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U. S. SECURITIES AND EXCHANGE COMMISSION  FORM 10-QSB QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004 CVF TECHNOLOGIES CORPORATION  NEVADA
    
    0-29266
    
    87-0429335(State or other jurisdiction
of incorporation or organization)
    
    (Commission File
Number)
    
    (I.R.S. Employer
Identification No.)
 8604 Main Street, Suite 1
WILLIAMSVILLE, NEW YORK 14221
(716) 565-4711
(Address, including zip code, and telephone number,
including area code, of issuers principal executive offices) Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days. Yes [X] No [  ] As of November 10, 2004, there were 13,690,035 shares of common stock,
$0.001 par value per share, of the issuer outstanding. Transitional
Small Business Disclosure Format (check one): Yes
[  ] No [X]




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TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENT OF OPERATIONSCONSOLIDATED STATEMENT OF CASH FLOWSSTATEMENT OF COMPREHENSIVE INCOMENOTES TO CONSOLIDATED FINANCIAL STATEMENTSItem 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONItem 3. Controls and ProceduresPART II  OTHER INFORMATIONItem 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities.Item 6. ExhibitsSIGNATURESEXHIBIT INDEXEX-11 Computation of RatiosEX-31.1 Certification - CEOEX-31.2 Certification - CFOEX-32 Rule 906    Table of Contents  
 PART I  FINANCIAL INFORMATION 
 Item 1. Financial Statements CVF TECHNOLOGIES CORPORATION AND SUBSIDIARIES 
  (Expressed in U.S. Currency)September 30,
    
    December 31,2004
    
    2003(unaudited)
    
    (audited)(Note 2)
    
    (Note 2)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    878,761
    
    
    $
    225,535Trade receivables
    
    
    1,826,035
    
    
    
    2,461,980Inventory (Note 6)
    
    
    392,553
    
    
    
    586,009Prepaid expenses and other
    
    
    174,915
    
    
    
    75,669Income taxes receivable
    
    
    468,225
    
    
    
    550,830TOTAL CURRENT ASSETS
    
    
    3,740,489
    
    
    
    3,900,023Property and equipment, net of accumulated depreciation
    
    
    351,507
    
    
    
    220,889Loans receivable
    
    
    142,251
    
    
    
    142,251Holdings available for sale, at market
    
    
    1,960
    
    
    
    4,772Technology, net of accumulated amortization
    
    
    
    
    
    
    228,001Goodwill
    
    
    1,405,222
    
    
    
    1,405,222TOTAL ASSETS
    
    $
    5,641,429
    
    
    $
    5,901,158LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCURRENT LIABILITIES:Current portion of long-term debt (Note 15)
    
    $
    475,680
    
    
    $
    82,297Subsidiary loans past due or in default
    
    
    227,407
    
    
    
    221,269Accounts payables and accrued liabilities
    
    
    5,483,162
    
    
    
    6,212,368Preferred and other non-voting stock of subsidiaries
    
    
    198,200
    
    
    
    192,850TOTAL CURRENT LIABILITIES
    
    
    6,384,449
    
    
    
    6,708,784Notes
payable - officers and directors (Note 15)
    
    
    810,276
    
    
    
    1,836,256Notes
payable - other
    
    
    25,000
    
    
    
    Deferred income taxes
    
    
    267,388
    
    
    
    368,566Minority interest
    
    
    
    
    
    
    79,220Pension obligation
    
    
    576,231
    
    
    
    577,4571,678,895
    
    
    
    2,861,499Redeemable Series A preferred stock, $0.001 par value, redeemable at $18.25 per
share, authorized 500,000 shares, issued and outstanding 3,477 shares
    
    
    63,455
    
    
    
    63,4558,126,799
    
    
    
    9,633,738STOCKHOLDERS (DEFICIT) EQUITY:Common stock, $0.001 par value, authorized 50,000,000 shares,
13,083,974 issued (2003: 10,855,549) and in
treasury 481,700 (2003: 481,700)
    
    
    13,566
    
    
    
    11,338Series B convertible preferred stock, $0.001 par value,
liquidation preference of 130% of stated value, authorized,
issued and outstanding 339,000 shares (Note 8)
    
    
    
    
    
    
    339Series C convertible preferred stock, $0.001 par value,
issued and outstanding 100,000 shares (Note 8)
    
    
    100
    
    
    
    Warrants
    
    
    111,094
    
    
    
    111,094Additional paid in capital
    
    
    30,385,033
    
    
    
    28,473,130Treasury stock
    
    
    (2,747,174
    )
    
    
    (2,747,174
    )Accumulated other comprehensive loss
    
    
    (1,878,212
    )
    
    
    (1,750,291
    )Accumulated deficit
    
    
    (28,369,777
    )
    
    
    (27,831,016
    )TOTAL STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (2,485,370
    )
    
    
    (3,732,580
    )TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
    
    $
    5,641,429
    
    
    $
    5,901,158
 See notes to consolidated financial statements




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CVF TECHNOLOGIES CORPORATION AND SUBSIDIARIES 
  (UNAUDITED) (Expressed in U.S. Currency)Three months ended September 30,
    
    Nine months ended September 30,2004
    
    2003
    
    2004
    
    2003(Note 2)
    
    (Note 2)
    
    (Note 2)
    
    (Note 2)SALES
    
    $
    2,365,797
    
    
    $
    2,228,015
    
    
    $
    7,027,429
    
    
    $
    6,655,863Cost of sales
    
    
    1,083,751
    
    
    
    1,197,293
    
    
    
    3,744,124
    
    
    
    3,897,813GROSS MARGIN
    
    
    1,282,046
    
    
    
    1,030,722
    
    
    
    3,283,305
    
    
    
    2,758,050EXPENSES:Selling, general and administrative (excluding repriced options)
    
    
    1,414,883
    
    
    
    1,352,712
    
    
    
    4,066,375
    
    
    
    4,038,810Repriced stock options expense
    
    
    (84,070
    )
    
    
    70,250
    
    
    
    103,394
    
    
    
    252,900Research and development
    
    
    71,190
    
    
    
    159,835
    
    
    
    312,424
    
    
    
    336,465TOTAL EXPENSES
    
    
    1,402,003
    
    
    
    1,582,797
    
    
    
    4,482,193
    
    
    
    4,628,175(Loss) from continuing operations before under noted items
    
    
    (119,957
    )
    
    
    (552,075
    )
    
    
    (1,198,888
    )
    
    
    (1,870,125
    )OTHER (EXPENSES) INCOMEInterest (expense), net
    
    
    (78,673
    )
    
    
    (47,250
    )
    
    
    (247,425
    )
    
    
    (120,812
    )Other income (expense), net
    
    
    27,761
    
    
    
    (58,787
    )
    
    
    24,393
    
    
    
    60,471Gain (loss) on sale of holdings
    
    
    (17
    )
    
    
    122
    
    
    
    (2,021
    )
    
    
    7,316Gain on sale of equity in subsidiary
    
    
    
    
    
    
    
    
    
    
    742,568
    
    
    
    TOTAL OTHER (EXPENSE) INCOME
    
    
    (50,929
    )
    
    
    (105,915
    )
    
    
    517,515
    
    
    
