial instruments, including cash and
cash equivalents, inventory, accounts payable and accrued expenses at December
31, 2007, approximate their fair value because of their relatively short-term
nature.
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. The Company
maintains its cash balances with various financial institutions. Balances at
these institutions may at times exceed the Federal Deposit Insurance Corporate
limits.
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 units being
rented on a short term basis and 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.
Fixed Assets
- ------------
Fixed assets are stated at cost less accumulated depreciation. The cost of
maintenance and repairs is expensed to operations as incurred. Depreciation is
computed by the straight-line method over the estimated economic useful life of
the assets (5-10 years). Gains and losses recognized from the sales or disposal
of assets is the difference between the sales price and the recorded cost less
accumulated depreciation less costs of disposal.
F-8
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 stock options have been excluded from the
calculation since they would be anti-dilutive.
Such equity instruments may have a dilutive effect in the future and include the
following potential common shares:
Warrants 5,589,367
Stock options 6,335,666
----------
11,925,033
==========
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 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.
Research and Development Expenses
- ---------------------------------
Research and development costs, which consist of travel expenses, consulting
fees, subcontractors and salaries are expensed as incurred.
Advertising Costs
- -----------------
Advertising costs are expensed as incurred and are included in general and
administrative expenses. Amounts incurred for advertising were not material as
of December 31, 2007 or 2006.
Stock-Based Compensation
- ------------------------
The company adopted SFAS No. 123(R) effective January 1, 2006. This statement
requires compensation expense relating to share-based payments to be recognized
in net income using a fair-value measurement method. Under the fair value
method, the estimated fair value of awards is charged to income on a
straight-line basis over the requisite service period, which is generally the
vesting period. The company elected the modified prospective method as
prescribed in SFAS No. 123 (R) and therefore, prior periods were not restated.
Under the modified prospective method, this statement was applied to new awards
granted after the time of adoption, as well as to the unvested portion of
previously granted equity-based awards for which the requisite service has not
been rendered as of January 1, 2006.
F-9
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Prior to January 1, 2006, the Company accounted 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 of SFAS No. 123. The Company
currently accounts for stock-based compensation under the fair value method
using the Black-Scholes option pricing model as indicated in Note G.
Accounting for the Impairment of Long-Lived Assets
- --------------------------------------------------
The long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell. There were no impairments of long-lived assets in 2007.
Recent Accounting Pronouncements
- --------------------------------
Accounting changes and error corrections
- ----------------------------------------
In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No.
154, "Accounting Changes and Error Corrections" (SFAS 154), which replaces
Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements - An
Amendment of APB Opinion No. 28." SFAS 154 provides guidance on the accounting
for and reporting of accounting changes and error corrections, and it
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company has adopted SFAS 154 in the first quarter of fiscal year 2006 and
does not expect it to have a material impact on its consolidated results of
operations and financial condition.
F-10
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Fair value measurements
- -----------------------
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157). SFAS 157 provides guidance for using fair value to measure assets and
liabilities. SFAS 157 addresses the requests from investors for expanded
disclosure about the extent to which companies measure assets and liabilities at
fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2006 and has been adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect that its adoption of SFAS 157 will materially
impact its consolidated results of operations and financial condition.
Accounting for uncertainty in income taxes
- ------------------------------------------
In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing the recognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The cumulative effects, if any, of applying
FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption. FIN 48 is effective for fiscal years
beginning after December 15, 2006, and the Company is required to adopt it in
the first quarter of fiscal year 2007. The Company does not expect that its
adoption of FIN 48 will have a material effect on its consolidated results of
operations and financial condition.
Taxes collected from customer and remitted to governmental authorities
- ----------------------------------------------------------------------
In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-3
(EITF 06-3), "How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That Is, Gross versus
Net Presentation)." EITF 06-3 applies to any tax assessed by a governmental
authority that is directly imposed on a revenue producing transaction between a
seller and a customer. EITF 06-3 allows companies to present taxes either gross
within revenue and expense or net. If taxes subject to this issue are
significant, a company is required to disclose its accounting policy for
presenting taxes and the amount of such taxes that are recognized on a gross
basis. The Company currently presents such taxes net. EITF 06-3 is required to
be adopted during the first quarter of fiscal year 2008. These taxes are
currently not material to the Company's consolidated financial statements.
