The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

MARCH 31, 20202021

(unaudited)(UNAUDITED) 

NOTE A - ORGANIZATION AND OPERATIONS

Organization

Enviro Technologies U.S., Inc., an Idahoa Florida corporation (the “Company”), is a manufacturer and provider of environmental and industrial separation technology. The Company developed, and now manufactures and sells the Voraxial®V-Inline Separator, for Cameron Solutions,a technology that efficiently separates liquid/liquid, liquid/solid or liquid/liquid/solid fluid streams with distinct specific gravities. On June 8, 2017, the Company and Florida Precision Aerospace, Inc., an affiliatea Florida corporation (“FPA”), a wholly-owned subsidiary of Schlumbergerthe Company, closed the transactions contemplated by the Technology Corporation for a period of 3 years. The Voraxial is a patented technology that was sold toPurchase Agreement dated March 13, 2017 with Schlumberger Technology Corporation, a Texas corporation, Schlumberger Canada Limited, a Canadian entity, and Schlumberger B.V., an entity organized under the laws of the Netherlands (collectively, “Schlumberger”) on June 8, 2017. The Company receivedfor the sale of our intellectual property, substantially consisting of Voraxial patents, marks, software and copyrights (the “Intellectual Property”). As part of the agreement, Schlumberger granted us a Grantnon-exclusive, worldwide, royalty-free licenses (the “Grant Back LicenseLicenses”), to make, use, sell, offer for sale, and import products and processes embodying the Separation Technology in marketsIntellectual Property outside of the oil and gas market. Current and potential commercial applications and markets which include oil exploration and production, oil refineries, oil spill, mining, sewage,utilities, manufacturing, waste-to-energy and food processing industry.among other industries.

Florida Precision Aerospace, Inc., a Florida corporation (“FPA”), is the wholly-owned subsidiary of the Company andFPA is used to manufacture, assemble and test the VoraxialV-Inline Separator. Effective November 10, 2017On August 20, 2020, the Company’s shareholders approved a change of domicile of the Company filed Articlesfrom Idaho to Florida. On December 28, 2020, the Company received the file stamped Certificate of Amendment to itsDomestication and Articles of Incorporation changingfrom the Secretary of State of Florida, which was effective on December 18, 2020, thereby completing the change in domicile from Idaho to Florida. In connection with the change in domicile from Idaho to Florida, the Company’s name from “Enviro Voraxial Technology, Inc.”changed to “Enviro Technologies U.S., Inc.” and increasing its authorized common stock to 250,000,000 shares..

NOTE B – GOING CONCERN

Since entering into the Technology Purchase Agreement, Supply Agreement and Grant Back License in June 2017, we have generated limited revenues, significantly less than we anticipated, under the terms of any of these agreements. Although the Supply Agreement expired in June 2020, we continue to have a relationship with Schlumberger. The Grant Back License did not expire. There are no assurances that the Technology Purchase Agreement, the Supply Agreement and/or the Grant Back License will ever generate any material ongoing revenues. We intend to continue to seek opportunities for the V-Inline Separator. Our ability to generateincrease our revenues in future revenuesperiods will depend on a number of factors, many of which are beyond our control, including our ability to generate sales of the V-Inline Separator, our ability to leverage the Grant Back License to generate additional revenues, the continuing impact of the Covid-19 pandemic on the economy in general and the Company in particular, competitive efforts and other general economic trends. There are no assurances we will be ablereturn to continue to generate revenuesthe pre-Covid revenue and profitability levels of 2019 or report profitable operations in the future. The Supply Agreement expires in June 2020 and there is no certainty that Cameron Industries will seek to renewFurther, the agreement. If the Supply Agreement is not renewed or renegotiated, we will potentially lose additional sales from Schlumberger. Without a Supply Agreement, we would have to redevelop our relationships with customers in the oil and gas industry to generate revenues from this industry. However, with or without a new Supply Agreement, the oil industry will potentially be challenging as the pricelingering economic impact of oil has decreased by approximately 60% from approximately $60 per barrel in January 2020 to approximately $24 per barrel by May 11, 2020. Further, with the current economic condition impacted by the Covid-19 virus, including weak oil prices, thispandemic may have a continued negative effect on the potential for sales of Voraxial under the Supply Agreement or sales of V-inline Separators outside the oil and gas industry.Separators.