    (53,025
    )(Loss) before income taxes and minority interest
    
    
    (170,886
    )
    
    
    (657,990
    )
    
    
    (681,373
    )
    
    
    (1,923,150
    )Income taxes (recovery)
    
    
    5,307
    
    
    
    (34,255
    )
    
    
    5,307
    
    
    
    (98,397
    )(Loss) before minority interest
    
    
    (176,193
    )
    
    
    (623,735
    )
    
    
    (686,680
    )
    
    
    (1,824,753
    )Minority interest in loss
    
    
    2,869
    
    
    
    15,180
    
    
    
    77,454
    
    
    
    143,118NET (LOSS)
    
    $
    (173,324
    )
    
    $
    (608,555
    )
    
    $
    (609,226
    )
    
    $
    (1,681,635
    )BASIC (LOSS) PER SHARE
    
    $
    (0.01
    )
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.18
    )DILUTED (LOSS) PER SHARE
    
    $
    (0.01
    )
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.18
    )WEIGHTED
SHARES USED IN COMPUTATION - BASIC
    
    
    12,812,438
    
    
    
    10,740,174
    
    
    
    12,157,730
    
    
    
    10,713,140WEIGHTED
SHARES USED IN COMPUTATION - DILUTED
    
    
    12,812,438
    
    
    
    10,740,174
    
    
    
    12,157,730
    
    
    
    10,713,140
 See notes to consolidated financial statements




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CVF TECHNOLOGIES CORPORATION AND SUBSIDIARIES 
 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Expressed in U.S. Currency)Nine Months Ended September 30,2004
    
    2003(Note 2)
    
    (Note 2)CASH FLOW FROM OPERATING ACTIVITIES:Net loss from continuing operations
    
    $
    (609,226
    )
    
    $
    (1,681,635
    )Adjustments to reconcile net loss
from operating activities:Depreciation and amortization
    
    
    274,669
    
    
    
    326,366Gain on sale of subsidiary
    
    
    742,568
    
    
    
    Gain (loss) on sale of holdings
    
    
    2,021
    
    
    
    (7,316
    )Minority interest in losses of subsidiaries
    
    
    (77,454
    )
    
    
    (143,118
    )Pension expense
    
    
    24,321
    
    
    
    22,160Deferred tax expense (income)
    
    
    5,307
    
    
    
    (98,397
    )Stock option compensation
    
    
    585,992
    
    
    
    252,900Changes in non-cash working capital itemsDecrease (increase) in trade receivables
    
    
    669,957
    
    
    
    (939,165
    )Decrease in inventory
    
    
    199,503
    
    
    
    13,370(Increase) decrease in prepaid expenses and other
    
    
    (92,417
    )
    
    
    36,936Decrease in income taxes receivable
    
    
    93,120
    
    
    
    443,710(Decrease) increase in trade payables and accrued liabilities
    
    
    (857,653
    )
    
    
    1,131,3291,569,934
    
    
    
    1,038,775CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES
    
    
    960,708
    
    
    
    (642,860
    )CASH FLOWS FROM INVESTING ACTIVITIES:Disposal (purchase) of property and equipment
    
    
    97,038
    
    
    
    (37,959
    )Proceeds from sale of holdings
    
    
    2,432
    
    
    
    46,724(Purchase) of treasury shares
    
    
    (69,688
    )
    
    
    CASH PROVIDED BY INVESTING ACTIVITIES
    
    
    29,782
    
    
    
    8,765CASH FLOWS (USED) FROM FINANCING ACTIVITIES:(Decrease) increase in bank indebtedness
    
    
    (5,042
    )
    
    
    84,791(Decrease) increase in note payable to officer
    
    
    (694,980
    )
    
    
    1,294,440Issuance of common stock
    
    
    681,012
    
    
    
    CASH PROVIDED (USED) BY FINANCING ACTIVITIES
    
    
    (19,010
    )
    
    
    1,379,231EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    (318,254
    )
    
    
    (159,382
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    653,226
    
    
    
    585,754CASH AND
CASH EQUIVALENTS - beginning of period
    
    
    225,535
    
    
    
    218,003CASH AND
CASH EQUIVALENTS - end of period
    
    $
    878,761
    
    
    $
    803,757
 See notes to consolidated financial statements




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CVF TECHNOLOGIES CORPORATION AND SUBSIDIARIES 
 STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) (Expressed in U.S. Currency)Three months ended September 30,
    
    Nine months ended September 30,2004
    
    2003
    
    2004
    
    2003Net (loss)
    
    $
    (173,324
    )
    
    $
    (608,555
    )
    
    $
    (609,226
    )
    
    $
    (1,681,635
    )Other comprehensive income, net of tax:Foreign currency translation adjustments
    
    
    (265,396
    )
    
    
    53,854
    
    
    
    (128,606
    )
    
    
    (383,096
    )Unrealized holding gains:Unrealized holding losses arising during period (see note below)
    
    
    (702
    )
    
    
    603
    
    
    
    685
    
    
    
    (4,705
    )Total other comprehensive income (loss)
    
    
    (266,098
    )
    
    
    54,457
    
    
    
    (127,921
    )
    
    
    (387,801
    )Comprehensive (loss) during period
    
    $
    (439,422
    )
    
    $
    (554,098
    )
    
    $
    (737,147
    )
    
    $
    (2,069,436
    )
 Note: Unrealized holding losses are net of tax (benefit) of ($468)
and $402 for the three months ended September 30, 2004 and 2003
respectively and $457 and ($3,137) for the nine months ended
September 30, 2004 and 2003 respectively. See notes to consolidated financial statements




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CVF TECHNOLOGIES CORPORATION AND SUBSIDIARIES 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED) (Dollars Expressed in U.S. Currency)  1.
    
    BASIS OF PRESENTATION The accompanying financial statements are unaudited, but reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of financial position and the results of operations for the
interim periods presented. All such adjustments are of a normal and
recurring nature. The results of operations for any interim period are
not necessarily indicative of the results attainable for a full fiscal
year. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates. Certain of the comparative figures have been reclassified to conform with
the presentation adopted in the current period. The Canadian dollar is
the functional currency used by the Company, whereas the reporting
currency is the U.S. dollar. 2. ACCOUNTING POLICIES (i) Going Concern These consolidated financial statements have been prepared on a
going concern basis, which presumes that assets will be realized and
liabilities discharged in the normal course of business over the
foreseeable future. The Companys current liabilities exceed its current
assets and the Company has incurred significant losses over the past six
years, which have reduced the Companys cash reserves, and depleted
stockholders equity. Further, the Company has contingent liabilities
(note 13). These conditions raise substantial doubt about the Companys
ability to continue in the normal course of business as a going concern. The Companys primary need for cash is to maintain its ability to support
the operations and ultimately the carrying values of certain of its individual
investee companies. From time to time, the Company may pursue the sale of a
portion of its interests in some of its investee companies as a source of funds,
as well as reducing its cash flow needs. The Company has been successful in
obtaining $1 million (Cdn funds) through this method over the last year. In
addition the Company has borrowed $374,850 from one of its investee directors.
The Company will continue