F-11
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Accounting for rental costs incurred during a construction period
- -----------------------------------------------------------------
In September 2006, the FASB issued FASB Staff Position No. FAS 13-1 (As
Amended), "Accounting for Rental Costs Incurred during a Construction Period"
(FAS 13-1). This position requires a company to recognize as rental expense the
rental costs associated with a ground or building operating lease during a
construction period, except for costs associated with projects accounted for
under SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects." FAS 13-1 is effective for reporting periods beginning after
December 15, 2005 and was adopted by the Company in the first quarter of fiscal
year 2007. The Company's adoption of FAS 13-1 will not materially affect its
consolidated results of operations and financial position.
Effects of Prior Year Misstatements when Quantifying Misstatements in the
- -------------------------------------------------------------------------
Current Year Financial Statements
- ---------------------------------
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006, and will be adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect the adoption of SAB 108 to have a material
impact on its consolidated results of operations and financial condition
FSP FAS 123(R)-5
- ----------------
FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that
instruments that were originally issued as employee compensation and then
modified, and that modification is made to the terms of the instrument solely to
reflect an equity restructuring that occurs when the holders are no longer
employees, then no change in the recognition or the measurement (due to a change
in classification) of those instruments will result if both of the following
conditions are met: (a). There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b). All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. The Company does not expect the adoption of FSP FAS 123(R)-5 to have a
material impact on its consolidated results of operations and financial
condition
F-12
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Business Combinations
- ---------------------
In December, 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007),
"Business Combinations" (hereinafter "SFAS No. 141 (revised 2007)"). This
statement establishes principles and requirements for how an acquirer a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree, b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and c) determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The scope of SFAS No. 141
(revised 2007) is broader than the scope of SFAS No. 141, which it replaces. The
effective date of SFAS No. 141 (revised 2007) is for all acquisitions in which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The adoption of this statement
has no immediate material effect on the Company's consolidated financial
condition or results of operations.
Noncontrolling Interests in Consolidated Financial Statements - an amendment of
- -------------------------------------------------------------------------------
ARB 51
- ------
In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51" (hereinafter
"SFAS No. 160"). This statement establishes accounting and reporting standards
that require a) the ownership interests in subsidiaries held by parties other
than the parent be clearly identified, labeled and presented in the consolidated
statement of financial position with equity, but separate from the parent's
equity, b) the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, c) changes in a parent's ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, d) when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The
effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Company's consolidated financial condition or
results of operations.
NOTE D - CONCENTRATION OF CREDIT RISK
One customer accounted for approximately 63% of revenue for the years end
December 31, 2007. There were no outstanding receivables from this customer as
of December 31, 2007.
F-13
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE E - FIXED ASSETS
Fixed assets as of December 31, 2007 consists of:
2007
-----------------
Machinery and equipment $ 500,666
Furniture and fixtures 14,498
-----------------
Total 515,164
Less: accumulated depreciation (288,922)
-----------------
Fixed Assets, net $ 226,242
=================
Depreciation expense for the years ended December 31, 2007 and 2006 amounted to
$11,880 and $583 respectively.
NOTE F - NOTES PAYABLE
Notes payable to finance companies, due in monthly
installments of $3,695, including principal and
interest at prime plus .25% collateralized by
certain equipment $ 172,789
Less current portion (30,836)
-----------------
Long term debt $ 141,953
=================
The Company has recorded interest expense of $3,776 for the year ended December
31, 2007.
Payments of long term debt over the next five years are due as follows:
Year Ending
2008 $ 33,561
2009 36,528
2010 39,757
2011 32,107
----------------
Thereafter $ 141,953
================
NOTE G - RELATED PARTY TRANSACTIONS
For the year ended December 31, 2007, the Company incurred consulting expenses
from the chief executive officer and majority stockholder of the Company of
$250,000. Of these amounts, $120,000 has been paid out for the year ended
December 31, 2007. The unpaid balance has been included in accrued expenses.
F-14
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE H - CAPITAL TRANSACTIONS
Common stock
- ------------
In January 2006, the Company entered into a six month consulting agreement and
agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000. The shares contain legends restricting their
transferability absent registration or applicable exemption.
In August 2006, the Company entered into a three month consulting agreement and
agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000. The shares contain legends restricting their
transferability absent registration or applicable exemption.