At March 31, 2020,2021, we had a working capital deficit of $321,562,$986,502, an accumulated deficit of $15,162,371.$16,113,303. We do not have any external sources of liquidity. Our revenues have declined forsignificantly from quarter ended and year ended December 31, 2019, our last full reporting period prior to the first quarterstart of 2020 from the fourth quarter of 2019 as a result of the impact of the Covid-19 pandemic and the significant drop in oil prices.has yet to recover. Covid-19 pandemic has created a very challenging economic condition for our company. In an effort to conserve our cash resources to sustain our operations until such time as the economy begins returning to pre-Covid-19 pandemic activity levels, we have reduced employee hours and accrued a portion of management’s salary. We also have begun marketing our machining capabilities to local manufactures. In addition, we reorganized our manufacturing in order to supply face guards to the community, including the medical industry starting in April 2020. To date we have generated limited revenues from the sales of face guards. There are no assurances, however, that these efforts will be sufficient to permit us to pay our operating expenses. In thatthe event we cannot increase our revenues, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection.

As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

MARCH 31, 20202021

(unaudited)(UNAUDITED) 

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The condensed consolidated financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements should be read in conjunction with the company’s annual consolidated financial statements, notes and accounting policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019,2020, as filed with the SEC on April 14, 2020.March 31, 2021. In the opinion of management, all adjustments, which are necessary to provide a fair presentation of financial position as of March 31, 2020,2021, and the related operating results and cash flows for the interim period presented, have been made. The results of operations, for the period presented are not necessarily indicative of the results to be expected for the year.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the parent company, Enviro Technologies U.S., 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. Significant estimates include valuation of deferred tax assets, allowance for doubtful accounts and allowance for inventory obsolescence. Actual results may differ.

Revenue Recognition

We account for our revenues in accordance with the Accounting Standard Codification Topic 606, “Revenue from Contracts with Customers” and all the related amendments. This standards core principal is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to receive.

The Company derives its revenue from the sale of the Voraxial Separator, V-Inline Separators and some high precision manufacturing projects. We account for revenue in accordance with ASC Topic 606.pursued designing, manufacturing and selling face shields during the Covid-19 quarantine period and are constantly seeking other sources of revenues.

Revenues that are generated from high precision manufacturing projects are recognized when we satisfy a performance obligation by transferring control of the promised goods or services to our customers at a point in time, in an amount specified in the contract with our customer and that reflects the consideration we expect to be entitled to in exchange for those goods or services. The Company also assesses our customer’s ability and intention to pay, which is based on a variety of factors including our customer’s historical payment experience and financial condition.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited) 

Revenues that are generated from sales of V-Inline separators, auxiliary equipment and parts and face shields 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 order, revenue is deferred until we have evidence of customer order and all terms of the agreement have been complied with. As of March 31, 20202021, and December 31, 2019,2020, respectively, there was $0 and $0, respectively, of deposits from customers.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED)  

ACCOUNTS RECEIVABLE

Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections. At March 31, 20202021 and December 31, 2019,2020, the Company has $254$7,044 and $254$7,044 in the allowance for doubtful accounts, respectively.

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 March 31, 20202021 and December 31, 2019,2020, approximate their fair value because of their relatively short-term nature.

ASC 820 “Disclosures about Fair Value of Financial Instruments,” requires disclosures of information regarding the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale of liquidation.

The Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value is observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1—inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. We have no Level 1 instruments as of March 31, 20202021 and December 31, 2019.2020.

Level 2— inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques (e.g. the Black-Scholes model) for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and forward and spot prices for currencies and commodities. We have no Level 2 instruments as of March 31, 20202021 and December 31, 2019.2020.

Level 3— inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. We have no Level 3 instruments as of March 31, 20202021 and December 31, 2019.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited) 2020.

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 (“FDIC”) limits. As of March 31, 2021 and December 31, 2020, the Company has a cash concentration of $365,268 in excess of FDIC limits.limits of $0 and $80,014, respectively.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

Inventory

Inventory primarily consists of components, including raw material and finished parts for the VoraxialV-Inline Separator and face shields and is priced at lower of cost or net realizable value. Net realizable value is defined as sales price less cost of completion and disposable and transportation and a normal profit margin.transportation. Inventory may include units being rented on a short term basis or 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. The third parties do not have a contractual obligation to purchase the equipment. The Company maintains the title and risk of loss. Therefore, these units are included in the inventory of the Company. As of March 31, 20202021 and December 31, 2019:2020:

Inventory amounts are presented net of allowance for inventory reserves of $66,937$75,785 and $66,937$75,785 as of March 31, 20202021 and December 31, 2019,2020, respectively.