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to assist its investee companies in their efforts to
obtain outside financing in order
to fund the growth and development of their respective businesses and has
taken steps to reduce the operating cash requirements of the parent company and
its investees. The Company is also seeking outside investment. There is no
assurance that these initiatives will be successful or that the Company or
certain of its investees will continue to have adequate cash resources and
capital to be able to continue as going concerns. The Companys ability to continue to realize assets and discharge
liabilities in the normal course of business is uncertain. These
financial statements do not include any of the adjustments to the amounts
or classification of assets and liabilities that might be necessary
should the Company be unable to continue its business in the normal
course. (ii) Stock Based Compensation Plans The Company accounts for stock-based compensation plans under
Accounting Principles Board Opinion 25, (APB 25) Accounting for Stock
Issued to Employees and the related interpretation, for which no
compensation cost is recorded in the statement of operations for the
estimated fair value of stock options issued with an exercise price equal
to the fair value of the common stock on the date of grant. Statement of
Financial Accounting Standards No.123 (SFAS 123) Accounting for
Stock-Based Compensation, as amended by Statement of Financial Accounting
Standards No. 148 (SFAS 148) Accounting for Stock-Based Compensation 
Transition and Disclosure, requires that companies, which do not elect to
account for stock-based compensation as prescribed by this statement,
disclose the pro-forma effects on earnings and earnings per share as if
SFAS 123 has been adopted. If the Company had applied the recognition provisions of SFAS 123 using
the Black-Scholes option pricing model, the resulting pro-forma net income
(loss) available to common shareholders, and pro-forma net income (loss)
available to common shareholders per share would be as follows: For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Net (loss) to common shareholders, as reported
    
    $
    (174,102
    )
    
    $
    (694,656
    )
    
    $
    (611,544
    )
    
    $
    (1,937,130
    )Deduct (Add): Stock-based compensation, net
of tax
    
    
    
    
    
    
    
    
    
    
    38,164
    
    
    
    Net (loss) available to common shareholders,
pro-forma
    
    $
    (174,102
    )
    
    $
    (694,656
    )
    
    $
    (649,708
    )
    
    $
    (1,937,130
    )Basic and diluted earnings (loss) per share:As reported -
    
    $
    (.01
    )
    
    $
    (.06
    )
    
    $
    (.05
    )
    
    $
    (.18
    )Pro-forma -
    
    $
    (.01
    )
    
    $
    (.06
    )
    
    $
    (.05
    )
    
    $
    (.18
    )




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The above stock-based employee compensation expense has been determined
utilizing a fair value method, the Black-Scholes option-pricing model. The Company has recorded no compensation expense for stock options as
none were granted to employees during the three months or nine months
ended September 30, 2004 and September 30, 2003. In accordance with SFAS 123, the fair value of each option grant has been
estimated as of the date of the grant using the Black-Scholes option
pricing model with the following weighted average assumptions: For the Nine months Ended September 30,2004
    
    2003Risk free interest rate
    
    
    5.0
    %
    
    
    5.0
    %Expected life
    
    5.0 years
    
    5.0 yearsDividend rate
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    95.2
    %
    
    
    95.2
    %
 3. SALE OF EQUITY IN SUBSIDIARY As of March 25, 2004, SRE as a result of signing a Memorandum of
Agreement, has received $500,000 Cdn investment in new equity into SRE. As part
of the requirements of the new investment, all debt in SRE, including $1,751,000
in debt held by CVF, but excluding $390,000 Cdn held by other shareholders of
SRE was converted into equity. The net result of the new investment and the
restructuring of the debt is that CVF holds approximately 37% of the equity of
SRE. The gain of $742,568 is shown as a separate line, Gain on sale of equity
in subsidiary in other income within the income statement. 4. SALE OF EQUITY IN SUBSIDIARY On August 17, 2004, Biorem sold 500,000 of its common shares to a
third party investor at a valuation of $2.00 Cdn per share resulting in
net proceeds of $681,012. 5. INCOME (LOSS) PER SHARE Basic loss per share amounts are computed by dividing net loss from
continuing operations available to common stockholders from continuing
operation and loss from discontinued operations, and net loss available
to common stockholders by the weighted average number of common shares
outstanding during the period. The net loss from continuing operations
and net loss available to




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common stockholders consists of net loss from
continuing operations and net loss
amounts reduced by the dividends on the Companys Series A, B and C
preferred stock. Diluted loss per share reflects the per share amount
that would have resulted if diluted potential common stock had been
converted to common stock, as prescribed by SFAS 128. The Company has
presented dilutive income per share in those periods where there was net
income and therefore reduced income per share and not presented dilutive
loss per share information when the dilution would reduce the loss per
share. 6. INVENTORY Inventory consists of the following: September 30, 2004
    
    December 31,2003Raw Material
    
    $
    339,504
    
    
    $
    568,364Finished goods
    
    
    53,049
    
    
    
    87,071Less obsolescence reserve
    
    
    
    
    
    
    (69,426
    )$
    392,553
    
    
    $
    586,009
 7. INVESTMENTS The following table provides certain summarized unaudited financial
information related to the Companys equity basis holdings: Nine Months Ended September 30,2004
    
    2003Net Sales
    
    $
    1,767,613
    
    
    $
    123,566Gross profit on sales
    
    
    584,522
    
    
    
    37,836Net loss
    
    $
    (862,717
    )
    
    $
    (168,326
    )
 Included in the above results for the nine months ended September 30, 2004
are the full nine months of SRE results. The first 86 days of 2004 (the date
CVFs equity holdings in SRE changed from above 50% to 37%) are also included
in the consolidated results.




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8. SERIES B PREFERRED DIVIDENDS In February 2004 the Companys outstanding Series B Convertible Preferred
Stock was restructured in a transaction agreed to with the holder of this
stock. The holder exchanged its Series B Convertible Preferred Stock with a
stated value of $3,385,000 and accrued dividends of approximately $673,600 for
1,000,000 shares of the Companys common stock and a new Series C 6%
Convertible Preferred Stock with a stated value of $1,000,000, convertible into
common stock at $1 per share. The Series C Preferred will be subject to
mandatory redemption on February 27, 2006; however, the Companys obligation to
redeem will be limited to available cash in excess of working capital
requirements for the next twelve months. The Company also issued to the former
Series B holder a three-year warrant to purchase 100,000 shares of the
Companys common stock at an exercise price of $0.35 per share. 9. INTERIM FINANCIAL STATEMENT DISCLOSURES Certain information and footnote disclosures normally included in
annual financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted from the
accompanying unaudited interim financial statements. Reference is made
to the Companys audited financial statements for the year ended December
31, 2003 included in the Companys Annual Report on Form 10-KSB filed
with the Securities and Exchange Commission on April 2, 2004. 10. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS The Company has implemented new accounting standards as follows: Consolidation of Variable Interest Entities In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46, Consolidation of Variable Entities, (FIN No. 46) an
interpretation of Accounting Research Bulletin No. 51. FIN No. 46 requires that
variable interest entities be consolidated by a company if that company is
subject to a majority of the risk and loss from the variable interest entitys
activities or is entitled to receive a majority of the entitys residual returns
or both. FIN No. 46 requires disclosures about variable interest entities that
companies are not required to consolidate but which the company has a
significant variable interest. The consolidation requirements will apply
immediately for newly formed variable interest entities created after January
31, 2003 and entities established prior to January 31, 2003, in the first fiscal
year or interim period beginning after June 30, 2003. The Company does have
investments in unconsolidated entities, but such entities are virtually inactive
and CVF does not support them financially. The adoption of FIN No. 46 will not
have a material impact on our consolidated results of operations and financial
position.