In November 2006, the Company entered into a three month consulting agreement
and agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000. The shares contain legends restricting their
transferability absent registration or applicable exemption.
During fiscal year 2006, the Company received gross proceeds of $893,000 from 19
accredited investors, including five investment funds to purchase an aggregate
of 2,232,500 shares of the Company's restricted common stock at $0.40 per share.
The shares contain legends restricting their transferability absent registration
or applicable exemption.
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. The shares contain legends restricting
their transferability absent registration or applicable exemption.
During the year ended December 31, 2007 the Company sold 780,000 shares of
restricted common stock for $.60 per share in a private placement offering to
four accredited investors. Total proceeds from the sale were $468,000. The
shares contain legends restricting their transferability absent registration or
applicable exemption.
During the year ended December 31, 2007 the Company sold 250,000 shares of
restricted common stock for $.60 per share in a private placement offering to
one accredited investor. Total proceeds from the sale were $150,000. The shares
contain legends restricting their transferability absent registration or
applicable exemption.
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 December 31, 2007.
F-15
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 December 31, 2007.
In October 2007, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 1,033,333 shares of common stock
issued in 2002 for a period of one year. The warrants now expire in October
2008. The purchase price of these warrants ranges from $1.00 - $1.25 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 one years. No increase in
fair value was noted and, therefore, no adjustment has been made to the
financial statements as of December 31, 2007.
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 exercisable at $1.00 per share. These
warrants vest equally in 12 traunches over a period of one year commencing in
January, 2005 and expire in January 2008. The Company calculated 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.
During 2008, the warrants were extended for a one year period. 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 one year. No increase in fair value was noted
and, therefore, no adjustment has been made to the financial statements as of
December 31, 2007.
Information with respect to warrants outstanding and exercisable at December 31,
2007 is as follows:
Number Range of Exercise Number
Outstanding Price Exercisable
- -------------------------------------------------------------------------------
Balance, December 31, 2006 5,589,367 $0.75 - $9.00 5,389,367
Issued - -
- -------------------------------------------------------------------------------
Balance, December 31, 2007 5,589,367 $0.75-$9.00 5,389,367
- -------------------------------------------------------------------------------
Options extended
- ----------------
In January 2007, the Company extended the exercisable life of certain options
F-16
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 25%; risk-free interest rate of 5% and an expected life
of five years. This result in fair value of approximately $687,000, which has
been recorded as compensation expense for the year ended December 31, 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
25%; 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 no adjustment has been
made to the financial statements as of December 31, 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 25%; risk-free interest rate of 5% and an expected life of five
years. This resulted in a fair value of approximately $10,500, which has been
recorded as compensation expense for the year ended December 31, 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 25%; 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
remaining $60,000 has been recorded as compensation expense for the year ended
December 31, 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 25%;
risk-free interest rate of 5% and an expected life of 1 to 5 years, resulting in
a fair value of approximately $86,000.
F-17
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
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 25%; 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. These options have expired as of December 31, 2007.
Information with respect to employee stock options outstanding and employee
stock options exercisable at December 31, 2007 is as follows:
- ---------------------------------------------------------------------------------------------------------------
Weighted Average
Exercise Price
Options Vested Exercise Price Per Per Option
Outstanding Shares Common Share Outstanding
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2006 3,729,666 3,709,666 $0.15-$1.00 $0.52
- ---------------------------------------------------------------------------------------------------------------
Granted/vested during the year ended
December 31, 2007 2,981,000 2,981,000 $0.40 $0.40
- ---------------------------------------------------------------------------------------------------------------
Expired during 2007 (375,000) (375,000) ($.80-$1.00) ($.90)
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 2007 6,335,666 5,830,866 $0.15-$1.00 $0.46
- ---------------------------------------------------------------------------------------------------------------
The following table summarizes information about the stock options outstanding
at December 31, 2007:
- ------------------------------------------------------------------------------------------------------------------
Weighted
Number Average
Outstanding at Remaining Weighted
Exercise December 31, Contractual Average Number Exercisable Weighted Average
Price 2007 Life Exercise Price at December 31, 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 2,606,000 4.25 0.40 2,981,000 0.40
--------- ---------
6,335,666 6,335,666
--------- ---------
- ------------------------------------------------------------------------------------------------------------
F-18
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
NOTE I - INCOME TAXES
The provision (benefit) for income taxes from continued operations for the years
ended December 31, 2007 and 2006 consist of the following:
December 31,
-----------------------------
2007 2006
-------------- -------------
Current:
Federal $ - $ -
State $ - -
-------------- -------------
- -
Deferred:
Federal $ (653,500) $ (283,560)
State (115,300) (50,040)
-------------- -------------
(768,800) (333,600)
Benefit from the operating
loss carryforward 768,800 333,600
-------------- -------------
Benefit for income taxes, net $ - $ -
============== =============
The difference between income tax expense computed by applying the federal
statutory corporate tax rate and actual income tax expense is as follows:
December 31,
--------------------------
2007 2006
----------- ----------
Statutory federal income tax rate 34.0% 34.0%
Decrease in valuation allowance (40.0)% (40.0)%
State income taxes 6.0% 6.0%
----------- ----------
Effective tax rate (0)% (0)%
=========== ==========
Deferred income taxes result from temporary differences in the recognition of
income and expenses for the financial reporting purposes and for tax purposes.