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.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited) 

Net Loss Per Share

In accordance with the accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share”basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

Due toAs of March 31, 2021 and 2020, there were 10,000 and 1,346,500 shares issuable upon the exercise of options, respectively. The Company had a net loss for the three-month periods ended March 31, 20202021 and 2019,2020; therefore, common stock equivalent shares are excluded from the effect of 13,465,000 and 13,465,000 options, respectively are anti-dilutive. A separate computation of dilutednet loss per share if their effect is not presented.anti-dilutive. 

INCOME TAXES

The Company accounts for income taxes under ASC 740-10-25. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

BUSINESS SEGMENTS

The Company operates in one segment and therefore segment information is not presented.

LEASES

The Company accounts for leases in accordance with Accounting Standard Codification Topic 842.

Advertising Costs

Advertising costs are expensed as incurred and are included in general and administrative expenses. There was $168 and $1,863 in advertising costs during the periods ended March 31, 2021 and March 31, 2020, respectively.

Stock-Based Compensation

The Company accounts for stock-based instruments issued for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued. The value of the portion of a stock award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited) 

Recent Accounting Pronouncements

All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

NOTE D - RELATED PARTY TRANSACTIONS

Effective January 1, 2018 the annual compensation of the Company’s chief executive officer is $210,000. For the three months ended March 31, 2020,2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500. During the three months ended March 31, 2020,2021, a total of $0$26,250 of salary and accrued salary have been paid. The total unpaid balance as of March 31, 20202021 is $663,465$690,565 and is included in accrued expenses – related party. In November, 2018, the Board of Directors also approved the health insurance benefit for our CEO. For the three month ended March 31, 2019,2020, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500. Of these amounts, $180,000$0 had been paid for the three months ended March 31, 2019.2020. The total unpaid balance as of March 31, 2019 is $686,2612021 and isDecember 31, 2020 are $663,465 and $664,315, respectively, which are included in accrued expenses – related party.

During the three months ended March 31, 2021 and 2020, Mr. Veldman, received compensation for being a member of the Company’s board of directors of $3,000 and $3,000, respectively. The unpaid balance has been included in accrued expenses-related party. Mr. John DiBella does not receive compensation for being a member of the Company’s board of directors.

Effective July 1, 2017, Raynard Veldman, a member of the Company’s board of directors, receives a fee of $2,500 per month for consulting services. During the three months ended March 31, 20202021 and 2019,2020, Mr. Veldman received consulting fees of $7,500 and $7,500, respectively.

During the three months ended The unpaid balance has been included in accrued expenses- related party. As of March 31, 20202021 and 2019, Mr. Veldman, receivedDecember 31, 2020, the total accrued compensation for being a member of the Company’s board of directors of $3,000 and $3,000,consulting services are $53,000 and $42,500 respectively. Mr. John DiBella does not receive compensation for being a member of the Company’s board of directors.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

NOTE E – FIXED ASSETS

Fixed assets as of March 31, 20202021 and December 31, 20192020 consist of:

Depreciation expense was $11,328$11,471 and $11,264$11,328 for the three months ended March 31, 2021 and 2020, and 2019, respectively.

NOTE F – EQUIPMENT NOTE PAYABLE

In July 2017, the Company entered into a financing agreement for the purchase of CNC machining equipment valued at approximately $426,000. The machining equipment was received in July 2017 and will bewas used for the manufacture of Voraxial Separators in preparation of potential future orders under the Supply Agreement and sales pursuantof the V-Inline Separators. Under the terms of the agreement the Company made an initial down payment of $85,661 and is required to make monthly payments of $6,788 through January 2023. In addition, the Grant Back Licenses.Company incurred $24,281 of installation costs. As of March 31, 20202021 and December 31, 2019,2020 the amount owed is $209,531$157,665 and $226,172$175,398, respectively. See NOTE K “SUBSEQUENT EVENTS”.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited) 

note fG – shareholders’ equity

Options

 Information with respect to options outstanding and exercisable at March 31, 2021 is as follows:

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

The aggregate intrinsic value represents the excess amount over the exercise price optionees would have received if all the options have been exercised on the last business day of the period indicated based on the Company’s closing stock price of for such day. The aggregate intrinsic value as of March 31, 2021 is $1,500.