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Derivative Instruments and Hedging Activities In April 2003, the FASB issued Statements of Financial Accounting
Standards No.149 (SFAS No. 149), an amendment to SFAS No. 133. SFAS No.
149 clarifies under what circumstances a contract with initial
investments meets the characteristics of a derivative and when a
derivative contains a financing component. This SFAS is effective for
contracts entered into or modified after June 30, 2003. The adoption of
SFAS No. 149 will not have a material impact on our consolidated results
of operations and financial position. Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity In May 2003, the FASB issued Statements of Financial Accounting Standards No.150
(SFAS No. 150), SFAS No. 150 established standards for how an issuer
classifies and measures in its statement of financial position certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances) because that financial instrument
embodies an obligation of the issuer. This SFAS is effective for financial
instruments entered into or modified after May 31, 2003 and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. It is to be implemented by reporting the cumulative effect of a change in
accounting principle for financial instruments created before the issuance date
of SFAS No. 150 and still existing at the beginning of the interim period of
adoption. Restatement is not permitted. The adoption of SFAS No. 150 will not
have a material effect on the financial statements. Employers Disclosure about Pensions and Other Post-Retirement Benefits In December 2003, the FASB revised SFAS No. 132 Employers Disclosures
about Pensions and Other Post Retirement Benefits. This revision
requires additional disclosures to those in the original SFAS No.
132 about assets, obligations, cash flows and net periodic benefit
cost of deferred benefit pension plans and other deferred
benefit post-retirement plans. The required information should be
provided separately for pension plans and for other post-retirement
benefit plans. This statement revision is effective for fiscal year
ending after December 14, 2003 and interim periods beginning after
December 15, 2003. The adoption of this revision will not have a
material impact on our results of operations, financial position or
disclosures. 11. STOCK OPTIONS AND WARRANTS Stock Options/Warrants  Due to the re-pricing of stock options in 2002
those options are subject to variable plan accounting using the intrinsic value
as prescribed by APB25. As the fair market value of the Companys stock as of




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September 30, 2004 was $0.29 compared to $0.45 at June 30, 2004, and also since
662,244 of the repriced options were exercised during the third quarter of 2004,
a reduction in compensation expense of $233,651 was recorded during the 2004
third quarter. As the fair market value of the Companys stock as of September
30, 2004 was $0.29 compared to $0.41 at December 31, 2003, and also since
1,145,000 of the repriced options were exercised during the 2004 nine month
period, a reduction in compensation expense of $317,450 was recorded during such
period. During the 2004 period a total of 1,345,000 options were exercised,
mostly in cashless exercises resulting in 752,160 common shares being issued and
592,840 being cancelled. Due to the re-pricing of Biorem stock options in 2003,
those options are subject to variable plan accounting using the intrinsic value
method as prescribed by APB25. As the fair market value of the Companys stock
as of September 30, 2004 was $2.00 Cdn compared to $1.58 Cdn at June 30, 2004,
compensation expense of $149,581 was recorded during the 2004 third quarter. During the 2004 period 648,652 warrants were exercised in cashless
exercises resulting in 401,546 common shares being issued
and 247,106 being cancelled. 12. SEGMENTED INFORMATION The Company has five reportable segments: bioremediation, machine
controls, precious gem identification, and natural horticultural and
general corporate. In 2002, as a result of growth in the natural
horticultural segment, as a percentage of consolidated sales, the Company
reallocated business units to business segments to more appropriately
group units for chief operating decision purposes and reporting in
accordance with SFAS 131. This change was applied on a retroactive
basis. The bioremediation segment consists of one company that applies
bio-filtration technology to odor and air pollution control for
environmental applications. The machine controls segment designs,
manufactures and sells electric motor controls to electric vehicle
manufacturers. The gem identification segment consists of one company
that has developed identification and database systems, and markets its
products and services to the companies in the precious gem business,
including producers, cutters, distributors and retailers. The natural
horticultural segment consists of one company that develops, manufactures
and markets natural fertilizers, insecticides and herbicides. The
Companys general corporate segment includes one company which provides
funding and management overview services to the holdings. This segments
profits include interest income and gains on sales of its various
holdings. The Company evaluates performance and allocates resources based on
continuing profit or loss from operations before income taxes,
depreciation and research and development. The accounting policies of the
reportable segments are the same as those described in the summary of
significant accounting policies.




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There are no intersegment sales, transfers, or profit or loss. Industry Segments for the Nine Months Ended September 30, 2004 and 2003 Biorem-
    
    Machine
    
    Identification
    
    Natural
    
    Corporateediation
    
    Controls *
    
    Systems
    
    Horticultural
    
    Administration
    
    Total$
    
    $
    
    $
    
    $
    
    $
    
    $2004Sales
    
    
    5,975,726
    
    
    
    402,029
    
    
    
    447,353
    
    
    
    202,321
    
    
    
    
    
    
    
    7,027,429Income (Loss) from
continuing operations
before other income
    
    
    566,272
    
    
    
    (205,782
    )
    
    
    (138,716
    )
    
    
    (215,144
    )
    
    
    (1,205,518
    )
    
    
    (1,198,888
    )Other income
    
    
    (162,931
    )
    
    
    (23,175
    )
    
    
    (39,075
    )
    
    
    28,295
    
    
    
    (28,167
    )
    
    
    (225,053
    )Income (loss) from
continuing operations
before income taxes
    
    
    403,341
    
    
    
    (228,957
    )
    
    
    (177,791
    )
    
    
    (186,849
    )
    
    
    (1,233,685
    )
    
    
    (1,423,941
    )2003Sales
    
    
    4,742,543
    
    
    
    1,109,669
    
    
    
    550,453
    
    
    
    253,198
    
    
    
    
    
    
    
    6,655,863Income (Loss) from
continuing operations
before other income
(expense)
    
    
    738,555
    
    
    
    (548,313
    )
    
    
    (48,576
    )
    
    
    (611,213
    )
    
    
    (1,400,578
    )
    
    
    (1,870,125
    )Other income (expense)
    
    
    (8,218
    )
    
    
    (38,712
    )
    
    
    (61,488
    )
    
    
    151,444
    
    
    
    (96,051
    )
    
    
    (53,025
    )(Loss) from
continuing operations
before income taxes
    
    
    730,337
    
    
    
    (587,025
    )
    
    
    (110,064
    )
    
    
    (459,769
    )
    
    
    (1,496,629
    )
    
    
    (1,923,150
    )
 * Nine months 2004 Machine Controls results above includes only January
1, 2004 through March 24, 2004 as CVF no longer consolidates the company
as of March 24, 2004 while the nine months 2003 includes the full period. 13. CONTINGENCIES The Company is currently under an audit by the Internal
Revenue Service (IRS). As part of the audit, the IRS indicated
that they reviewed the treatment of capital losses claimed in the
prior year and refunds of $2,532,000 received in 2001. A proposed
deficiency in federal income tax was issued by the IRS on December
1, 2003 totaling $2,969,123. On February 5, 2004 CVF issued a formal
protest to the proposed deficiency and it is expected that this will
now go before appeals at the IRS. If it is not resolved at the
appeals level of the IRS, CVF intends to challenge the IRS ruling in
federal tax court, as CVF and its legal counsel strongly believes
its original deductions were correctly taken. This process could
take up to 2 more years to be resolved. 14. COMMON SHARES ISSUED In January 2004, the Company issued 57,316 shares of its common stock
in consideration of consulting services to the Company. The expense
associated with this was $12,000 and was accrued as an expense in 2003.