The net deferred tax assets and liabilities are comprised of the following:
2007
---------------
Deferred income tax asset:
Net operating loss carry-forwards $ 3,454,800
Valuation allowance (3,454,800)
---------------
Deferred income tax asset $ -
===============
F-19
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
The tax effect of these temporary differences representing deferred tax asset
and liabilities result principally from the following:
2007
-------------------
Deferred tax assets
Current $ -
Non-current 3,454,800
-------------------
Net deferred income tax asset $ 3,454,800
===================
The Company has a net operating loss carryforward of approximately $8,637,000
available to offset future taxable income through 2019.
The Company has made a 100% valuation allowance of the deferred income tax asset
at December 31, 2006, as it is not expected that the deferred tax assets will be
realized. The net increase in valuation allowance during the year ended December
31, 2006 was $336,000.
NOTE J - COMMITMENTS AND CONTINGENCIES
Employment Agreements
- ---------------------
The Company entered into an employment agreement dated January 17, 2002 with an
individual to serve as the Vice President and Director of Business Development.
The agreement provides for a contingent bonus to be paid to this employee in the
amount of $300,000 to improve the financial condition of the Company. Such bonus
is payable upon the Company obtaining a total of $3 million of financing or when
revenue exceeds $1 million. In 2002, this individual was granted stock options
to purchase 2 million shares of common stock with an exercise price of $0.15 per
share. The market price at the date of grant was $0.12 per share.
The Company hired two employees under employment agreements that commenced in
January 2003. The combined salaries for 2003 are $215,000 subject to annual
increases beginning in 2004. Both agreements have a term of 5 years. One
agreement provided for the granting of up to 300,000 cashless exercise warrants
to purchase common stock at $1 per share which may result in a significant
charge to operations in the future. This agreement was terminated by mutual
agreement on December 31, 2004, and only 150,000 warrants were vested and are
exercisable. The other agreement provides for the granting of 10,000 stock
options to purchase common stock at $1 per share exercisable ratably over two
years from the date of grant.
F-20
ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Operating Lease
- ---------------
The Company leases office and warehouse space in Ft. Lauderdale, Florida under a
business lease agreement for a three-year term ending in August 2007. The
Company has extended the lease for an additional twelve months, with the option
to cancel the lease with sufficient notice. The Company expects to pay
approximately $49,000 toward this lease in 2008 prior to its expiration in
August 2008.
Rent expense charged to operations amounted to $71,752 in 2007.
F-21
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF
ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
----
Prospectus Summary........................................................................................... 1
Forward-Looking Statements................................................................................... 4
Risk Factors................................................................................................. 4
Capitalization............................................................................................... 9
Price Range of common stock and Dividend Policy.............................................................. 10
Use of Proceeds.............................................................................................. 11
Management's Discussion and Analysis or Plan of Operation.................................................... 12
Business..................................................................................................... 18
Management................................................................................................... 23
Certain Transactions......................................................................................... 26
Description of Securities.................................................................................... 28
Selling Shareholders......................................................................................... 29
Plan of Distribution......................................................................................... 41
Shares Eligible for Future Sale.............................................................................. 42
Legal Matters................................................................................................ 42
Experts...................................................................................................... 42
Additional Information....................................................................................... 42
Financial Statements......................................................................................... F-1
9,543,363 Shares
Enviro Voraxial Technology, Inc.