The Company accounts for stock-based instruments issued for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued. The value of the portion of a share award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. The Company estimates the fair value of stock options by using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such stock options. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with a term similar to the expected term. The expected dividend yield is based upon the Company’s history of having never issued a dividend and management’s current expectation of future action surrounding dividends. Expected volatility was based on historical data for the trading of our stock on the open market. The expected lives for such grants were based on the simplified method for employees and officers.method.

Information with respect to options outstanding and exercisable at March 31, 2020 is as follows:REVERSE SPLIT

On August 27, 2020 the Company filed Articles of Amendment to its Articles of Incorporation which, on the effective date of September 10, 2020 (the “Effective Date”):

These actions were approved by our shareholders at our 2020 Annual Meeting held on August 20, 2020.

As a result of the Reverse Stock Split, on the Effective Date each 10 shares of our common stock issued and outstanding immediately prior to the Effective Date became one share of our common stock on the Effective Date. No fractional shares of common stock were issued to any shareholder in connection with the Reverse Stock Split and all fractional shares which might otherwise be issuable as a result of the Reverse Stock Split were rounded up to the nearest whole share. On the Effective Date, each certificate representing shares of pre-Reverse Stock Split common stock was deemed to represent one-tenth of a share of our post-Reverse Stock Split common stock, subject to rounding for fractional shares.

The aggregate intrinsic value representsReverse Stock Split also affected the excess amount overCompany’s outstanding stock options which resulted in the underlying shares of such instruments being reduced and exercise price optionees would have received if allbeing increased proportionally to the optionsReverse Stock Split ratio. All shares and per share data have been exercised onretroactively adjusted for all periods presented to reflect the last business dayeffects of the period indicated based on the Company’s closing stock price of for such day. The aggregate intrinsic value as of March 31, 2020 is $444,345.

Reverse Stock Split.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

MARCH 31, 20202021

(unaudited) (UNAUDITED)

NOTE GH – COMMITMENTS AND CONTINGENCIES

EQUIPMENT FINANCINGSBA AND PPP LOANS

In July 2017,On May 4, 2020, FPA received a loan (the “PPP Loan”) from Bank of America, N.A. in the Company entered intoaggregate amount of $111,971, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a financing agreement forNote dated May 4, 2020 issued by FPA, matures on May 4, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 6, 2020. The Note may be prepaid by FPA at any time prior to maturity with no prepayment penalties. Funds from the purchase of CNC machining equipment valued at approximately $426,000. The machining equipment was received in July 2017 and willPPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. FPA believes it used the manufacture of Voraxial Separators in preparation of potential future orders under the Supply Agreement and sales of the V-Inline Separators pursuant to the Grant Back Licenses.entire PPP Loan amount for qualifying expenses. Under the terms of the agreementPPP Loan, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. We intend to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

On June 23, 2020, FPA executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the Covid-19 pandemic on the Company’s business. Pursuant to that certain Loan Authorization and Agreement, the principal amount of the EIDL Loan is up to $150,000, with proceeds to be used for working capital purposes. On July 16, 2020, the Company made an initial down paymenthas requested $150,000 in disbursements under the EIDL Loan. The funds were received on July 20, 2020. Interest accrues at the rate of $85,6613.75% per annum. Installment payments, including principal and financedinterest, are due monthly beginning June 23, 2021 (12 months from the remainingdate of the SBA note) in the amount of $731. The balance of $340,644. The Companyprincipal and interest is required to make monthly paymentspayable 30 years from the date of $6,788 through January 2023. Asthe SBA Note. In connection therewith, FPA executed (i) a note for the benefit of March 31, 2020the SBA, which contains customary events of default and December 31, 2019,(ii) a Security Agreement, granting the amount owed is $209,531SBA a security interest in all tangible and $226,172 respectively.intangible personal property of FPA, which also contains customary events of default.

Litigation

On or about October 23, 2017, a claim was filed in the 17th Judicial Circuit Court in and for Broward County in Fort Lauderdale, Florida, by the plaintiff, Industrial and Oilfield Procurement Services, LLC, against our company. The case involves an alleged breach of contract between the parties relating to the purchase and sale of a Voraxial unit in 2015. The plaintiff has demanded a refund and damages. We are defending the case vigorously.