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In January 2003, the Company issued 92,593 shares of its common stock in
consideration of legal services to the Company. The expense associated with
this was $25,000 and was accrued as an expense in 2002. In June 2004, the Company issued 17,046 shares of its common stock in
consideration of consultation services to the Company. The expense associated
with this was $7,500 and was expensed in 2004. 15. DEBT DUE TO OFFICERS AND DIRECTORS OF SUBSIDIARIES Included in current portion of long-term debt and in long-term notes
payable - officers and directors - are amounts due to subsidiary officers
and subsidiary directors totaling $475,680 and $810,276 respectively at
September 30, 2004. These notes accrue interest at varying interest rates
from Canadian prime interest rate plus 3% or 4%, to fixed rates of 5%,
10% or 12%. In September 2003 a director of Biorem closed on a $1 million
Canadian (approximately $ 762,700 US) convertible note to the subsidiary
bearing interest at 10% per annum and convertible into the common stock
of the subsidiary at $1.76 Cnd per share. The note has a 3 year term. If
converted the holder of the note would own 11.2% ownership interest in
Biorem on a fully diluted basis, which includes 287,937 shares already owned directly. 16. SUBSIDIARY BIOREM GOING PUBLIC In September 2004 Biorem signed a Letter of Intent to merge and take Biorem
public in the Canadian market through the Capital Pool Company Program (CPC),
which is supported by the Toronto Venture Exchange, a division of the Toronto
Stock Exchange. It is anticipated that this transaction will be completed in the
fourth quarter of 2004. 17. SUBSEQUENT EVENTS In October 2004 Biorem sold 1,000,000 additional common shares to an outside
investor at a valuation of $2.00 Cdn per share resulting in gross proceeds to
Biorem of $2,000,000 Cdn. In connection with that financing, Biorem redeemed
625,000 of CVFs common shares held in Biorem at $2.00 Cdn per share. This
resulted in CVFs direct percentage of common shares ownership in Biorem decreasing to
10.1 %. On a fully diluted basis, giving effect to the conversion of outstanding
convertible debt held by CVF, CVF would own 46.7% of Biorems common shares.




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW: CVF Technologies Corporation (CVF or the Company) was converted into a
corporate structure in 1995 from a limited partnership that originally formed
in 1989, and is involved in the business of investing in and managing early and
expansion stage companies primarily engaged in the environmental technology and
information technology sectors. CVFs mandate is to acquire significant
holdings in new and emerging technology companies and then to assist them in
their management. CVFs current holdings include investments made in its
investee companies during the period from 1990 to the present. CVFs mandate is to generate revenues and profits through consolidation of the
operating results of its investee companies. CVF also endeavors to realize
capital gains through the eventual sale of some or all of its holdings in these
companies at such time as management determines that CVFs funds can be better
deployed in other companies. CVFs goal is to maximize the value of its
holdings in its investee companies for the Companys shareholders. One
important way that CVF accomplishes this is by assisting an investee company to
go public at the appropriate time or by the sale of some or all of its holdings
in its investee companies. This has been done with the investee companies
Certicom Corporation, RDM Corporation and TurboSonic Technologies, Inc. After CVFs initial investment, an investee company often requires additional
capital to meet its business plan. Consequently, the Company actively assists
its investee companies in obtaining additional capital which is usually sourced
through CVFs own resources or via other participants. On a stand-alone basis, CVF has no sales from operations. Sales and gross
profit from sales reflect the operations of CVFs consolidated subsidiaries
only. The consolidated subsidiaries are Biorem Technologies Inc. (Biorem),
Gemprint Corporation (Gemprint), SRE Controls Inc. (SRE) (results
consolidated through March 24, 2004 only, the date CVF had its majority
interest in SRE diluted to 37%), Ecoval Corporation (Ecoval), and CVF Capital
Management Corporation (CVF Capital Management). CVF records profit and loss
using the equity method for companies in which CVF holds 20% to 50% ownership.
These companies are Petrozyme Technologies Inc. (Petrozyme), and SRE
(subsequent to March 24, 2004 when CVFs ownership position in SRE declined to
37%). The results of RDM Corporation (RDM) and TurboSonic Technologies Inc.
(TurboSonic), companies in which CVF has less than 20% ownership, are not
included in the Consolidated Statement of Operations. CVFs investments in RDM
and TurboSonic have been carried at market value on the Consolidated Balance
Sheet under Holdings Available for Sale, at market, which is currently a nominal value. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2003: Consolidated sales of CVF subsidiaries for the three months ended September 30,
2004 amounted to $2,365,797, representing an increase of $137,782 (6%) compared
to sales of $2,228,015 for the same period in 2003. For the three months ended September 30, 2004, SREs sales are not included in
CVFs consolidated results as CVFs ownership in SRE decreased to 37% during
March 2004. SREs sales that were consolidated in the 2003 period were
$365,942. Biorems sales increased by $575,548 or 35% compared to the same
quarter of 2003. This increase was mainly due to numerous modular system
installations in the US in the 2004 period. Gemprints sales decreased by
$74,458 or 34% compared to the same quarter of 2003 due to lower diamond
registrations and lower system sales. Also the weaker US dollar in the 2004
period contributed to the decrease. CVFs gross margin of $1,282,046 for the third quarter of 2004 represents an
increase of $251,324 (24%) from the same period last year. Overall gross margin
of CVF as a percentage of sales increased to 54.2%