-------------
PROSPECTUS
-------------
_______________, 2008
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Idaho Statutes (the "Idaho Statutes") permits the indemnification
of directors, employees, officers and agents of Idaho corporations. Our Articles
of Incorporation (the "Articles") and Bylaws provide that we shall indemnify its
directors and officers to the fullest extent permitted by the Idaho Statutes.
The provisions of the Idaho Statutes that authorize indemnification do
not eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Idaho. In addition, each director will continue to be
subject to liability for (a) violations of criminal laws, unless the director
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for our best
interests in a proceeding by or in the right of a shareholder. The statute does
not affect a director's responsibilities under any other law, such as the Idaho
securities laws.
The effect of the foregoing is to require us to indemnify our officers
and directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers or persons in control
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses payable by us in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee............................................................. $ 293.09
Legal Fees and Expenses*.................................................................... 30,000.00
Accounting Fees and Expenses*............................................................... 5,000.00
Financial Printing*......................................................................... 5,000.00
Transfer Agent Fees*........................................................................ 1,000.00
Blue Sky Fees and Expenses*................................................................. 1,000.00
Miscellaneous*.............................................................................. 5,000.00
-------------
TOTAL.................................................................................. $ 47,293.09
=============
- ------------------
* Estimated
II-1
None of the foregoing expenses are being paid by the selling
shareholders.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In April 2001, we raised $100,000 through the private placement of our
securities pursuant to Regulation D of the Securities Act. We sold 1,000 units
containing share of our common stock and warrants to 1 investor. Each unit was
comprised of 100 shares of restricted common stock, par value $.001, and 200
common stock purchase warrants, of which 100 warrants are exercisable at $3.00
per share and 100 warrants are exercisable at $4.00 per share. The warrants
expire April 2007. The transaction was exempt from registration under Section
4(2) of the Securities Act.
In July 2001, we raised $20,000 through a private transaction whereby
the Company issued 23,530 shares of restricted common stock at $.85 per share to
an individual investor. The transaction was exempt from registration under
Section 4(2) of the Securities Act.
On January 17, 2002, we issued options to purchase 2,000,000 shares of
our common stock at an exercise price of $.15 per share. The market price at the
date of the grant was $.12 per share. These options were issued pursuant to an
employment agreement. In addition, during year ended December 31, 2002, we also
issued stock options to purchase 200,000 shares of common stock to an additional
employee of our Company. These options have an exercise price of $.77 per share.
On December 31, 2002, we issued 6,000,000 shares of common stock to
Alberto DiBella pursuant to the automatic conversion rights of the preferred
stock held by Mr. DiBella. The 6,000,000 shares of preferred stock held by Mr.
DiBella were returned to treasury and cancelled.
During the year ended December 31, 2002, we sold 5.17 units of
securities at $60,000 per unit in a private placement to 5 investors. Each unit
consisted of 100,000 shares of common stock, 100,000 warrants to purchase
100,000 shares of common stock at an exercise price of $1 per share and 100,000
warrants to purchase 100,000 shares of common stock at an exercise price of
$1.25 per share. The warrants issued at $1 per share are callable at par value
provided the stock trades above $1.50 per share for 20 consecutive trading days.
The warrants issued at $1.25 per share are callable at par value provided the
stock trades above $2 per share for 20 consecutive trading days. Net proceeds
received by our Company aggregated $286,000. The warrants are exercisable from
the date of issuance through December 2007. No warrants have been exercised
through December 31, 2002. The transaction was exempt from registration under
Section 4(2) of the Securities Act.
During the year ended December 2003, we sold an aggregate of 8.08 units
of securities to 30 investors for proceeds of $808,000. Each unit consisted of
166,666 shares of restricted common stock at $0.60 per share and 166,666
warrants to purchase 166,666 shares of common stock at $1.00 per share. The
warrants are exercisable for a period of five years from the date of closing.
The investors received information concerning our company and had the
opportunity to ask questions to the viability of our company. A total of
1,346,665 warrants were issued in this Offering. The issuances were exempt from
registration under Section 4(2) of the Securities Act. The investors received
information concerning the Company and had the opportunity to ask questions
concerning the viability of the Company. The shares contain legends restricting
their transferability absent registration or applicable exemption.