SALE OF INTELLECTUAL PROPERTY

On June 8, 2017, the Company and FPA, our wholly owned subsidiary, closed the transactions contemplated by the Technology Purchase Agreement dated March 13, 2017 with Schlumberger Technology Corporation, a Texas corporation, Schlumberger Canada Limited, a Canadian entity, and Schlumberger B.V., an entity organized under the laws of the Netherlands (collectively, “Schlumberger”).

At closing, we sold our intellectual property (the “Purchased Intellectual Property”), substantially consisting of the Voraxial patents, marks, software and copyrights, to Schlumberger in consideration of up to $4,000,000, of which $3,000,000 was paid to us at closing and the balance of $1,000,000 was paid in August 2019 upon satisfaction of certain post-closing conditions.

We utilized a portion of the proceeds from this transaction to pay most of our outstanding debt and are using the balance for general working capital. We used some of the proceeds to buy additional manufacturing equipment to meet potential future sales.

As part of the agreement, Schlumberger granted us a non-exclusive, worldwide, royalty-free licenses (the “Grant Back Licenses”), to make, use, sell, offer for sale, and import products and processes embodying the Purchase Intellectual Property outside the oil and gas market. In addition to the proceeds from the sale of our intellectual property, our management believes that the Grant Back License will provide for the potential increase of revenues through the sale of the intellectual technology, possibly leveraging future sales by Schlumberger in the oil and gas market to penetrate the sale and use of licensed products to other industries, including, but not limited to mining, sewage and wastewater.

In addition, at closing FPA entered into a Framework Agreement (the “Supply Agreement”) with Cameron Solutions, Inc. (“Cameron Solutions”), a Houston, Texas-based company engaged in the development, manufacture and sale of equipment used in the oil and gas industry. Under the terms of the three-year Supply Agreement, which ends in June 2020, FPA is the exclusive supplier to Cameron Solutions of certain Voraxial series products for use in the oil and gas industry. Sales will be made from time to time in accordance with the terms of purchase orders. The Supply Agreement is cancellable by Cameron Solutions upon 15 days’ notice if FPA fails to meet delivery or performance schedules or breaches any of the terms of the agreement, including the warranties. Cameron Solutions may also cancel the Supply Agreement without notice in the event FPA becomes insolvent or commits any act of bankruptcy. The Supply Agreement contains customary indemnification and confidentiality provisions.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

MARCH  31, 2020

(unaudited)

For a period of three years following the closing of the Agreement, which expires in June 2020, the Company and Raynard Veldman and John Di Bella have agreed to not participate or cause participation in the oil-and-gas market in relation to phase or constituent sensing or separation which is defined as, liquid-liquid, liquid-solid or liquid-gas separation and gas or liquid sensing, including all product lines and services related thereto and including the Voraxial product line and services, except to the extent necessary to: (i) repair or service, but not remanufacture, any goods the Company sold to third persons prior to closing; (ii) fulfill, on or after closing, any customer obligation; or (iii) comply with any term or condition of the Agreement. In addition, the Company shall take all reasonable measures to ensure the confidentiality and prevent the improper use of all trade secrets.

NOTE HI - LEASE

In December 2018, the Company entered into a three (3) year lease for an office and manufacturing facility located at 821 NW 57^th Place, Fort Lauderdale, FL 33309. The lease is $4,839 per month, which includes common area maintenance, taxes and insurance and expires in October 2021. The lease has a one-time renewal option for three years and an increased base rent of 3%. The Company has the option to terminate the lease with three months’ notice. The Company accounts for lease in accordance with ASC Topic 842.

For the three months ended March 31, 20202021 and 2019,2020, the total lease cost was $19,510$20,220 and $19,510, respectively, which includes variable lease cost of $4,771$5,704 and $4,771, respectively. Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. For the three months ended March 31, 20202021 and 2019,2020, cash paid for operating lease liabilities was $14,516 and $14,516, respectively.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial StatementsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

MARCH 31, 20202021

(unaudited)(UNAUDITED) 

NOTE IJ – MAJOR CUSTOMERS

During the three months ended March 31, 2021, we recorded 76% of our revenue from one customer.

During the three months ended March 31, 2020, we recorded 96% of our revenue from two customers, with each representing 57% and 39% of total revenues.

During the three months ended March 31, 2019, we recorded 100% of our revenue from three customers with each representing 64%, 22% and 14% of total revenues.

As of March 31, 2020, two2021, one of the Company’s customers represents 71% and 14%, respectively,81% of the total accounts receivable.

For the year endedAs of December 31, 2019, one2020, three of the Company’s customers represents 93%68%, 17% and 15% of the total revenues.