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for the third quarter of 2004 from 46.3% for the third quarter of 2003. This
increase is mainly due to Biorem which had $391,947 higher gross margin in the
third quarter of 2004 due to higher margin business (53.2 % in the 2004 period
versus 47.9 % in 2003 period). The effect of no longer consolidating SRE
resulted in $117,468 lower gross margin in the third quarter of 2004. Gemprint
had a gross margin decrease of $52,803 (33%) due to fewer high-margin
GemprintTM registrations. Selling, general and administrative expenses (excluding repriced stock options
expense) on a consolidated basis for the three months ended September 30, 2004
amounted to $1,414,883, representing an increase of $62,171 (5%) compared to
expenses of $1,352,712 for the same period in 2003. The increase is due mainly
to $340,000 of expense in the 2004 period related to officers and/or directors
exercising stock options, $47,000 (189%) higher legal fees, and higher expenses
at Biorem due to the high sales activity. This increase is offset somewhat by
$217,476 lower expenses at SRE due to CVF no longer consolidating that company
and $37,500 (27%) lower consulting fees. Management continues to undertake a
concerted effort to effect an overall reduction in administrative costs. Over
the past 3 years CVF has undertaken many initiatives to lower the Companys
expenses. (See further discussion in the Liquidity and Capital Resources
section). Repriced stock options expense for the three months ended September 30, 2004
amounted to a negative expense of $84,070, representing a decrease of $154,320
compared to expense of $70,250 for the same period in 2003. The decrease is due
to some officers and/or directors exercising repriced stock options in the 2004
period offset somewhat by an increase in the value of the repriced Biorem stock
options. Research and development expenses for the third quarter of 2004 amounted to
$71,190 compared to $159,835 incurred in the comparable 2003 period, or a
decrease of $88,645 (56%). A portion of the decrease ($119,500) was due to CVF
no longer consolidating SREs results. Net interest expense increased to $78,673 for the third quarter of 2004
compared to net interest expense of $47,250 for the third quarter of 2003. This
increase is due to additional loans outstanding in the 2004 period. Other income increased to $27,761 in the third quarter of 2004 from expense of
$58,787 for the third quarter of 2003 due to foreign currency exchange related
to the weakening US dollar. Income tax expense amounted to $5,307 in the 2004 period compared to a recovery
of $34,255 in the 2003 period. Minority interest portion of the loss decreased to $2,869 in the third quarter
of 2004 from $15,180 in the comparable 2003 period. This amount in the 2004
period relates only to Gemprint while the 2003 period loss related to Gemprint
and SRE. SREs minority interest balance is now zero since its results are no
longer consolidated with the Company. CVF, on a consolidated basis, recorded a net loss of $173,324 for the three
months ended September 30, 2004 which was lower by $435,231 (72%) compared to a
loss of $608,555 in the 2003 period. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2003: Consolidated sales of CVF for the nine months ended September 30, 2004 amounted
to $7,027,429, representing an increase of $371,566 (6%) compared to sales of
$6,655,863 for the same period in 2003. Biorems sales increased by $1,233,182
or 26% compared to the same period of 2003. This increase was mainly due to
numerous modular system installations in the US in the 2004 period. Effective
March 25, 2004, SREs results are no longer included in CVFs consolidated
results as CVFs ownership in SRE decreased to 37%. SREs sales that were
consolidated in the 2004 period were $402,029 (from the first quarter only),
compared to $1,109,669 (from the first three quarters) in the 2003 period or a
decrease of $707,640 (64%). Ecovals sales decreased by $50,876 (20%) as Ecoval
had a relatively weak sales quarter in the second quarter of 2004. Gemprints
sales decreased by $103,100 or 19% compared to 2003 due to




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lower diamond registrations and lower system sales. Also the weaker US dollar
in the 2004 period contributed to the decrease. CVFs gross margin of $3,283,305 for the first nine months of 2004 represents
an increase of $525,255 (19%) from the same period last year. Overall gross
margin as a percentage of sales increased to 46.7% for the first nine months of
2004 from 41.4% for the first nine months of 2003. This increase is mainly due
to Biorem which had $786,666 higher gross margin in the 2004 period due to
higher margin business (46.6 % in the 2004 period versus 42.1 % in 2003
period). Ecovals gross margin increased by $79,914 due to generally improved
margin percentages on its business. Gemprint had a gross margin decrease of
$86,896 (21%) due to weaker sales. SRE had $254,429 lower gross margin in the
2004 period as SREs sales are no longer consolidated in CVFs results. Selling, general and administrative expenses (excluding repriced stock options
expense) on a consolidated basis amounted to $4,066,375 for the first nine
months of 2004 representing an increase of $27,565 (1%) compared to expense of
$4,038,810 for the same period in 2003. The increase is due mainly to $482,600
of expense in the 2004 period related to officers and/or directors exercising
stock options and higher expenses at Biorem due to the high sales activity.
This increase is offset somewhat by $486,399 lower expenses at SRE due to CVF
no longer consolidating that company, $112,650 is due to one of the Companys
subsidiaries settling a claim with a former officer during the 2003 period,
$84,500 (53%) lower accounting fees due to the Company changing its independent
accountants during 2003, and consulting fees were $70,400(17%) lower in the
2004 period. Theses decreases are off set somewhat by higher expenses at Biorem
due to the high sales activity. Management continues to undertake a concerted
effort to effect an overall reduction in administrative costs. Over the past 3
years CVF has undertaken many initiatives to lower the Companys expenses. (See
further discussion in the Liquidity and Capital Resources section). Repriced stock options expense for the nine months ended September 30, 2004
amounted to $103,394, representing a decrease of $149,506 (59%) compared to
expense of $252,900 for the same period in 2003. The majority of this decrease
is due to some officers and/or directors exercising repriced stock options in
the 2004 period offset somewhat by an increase in the value of the repriced
Biorem stock options. Research and development expenses for the nine months ended September 30, 2004
were $312,424 compared to $336,465 in the 2003 period, or a decrease of $24,041
(7%). Spending increased at Biorem offset somewhat by a decrease in spending
for such activity at Ecoval. Net interest expense for the first nine months of 2004 increased to $247,425
from $120,812 in the 2003 period. This increase is due to an increase in loans
outstanding in the 2004 period. Other income decreased to $24,393 in the 2004 period from income of $60,471 for
the 2003 period due to foreign currency exchange related to the weakening US
dollar. Loss on sale of holdings amounted to $2,021 in the 2004 period compared to
$7,316 income in the 2003 period. In the 2004 period the Company sold
additional holdings in TurboSonic and in the 2003 period some holdings in RDM.
The remaining holdings are relatively small and are not expected to contribute
significant gains to the Company. Gain on sale of equity in subsidiary totaling $742,568 in the 2004 period
represented the Company agreeing to an investment and resulted in a
restructuring of SRE whereby CVFs equity position decreased from 75% to 37%. Income tax expense amounted to $5,307 in the 2004 period compared to a recovery



of $98,397 in the 2003 period. Minority interest portion of the loss decreased to $77,454 in the 2004 period
from $143,118 in the comparable 2003 period. This amount in the 2004 period
relates only to Gemprint while the 2003 period loss relates to Gemprint and
SRE. SREs minority interest balance is now zero since its results are no
longer consolidated with the Company.




