UV FLU TECHNOLOGIES INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with our consolidated
financial statements and notes thereto included elsewhere in this quarterly
report. Forward-looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results
or other developments. Forward-looking statements are based upon estimates,
forecasts, and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond our control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by us, or on our behalf. We disclaim any
obligation to update forward-looking statements.
UV Flu Technologies, Inc. ("we", "us", "our," or the "Company") was organized
under the laws of the State of Nevada on April 4, 2006 under the name "Northwest
Chariots, Inc." We were engaged in the business of renting and selling
electrically powered human transporters, like electric bicycles, chariots, and
quads. Following our fiscal year ended September 30, 2009, we decided to change
our product mix to air purification products and to focus on the research,
development, manufacturing, and sales of air purification systems and products.
In furtherance of our business objectives, on November 12, 2009, we effected a
32-for-1 forward stock split of all our issued and outstanding shares of common
stock, and we merged with our wholly-owned subsidiary, UV Flu Technologies,
Inc., for the purposes of effecting a name change to "UV Flu Technologies, Inc."
Effective November 15, 2009, we acquired AmAirapure Inc.'s air purification
technology, product, inventory, and certain equipment pursuant to an Asset
Purchase Agreement with AmAirapure, Inc. We issued 15,000,000 shares of our
common stock to shareholders of AmAirapure in connection with the asset
acquisition. Additionally, on November 25, 2009, we entered into a Distribution
Agreement with Puravair Distributors LLC ("Puravair") where we appointed
Puravair as our exclusive master distributor for our Viratech UV-400 product and
our other products for the professional, medical, and commercial markets in the
U.S. and Canada. On September 30, 2010, we terminated our Distribution Agreement
with Puravair and began adding new distributors, which totaled five as of year
The latest production runs of our Viratech UV-400 product incorporate our
patented UV bacteria killing technology, which has been cleared by the FDA for
use as a medical device. In June 2010, we expanded our market reach by
introducing the latest generation of our Viratech UV-400 product into the
residential and hospitality markets.
On October 28, 2010, we entered into a binding letter of intent with The Red Oak
Trust ("Red Oak") (the "LOI") in connection with our proposed acquisition of one
hundred percent (100%) of the issued and outstanding units of RxAir Industries,
LLC, a Nevada limited liability company ("RxAir"), which is wholly owned by Red
Oak (the "Acquisition"). RxAir began operations 15 years ago and has built a
reputation for delivering high-quality air purification products made in the
United States. The Acquisition included the Company acquiring RxAir's patents,
trademarks, inventory, production equipment, one 510k covering an FDA clearance
for the Rx-3000 as a Class II Medical Device, as well as a customer list
covering approximately 1,000 locations, including over 400 hospitals. The
Company plans to use the Acquisition as a springboard into the medical and
commercial market and believes the Acquisition will lead to increased sales.
On January 31, 2011, we entered into and completed our Acquisition of RxAir
pursuant to the Acquisition Agreement, dated January 31, 2011, by and the
Company, and Red Oak, as the sole shareholder of RxAir. At the closing of the
Acquisition, RxAir became a wholly-owned subsidiary of the Company.
The Company has spent the last two years building the brand, and focusing
marketing efforts towards areas that will not only generate sales, but educate
consumers about the indoor air quality space, and why it is so important, and
why our product is so unique in its ability to treat all forms of indoor air
pollution. Sales have begun to show the results from these initiatives. In order
to meet our business objectives, we will need to raise additional funds through
equity or convertible debt financing. There can be no assurance that we will be
successful in raising additional funds and, if unsuccessful, our plans for
expanding operations and business activities may have to be curtailed. Any
attempt to raise funds, through debt or equity financing, would likely result in
dilution to existing shareholders.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with United
States generally accepted accounting principles requires management of our
company to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting periods.
The discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. We believe certain critical accounting policies affect
our more significant judgments and estimates used in the preparation of our
consolidated financial statements. A description of our critical accounting
policies is set forth in our Annual Report on Form 10-K for the year ended
September 30, 2013. As of, and for the three months ended December 31, 2013,
there have been no material changes or updates to our critical accounting
Results of Operations
The following discussion of the financial condition, results of operations, cash
flows and changes in our financial position should be read in conjunction with
our audited consolidated financial statements and notes included in our Annual
Report on Form 10-K for the fiscal year ended September 30, 2013 filed on
January 13, 2014.
Results of Operations for the three months ended December 31, 2013 as compared
to the three months ended December 31, 2012
During the three months ended December 31, 2013, we received gross revenue of
$18,924 as compared to $54,385 for the three months ended December 31, 2012.
For the three months ended December 31, 2013 and December 31, 2012, we incurred
a loss of $316,347 and $298,448 respectively.
The decrease in revenues is due to the delay in a major national sales launch.