In January 2004, we closed a private placement, which commenced in
2003. Under the private placement we sold an aggregate of 61,666 shares of
II-2
restricted common stock at $0.60 per share and 61,666 warrants to purchase
61,666 shares of common stock at $1.00 per share to four investors for proceeds
of $37,000. The warrants are exercisable for a period of five years from the
date of closing. The transactions were exempt from registration under Section
4(2) of the Securities Act. The investors received information concerning the
Company and had the opportunity to ask questions concerning the viability of the
Company. The shares and warrants contain legends restricting their
transferability absent registration or applicable exemption.
From May 2004 through August 2004, the Company sold an aggregate of
1,935,000 units of securities to 38 accredited investors for gross proceeds of
$1,451,250 under the private placement. The Company has paid Bathgate Capital, a
placement agent, a commission of 10% of the gross proceeds and a non-accountable
expense allowance of 3% of the gross proceeds and issued the placement agent
warrants to purchase six shares of common stock (three shares at $0.75 and three
shares at $1.00) for each 20 units sold in the offering. Each unit consisted of
one share of restricted common stock at $0.75 per share and one warrant to
purchase one share of common stock at $1.00 per share. The warrants are
exercisable for a period of five years from the date of closing. The
transactions were exempt from registration under Regulation D, Rule 506 of the
Securities Act. All of the investors were deemed accredited. The investors
received information concerning the Company and had the opportunity to ask
questions concerning the viability of the Company. The shares and warrants
contain legends restricting their transferability absent registration or
applicable exemption.
On June 30, 2004, we issued 7,100 shares of our common stock to an
individual in consideration for services rendered. The shares were issued
pursuant to the exemption from registration under Section 4(2) of the Securities
Act. The service provider received information concerning the Company and had
the opportunity to ask questions concerning the Company. The shares issued
contain a legend restricting transferability absent registration or applicable
exemption.
During fiscal year 2005, the Company received capital from ten
accredited investors to purchase an aggregate of 1,468,333 shares of the
Company's restricted common stock at $0.40 per share for gross proceeds of
$587,333. The issuances were exempt from registration under Section 4(2) of the
Securities Act. Commissions paid to registered brokers and other expenses
related to the Offering were approximately $50,000. The investors received
information concerning the Company and has the opportunity to ask questions
concerning the viability of the Company. The shares contain legends restricting
their transferability absent registration or applicable exemption.
In May 2005, the Company issued 75,000 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 are amortized over the life of the
consulting agreement of four months, resulting in consulting expense of $97,000
for the nine months ended September 30, 2005. In November 2005, this consultant
received another 225,000 shares of common stock valued at $85,500 based on the
closing market price of the Company's common stock on the date of the agreement.
The shares were issued pursuant to the exemption from registration under Section
4(2) of the Securities Act. The consultant received information concerning the
Company and had the opportunity to ask questions concerning the Company. The
shares issued contain a legend restricting transferability absent registration
or applicable exemption.
On July 1, 2005, the Company entered into a consulting agreement and
agreed to issue 15,000 shares for services performed by a consultant, which were
II-3
valued at $7,650. The shares were issued pursuant to the exemption from
registration under Section 4(2) of the Securities Act. The service provider
received information concerning the Company and had the opportunity to ask
questions concerning the Company. The shares issued contain a legend restricting
transferability absent registration or applicable exemption.
In January 2006, we extended the exercisable life of certain warrants
to purchase an aggregate of 243,200 shares of common stock issued in 2000 for a
period of one year. The options initially expired in February 2007, but were
extended on January 16, 2007 and now expire in February 2008. In January 2007,
we also extended the exercisable life of certain warrants to purchase an
aggregate of 200,000 shares of common stock issued in 2001. The warrants now
expire in April 2008.
In January 2006, the Company entered into a six month consulting
agreement and agreed to issue 100,000 shares for services performed by a
consultant, which were valued at $40,000. The shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act. The
consultant received information concerning the Company and had the opportunity
to ask questions concerning the Company. The shares issued contain a legend
restricting transferability absent registration or applicable exemption.