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CVF recorded a net loss of $609,226 for the nine months ended September 30,
2004 resulting from the operations described above, a decrease of 64% compared
to the prior year period. This compares to a net loss of $1,681,635 incurred in
the corresponding period of 2003. LIQUIDITY AND CAPITAL RESOURCES: Stockholders deficit as of September 30, 2004 amounted to $2,485,370 compared
to a deficit of $3,732,580 at December 31, 2003. This net decrease in the
deficit of $1,247,210 is primarily attributable to the restructuring of the
Series B Preferred Stock, common shares sold by Biorem totaling $681,000 and
offset somewhat by a net loss of $609,226 which was recognized in the first
nine months of 2004. The current ratio of CVF at September 30, 2004 is .59 to 1, which has increased
from .58 to 1 at December 31, 2003. CVF management anticipates that over the next twelve month period CVF should
have sufficient cash from various sources to sustain itself. Between cash on
hand, the issuance of new securities, and the sales of a portion of its
holdings in certain investee companies, the Company expects to have enough cash
to fund itself and certain of its investee companies which it may decide to
fund, that are currently not profitable. Additionally, CVF has limited outside
debt and a line of credit could be sought. The Company has been successful in
obtaining $ 1 million Canadian in financing through an investment into one of
its holdings in August 2004, and similarly in September 2003 was also
successful in obtaining $ 1 million Canadian in financing through an investment
into one of its holdings, and also received $961,000 as repayment of back
interest and dividends from one of its investee companies. During the first
nine months of 2004, CVF received $400,000 Canadian, $440,000 Canadian, $73,647
Canadian and $7,512 Canadian, respectively, in redemption of preferred shares,
repayment of loans as well as interest and dividend payments from one of its
investee companies. Over the past three years CVF has undertaken many initiatives to lower the
parent companys expenses. These initiatives have included lowering the head
count of its office staff as well as the elimination of two executive
positions. In June 2003 CVF changed its auditing firm from a major national
firm to a smaller firm which will save CVF in excess of $100,000 annually. The
use of consultants has been significantly reduced except those consultants who
agree to receive their fee in CVF common shares. Travel and entertainment has
been significantly reduced over the two years and will continue at the reduced
level going forward. CVF management has adopted a very aggressive cost and
expenditure controls and monitoring policy. In February 2004, CVF and the holder of CVFs Series B Convertible Preferred
Stock entered into a transaction whereby the holder exchanged its Series B
Convertible Preferred Stock with a stated value of $3,385,000 and accrued
dividends of approximately $673,600 for 1,000,000 shares of CVFs common stock
and a new Series C 6% Convertible Preferred Stock with a stated value of
$1,000,000, convertible into common stock at $1 per share. The Series C
Preferred and all accrued dividends thereon will be subject to mandatory
redemption on February 27, 2006; however, CVFs obligation to redeem will be
limited to available cash in excess of working capital requirements for the
next twelve months. The Company also issued to the former Series B holder a
three-year warrant to purchase 100,000 shares of CVFs common stock at an
exercise price of $0.35 per share. The Company no longer anticipates having to fund Gemprint or Biorem as both are
currently operating on positive cash flow, although no assurances can be given
that this trend will continue. Also the Company no longer anticipates that it
will be funding SRE as other outside investors have invested in SRE. As at September 30, 2004, CVFs cash balance was $878,761 which is an increase
of $653,226 compared to December 31, 2003. Of this amount, $848,871 is
attributable to consolidation of results with its subsidiaries. However CVF has
been successful in generating cash as required through the sale of a portion of
its investments in its subsidiaries or from CVF issuing additional securities.
The company is continuing to pursue opportunities to raise funds from potential
investors in CVF. In addition, certain subsidiaries are




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producing a significant positive cash flow and will be able to supplement other
cash requirements of the Company. If the above mentioned liquidity events do
not occur, the Company estimates that it could run out of operating cash in the
third quarter of 2005, if other sources of cash are not available. The Company
will also continue to assist its investee companies in their efforts to obtain
outside financing in order to fund their growth and development of their
business plans. Certain of the Companys financial obligations included in
current liabilities are related to items that will not be paid in the near
term. The Company will carefully manage its cash payments on such obligations. CRITICAL ACCOUNTING POLICIES: An understanding of CVFs accounting policies is necessary for a complete
analysis of our results, financial position, liquidity and trends. We focus
your attention on the following accounting policies of the Company: Going concern  These consolidated financial statements have been prepared on a
going concern basis, which presumes that assets will be realized and
liabilities discharged in the normal course of business over the foreseeable
future. The Companys current liabilities exceed its current assets and the
Company has incurred losses over the past six fiscal years, which have reduced
the Companys cash reserves, and depleted stockholders equity. Further, the
Company has contingent liabilities. These conditions raise substantial doubt
about the consolidated Companys ability to continue in the normal course of
business as a going concern. The Companys primary need for cash is to maintain its ability to support the
operations and ultimately the carrying values of certain of its individual
investee companies. From time to time, as required the Company may pursue the
sale of a portion of its interests in its investee companies as a source of
funds, and reduction of cash flow needs. The Company will continue to assist
its investee companies in their efforts to obtain outside financing in order to
fund the growth and development of their respective businesses and has taken
steps to reduce the operating cash requirements of the parent company and its
investees. The Company is also seeking outside investment. There is no
assurance that these initiatives will be successful or that the Company or
certain of its investees will have adequate cash resources and capital to be
able to continue as going concerns. The Companys ability to continue to realize assets and discharge liabilities
in the normal course is uncertain and dependent on these and other initiatives.
The accompanying financial statements do not include any of the adjustments to
the amounts or classification of assets and liabilities that might be necessary
should the Company be unable to continue its business in the normal course. Revenue
recognition - Revenue from the sale of manufactured products is
recognized when the goods are shipped and accepted by the customer. The Company
recognizes revenue on long-term contracts on the percentage of completion
basis, based on costs incurred relative to the estimated total contract costs.
Losses on such contracts are accrued when the estimate of total costs indicates
that a loss will be realized. Contract billings in excess of costs and accrued
profit margins are included as deferred revenue, which is part of current
liabilities. Service revenue is recognized when the services are performed. Inventory - Finished goods are stated at the lower of cost or market using the
first-in, first-out method of costing. Raw materials are stated at the lower
of cost or replacement value, using the first-in, first-out method. Goodwill - In June 2001, the FASB issued SFAS No. 141, Business Combinations
and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. SFAS No. 141 also specifies criteria which
intangible assets acquired in purchase method business combinations after June
30, 2001 must meet to be recognized and reported apart from goodwill. SFAS No.
142 addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 requires
that intangible