During the three months ended December 31, 2013, we received gross revenue of
$18,924 as compared to $54,385 for the three months ended December 31, 2013. The
decrease is primarily related to the delay in a national introduction of the
UV-400 through a major marketing company, which had been anticipated to begin in
the first quarter. The Company had signed a limited exclusivity agreement which
was in effect during the test period, which ends in February. The results don't
fully reflect the strides the Company has made in building a platform for
significant growth. The Company has decided to split its marketing efforts into
4 major areas:
· Sleep Market
Residentially, the Company is utilizing mediums that can efficiently sell
product, while also educating the consumer. Internet marketers, like Groupon,
video, infomercials, and direct mail and email campaigns are all potential
mediums. Our target market is health-conscious consumers, new mothers, any
individuals undergoing chemotherapy or transplants, and individuals with asthma
The Medical space, we are pursuing through our RX Air platform, which has an
installed base of almost 600 hospitals worldwide. We plan on attacking this
space through added distributors, both domestically, as well as Internationally,
while also contacting all of our current customers. We are also planning on
adding national distributors that sell into this space.
The Commercial space includes offices, hair salons, restaurants, pet and
veterinary applications, correctional facilities, health facilities, government
buildings and day care centers.
The Sleep Market, which has the potential to be several times larger than the
current air purification space, should be augmented by an endorsement agreement
with a nationally known Sleep Doctor, whose frequent television appearances
should help consumer and brand awareness. Clinical studies have linked Indoor
Air Pollution as being the biggest environmental factor in causing sleep related
issues, and sleep disorders are now known to dramatically increase the risks of
stroke, cancer, diabetes, and a host of other health ailments. We feel furniture
stores, through their bedding and infant nursery departments, hotels, sleep
centers, and consumers with sleep disorders are all potential customers.
In the first half of 2013, the Company began working with a national sales and
marketing company, that sells a line of infrared heaters and air purifiers. The
Company spends almost 40% of their gross revenues on marketing, which UV Flu
felt was necessary in building the brand. Test marketing is expected to be
completed in February of 2014, at which time the Companies will discuss the
potential of a national launch.
We have designed a lower cost unit for the residential marketplace, that we feel
will be the best product in the market, and will incorporate our technology with
an advanced filter medium. We feel next year the demand for that product
internationally could be significant.
Net Income (Loss)
During the three months ended December 31, 2013, our net loss was $316,347 as
compared to $298,448 for the three months ended December 31, 2012. The increase
in net loss is due to a decrease in sales due to a delay in a major contract.
General and Administrative Expenses
During the three months ended December 31, 2013, the Company incurred total
expenses of $302,754, as compared to $311,253 for the three months ended
December 31, 2012. The decrease is primarily due to a lower level of
professional fees during the quarter.
December 31, 2013 December 31, 2012
Marketing $ 11,454 1,650
Office and administration 186,543 90,991
Professional fees 6,255 184,421
Consulting 98,502 33,825
Depreciation 0 366
Total $ 302,754 311,253
Liquidity and Capital Resources
As of December 31, 2013, we had cash of $27,581, and working capital of
$(38,708). During the period ended December 31, 2013, we funded our operations
from receipts of sales revenues, proceeds from loans payable and sale of
shares. In order to survive, we are dependent on increasing our sales
volume. Additionally, we plan to continue further financings and believe that
this will provide sufficient working capital to fund our operations for at least
the next 12 months. Changes in our operating plans, increased expenses,
additional acquisitions, or other events may cause us to seek additional equity
or debt financing in the future.
For the three months ended December 31, 2013, $126,415 in cash flows was used in
operating activities as compared to $77,228 that was used in operating
activities for the three months ended December 31, 2012. The increase is
primarily due to an increase in our general and administrative expenses for the
three months ended December 31, 2013 as compared to the three months ended
December 31, 2012 as a result of additional staffing and marketing expenses. For
the period ended December 31, 2013, net cash provided by operating activities
reflected $22,921 in changes in current assets and inventory, and we used $4,311
in accounts payable and accrued liabilities.
For the three month period ended December 31, 2013 cash flows used for investing
activities was $0 as compared to $0 cash used for the three month period ended
December 31, 2012.
For the three months ended December 31, 2013, cash provided by financing
activities was $146,139 compared to $90,414 of cash used for the period ended
December 31, 2012. $5,000 was provided by notes payables, $9,375 from the
exercise of warrants, and $132,850 of proceeds from the sale of common shares
were provided for the three months ending December 31, 2013 as compared to
$12,414 was from notes payable and $78,000 proceeds from the sale of common
shares for the three month period ending December 31, 2012.
We anticipate that our cash requirements will be significant in the near term
due to contemplated development, purchasing, marketing and sales of our air
purification technologies and products. Accordingly, we expect to continue raise
capital through share offering and sales to fund current operations.
Off-Balance Sheet Arrangements
We presently do not have any off-balance sheet arrangements.
We did not make any capital expenditures in the three months ended December 31,
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