In August 2006, the Company entered into a three month consulting
agreement and agreed to issue 100,000 shares for services performed by a
consultant, which were valued at $40,000. The shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act. The
consultant received information concerning the Company and had the opportunity
to ask questions concerning the Company. The shares issued contain a legend
restricting transferability absent registration or applicable exemption.
In November 2006, the Company entered into a three month consulting
agreement and agreed to issue 100,000 shares for services performed by a
consultant, which were valued at $40,000. The shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act. The
consultant received information concerning the Company and had the opportunity
to ask questions concerning the Company. The shares issued contain a legend
restricting transferability absent registration or applicable exemption.
During the twelve months ended December 30, 2006 the Company sold
2,232,500 shares of common stock for $0.40 per share in a private placement
offering to 19 accredited investors. Total proceeds from the sale were $893,000.
The issuances were exempt from registration under Section 4(2) of the Securities
Act. Commissions paid to registered brokers and other expenses were
approximately $30,000. The investors received information concerning the Company
and had the opportunity to ask questions concerning the viability of the
Company. The shares contain legends restricting their transferability absent
registration or applicable exemption.
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 issuances of the options
was exempt from registration under Section 4(2) of the Securities Act. The
officers received information concerning the Company and had the opportunity to
ask questions concerning the viability of the Company. The certificates
representing the securities contain legends restricting their transferability
absent registration or applicable exemption.
In January 2007, the Company granted 606,000 stock options to employees
and 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
II-4
issuances of the options was exempt from registration under Section 4(2) of the
Securities Act. The employees and consultants received information concerning
the Company and had the opportunity to ask questions concerning the viability of
the Company. The certificates representing the securities contain legends
restricting their transferability absent registration or applicable exemption.
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 expired on October 31, 2007. The issuances of the options was exempt
from registration under Section 4(2) of the Securities Act. The consultant
received information concerning the Company and had the opportunity to ask
questions concerning the viability of the Company. The certificates representing
the securities contain legends restricting their transferability absent
registration or applicable exemption.
In February 2007, the Company entered into a three month consulting
agreement and agreed to issue 100,000 restricted shares of common stock for
services performed by a consultant, which were valued at $40,000. The issuances
of the shares was exempt from registration under Section 4(2) of the Securities
Act. The consultant received information concerning the Company and had the
opportunity to ask questions concerning the viability of the Company. The
certificates representing the securities contain legends restricting their
transferability absent registration or applicable exemption.
During the year ended December 31, 2007 the Company sold 1,030,000
restricted shares of common stock for $.60 per share in a private placement
offering to a total of five accredited investors, including a Water Investment
Fund. Total proceeds from the sale were $618,000. No commissions were paid in
connection with the sale. The issuances of the shares was exempt from
registration under Section 4(2) of the Securities Act. The investors received
information concerning the Company and had the opportunity to ask questions
concerning the viability of the Company. The certificates representing the
securities contain legends restricting their transferability absent registration
or applicable exemption.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. Description of Document
- ----------- -----------------------
2.1 Agreement and Plan of Reorganization dated May 1996 (1)
3.1 Articles of Incorporation, as amended (1)
3.2 Bylaws (1)
4.1 Form of Stock Certificate (1)
5.1 Opinion of Arnstein & Lehr LLP
10.1 Form of Warrant Agreement (previously filed)
10.2 Form of Option Agreement (previously filed)
16.1 Letter from former independent accountant (2)
23.1 Consent of Current Independent Auditor (filed herein)
23.2 Consent of Arnstein & Lehr LLP (included in exhibit 5.1)
(1) Previously filed on Form 10SB Registration Statement, as amended, on
January 19, 2000 (file 000-30454).
(2) Previously filed on Form 8-K Current Report dated March 14, 2005.
ITEM 28. UNDERTAKINGS
The undersigned Registrant undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-5
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or preceding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date
it is first used after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in
any such document immediately prior to such date of first use.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on this Form S-1/A and authorized this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Fort Lauderdale, Florida on April 30, 2008.
ENVIRO VORAXIAL TECHNOLOGY, INC.
By:/s/ Alberto Dibella
----------------------
Alberto DiBella, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Alberto DiBella Chief Executive Officer April 30, 2008
- ------------------ (principal executive officer)
Alberto DiBella and Chief Financial Officer
(principal financial and
accounting officer)
/s/John A. DiBella Vice President and Director April 30, 2008
- ------------------
John A. DiBella
II-7