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assets with finite useful lives be amortized, and that goodwill and intangible
assets with indefinite lives no longer be amortized, but instead be tested for
impairment at least annually. The Company adopted the provisions of SFAS No. 141 on July 1, 2001. Such
adoption had no effect on the Companys financial position or results of
operations. The Company adopted the provisions of SFAS No. 142 effective
January 1, 2002, at which time the amortization of the Companys existing
goodwill ceased. The new standard also required that the Company test the
goodwill for impairment. Any impairment, arising from the test, is charged to
income. As of December 31, 2003 the Companys goodwill was tested and the
Company calculated that no impairment existed at that time. No further
circumstances have arisen during the first six months of fiscal 2004 that would
indicate an impairment of goodwill has occurred subsequent to year end. Intangible assets with finite useful lives are amortized over their estimated
useful lives. Intangible assets are reviewed for impairment when there are
indications that the carrying value of an asset may not be recoverable over its
estimated useful life. Impairment testing involves estimating the fair value of
intangible assets using anticipated future cash flows and comparing the fair
value to the carrying value of the asset. The Companys only intangible asset
is acquired technology of Ecoval which is amortized over 5 years. Contingencies
- The Company is currently under an audit by the Internal Revenue
Service (IRS). As part of the routine audit, the IRS indicated that they
reviewed the treatment of capital losses claimed in the prior year and refunds
of $2,532,000 received in 2001. A proposed deficiency in federal income tax was
issued by the IRS on December 1, 2003 totaling $2,969,123. On February 5, 2004
CVF issued a formal protest to the proposed deficiency and it is expected that
this will now go before appeals at the IRS. If it is not resolved at the
appeals level of the IRS, CVF intends to challenge the IRS ruling in federal
tax court, as CVF and its legal counsel strongly believes its original
deductions were correctly taken. This process could take up to 2 more years to
be resolved. In February 2004 the Companys outstanding Series B Convertible Preferred Stock
was restructured in a transaction agreed to with the holder of this stock. The
holder exchanged its Series B Convertible Preferred Stock with a stated value
of $3,385,000 and accrued dividends of approximately $673,600 for 1,000,000
shares of the Companys common stock and a new Series C 6% Convertible
Preferred Stock with a stated value of $1,000,000, convertible into common
stock at $1 per share. The Series C Preferred will be subject to mandatory
redemption on February 27, 2006; however, the Companys obligation to redeem
will be limited to cash available to it at that time in excess of one years
prospective working capital. The Company also issued to the former Series B
holder a three-year warrant to purchase 100,000 shares of the Companys common
stock at an exercise price of $0.35 per share. Stock Options/Warrants  Due to the repricing of stock options in 2002 those
options are subject to variable plan accounting using the intrinsic value as
prescribed by APB25. As the fair market value of the Companys stock as of
September 30, 2004 was $0.29 compared to $0.45 at June 30, 2004, and also 662,244 of the repriced options were exercised during the third quarter 2004, a
reduction in compensation expense of $233,651 was recorded during the 2004
third quarter. This compares to compensation expense recorded totaling $70,250
in the third quarter 2003. As the fair market value of the Companys stock as
of September 30, 2004 was $0.29 compared to $0.41 at December 31, 2004, and
also 1,145,000 of the repriced options were exercised during the 2004 period,
a reduction in compensation expense of $317,450 was recorded during the 2004
period. This compares to compensation expense recorded totaling $252,900 in the
2003 period. Due to the repricing of Biorem stock options in 2003 those options
are subject to variable plan accounting using the intrinsic value method as
prescribed by APB25. As the fair market value of the Companys stock as of
September 30, 2004 was $2.00 Cdn compared to $1.58 Cdn at June 30, 2004,
compensation expense of $149,581 was recorded during the 2004 third quarter




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FINANCIAL CONSIDERATIONS: Early Stage Development Companies: Each of the investees is an early stage
development company with a limited relevant operating history upon which an
evaluation of its prospects can be made and prone to the risks of all early
stage development companies, including those described under Forward Looking
Statements. As such, there can be no assurance of the future success of any of
the investees. Quarterly Fluctuations: CVFs financial results have historically been, and
will continue to be, subject to quarterly and annual fluctuations due to a
variety of factors, primarily resulting from the nature of the companies in
which it invests. Any shortfall in revenues in a given quarter may impact CVFs
results of operations due to an inability to adjust expenses during the quarter
to match the level of revenues for the quarter. There can be no assurance that
CVF will report income in any period in the future. While some of CVFs
investees have consistently reported losses, CVF has recorded income in certain
fiscal periods and experienced fluctuations from period to period due to the
sale of some of its holdings, other one-time transactions and similar events. Rapid Technological Change: The markets for CVFs investees products are
generally characterized by rapidly changing technology, evolving industry
standards, changes in customer needs and frequent new product introductions.
The future success of the investees will depend on their ability to enhance
current products, develop new products on a timely and cost-effective basis
that meet changing customer needs and to respond to emerging industry standards
and other technological changes. There can be no assurance that the investees
will be successful in developing new products or enhancing their existing
products on a timely basis, or that such new products or product enhancements
will achieve market acceptance. AMEX Listing: CVF received notice from the AMEX during the second quarter of
2004 that CVF was no longer eligible to remain listed on the AMEX, subject to a
meeting with the AMEX that occurred in September 2004 at which time CVF
presented its case for a continued listing. After the meeting at the end of
September, the AMEX affirmed its decision and on September 28, 2004 the
Companys stock was suspended from trading on the AMEX. The Companies stock is
currently trading on the NASD OTC Bulletin Board. (Symbol: CNVT) FORWARD LOOKING STATEMENTS: CVF believes that certain statements contained in this Quarterly Report on Form
10-QSB constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the Companys actual results, performance or achievements to
vary materially from the Companys expected results, performance or
achievements. Other factors that may affect CVFs future results include:  
    
    general economic and business conditions;
    
    foreign currency fluctuations, particularly involving the Canadian dollar:
    
    the Companys ability to find additional suitable investments and the
ability of those investments to generate an acceptable return on invested
capital; and
    
    the uncertainties and risks involved in investing in early-stage
development companies which can arise because of the lack of a customer
base, lack of name recognition and credibility, the need to locate and
retain experienced management and the need to develop and refine the
business and its operations, among other reasons.
    
    the Companys ability to obtain capital to fund its operations and
those of its investees. The Company will not update any forward-looking statements to reflect actual
results or changes in the factors affecting the forward-looking statements.




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Item 3. Controls and Procedures  (a)
    
    The Company carried out an evaluation, under the supervision and
with the participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Companys disclosure
controls and procedures. Based upon that evaluation, the Companys
Chief Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective as of the
end of the period covered by this report. Disclosure controls and
procedures are controls and procedures that are designed to ensure that
information required to be disclosed in Company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms.(b)
    
    There has been no significant change in the Companys internal
controls over financial reporting that occurred during the last fiscal
quarter that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial
reporting.




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PART II  OTHER INFORMATION 
 Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities. On July 29, 2004, the Company issued 500,019 shares of its common stock to
one its officers who exercised stock options and warrants. Some of these shares
were issued pursuant to an effective registration statement on Form S-8 and
others were issued pursuant to an exemption from registration under Section
4(2) of the Securities Act of 1933 (the Securities Act). On July 29, 2004, the Company issued 200,773 shares of its common stock to
the wife of one its officers who exercised warrants. These shares were issued
in a transaction exempt from registration pursuant to Section 4(2) under the
Securities Act. On July 29, 2004, the Company issued 74,170 shares of its common stock to
one its directors who exercised stock options. Some of these shares were issued
pursuant to an effective registration statement on Form S-8 and others were
issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933 (the Securities Act). On September 1, 2004, the Company issued 52,941 shares of its common stock
to one its directors who exercised stock options. Some of these shares were
issued pursuant to an effective registration statement on Form S-8 and others
were issued pursuant to an exemption from registration under Section 4(2) of
the Securities Act of 1933 (the Securities Act). 
 Item 6. Exhibits (a)
    
    
    Exhibits(11)
    
    
    Statement re computation of per share earnings(31.1)
    
    
    Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.(31.2)
    
    
    Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.(32)
    
    
    Certifications Pursuant to 18 U.S.C. 1350 As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




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SIGNATURES In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized. DATED: November 15, 2004 CVF TECHNOLOGIES CORPORATIONBy:
    
    /s/ Jeffrey I. DrebenName:
Title:
    
    Jeffrey I. Dreben
Chairman of the Board, President
and Chief Executive Officer
 By:
    
    /s/ Robert L. MillerName:
Title:
    
    Robert L. Miller
Chief Financial Officer




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EXHIBIT INDEX No.
    
    Description(11)
    
    Statement re computation of per share earnings.(31.1)
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.(31.2)
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.(32)
    
    Certifications Pursuant to 18 U.S.C. 1350 As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.