As of December 31, 2019, one of the Company’s customers represents 99% of the total accounts receivables.

NOTE MK – SUBSEQUENT EVENTS

Impact of the Covid-19 pandemic on our company. The Company’s operations are located in Broward County, Florida which implemented a stay at home order on March 27, 2020. Broward County was excluded from the Florida Governor’s recent Phase One reopening schedule and we do not know when the stay at home order will be lifted. The Company is unable to predict the overall impact on our company at this time. Starting inOn April 2020, we reorganized our manufacturing capabilities to manufacture face guards for the community, including the medical community. To date, we have generated limited revenues from the sales of face guards.

On May 4, 2020,5, 2021, FPA (the “Borrower”) received a loan (the “PPP“2021 PPP Loan”) from Bank of America, N.A.Cross River Bank. in the aggregate amount of $111,971,$75,085, pursuant to the Paycheck Protection Program (the “PPP”)PPP under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The 2021 PPP Loan, which was in the form of a Notepromissory note dated May 4, 2020April 5, 2021 issued by the Borrower,FPA, has a 60 month term and matures on May 4, 2022April 5, 2026 and bears interest at a rate of 0.98%1.00% per annum, payable monthly commencing on November 6, 2020.April 5, 2022. The Notenote may be prepaid by the BorrowerFPA at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.obligations. FPA intends to use the entire 2021 PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the 2021 PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

On May 5, 2020, FPA alsoIn April 2021, the Company entered into a purchase agreement to sell its CNC machining equipment for $275,000. The machining equipment was received an $8,000 grant fromin July 2017 and was used for the U.S. Small Business Administration.manufacture of customer specific projects along with the largest Voraxial and V-Inline Separators. The Company sold the equipment as the utilization of the CNC machining equipment for customer specific projects and the separation equipment decreased due to the Covid-19 pandemic. The Company can still manufacture the Voraxial and V-Inline Separators and manufacture customer specific projects with its current manufacturing equipment.

Application of Critical Accounting Policies

The Company’sfollowing discussion of our financial condition and results of operations for the three months ending March 31, 2021 and 2020 and should be read in conjunction with the unaudited condensed consolidated unaudited financial statements have been preparedand the notes to those statements that are included elsewhere in accordance with accounting principles generally acceptedthis report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in the United Statesthese forward-looking statements as a result of America. Certain accounting policies have a significant impact on amounts reportednumber of factors, including those set forth under Cautionary Statement Regarding Forward Looking Information in the financialthis report. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. A summary of these significant accounting policies can be found in Note C to the Company’s financial statements in the Company’s 2019 10-K. 

Among the significant judgments made in preparation of the Company’s financial statements are the determination of the allowance for doubtful accounts, value of equity instruments and adjustments of inventory valuations. These adjustments are made each quarter in the ordinary course of accounting.

Overview

Historically, our business wasAlthough we experienced significant revenue growth in 2019 mainly through the development, manufacture and sale of the Voraxial^® Separator proprietary technology now owned by Schlumberger that efficiently separates large volumes of liquid/liquid, liquid/solids or liquid/liquid/solids fluid mixtures with distinct specific gravities. As described earlier in this report, in March 2017 we entered into a Technology Purchase Agreement with Schlumberger pursuantand V-Inline Separators, 2020 proved to which we sold our intellectual property, substantially consisting of the Voraxial patents, marks, softwarebe an extremely challenging and copyrights, to Schlumberger. In addition, pursuantdisappointing year due to the Technology Purchase Agreement FPA entered intoCovid-19 pandemic. Our revenues were mainly derived from machining, face guards and auxiliary parts for the V-Inline Separators. The demand from the oil industry dried up as we saw a three year Supply Agreement with Cameron Solutions, Inc. which expiressignificant decline in June 2020, pursuant to which FPA isoil prices and a drop in capital expenditures from the exclusive supplier to Cameron Solutions, Inc.overall market, both the oil industry and industries outside of certain Voraxial series products for use in the oil and gas industry. We continued to support Schlumberger underhindered sales opportunities for the V-Inline Separator. Customer inquiries decreased significantly as well. The Supply Agreement we signed with Schlumberger in June 2017 as part of the Technology Purchase Agreement.Agreement expired in 2020. As we did not generate significant revenues from this agreement, we did not pursue an extension of such agreement under its initial terms. However, we may continue to work together on a project by project basis with Cameron Solutions until such time a new agreement is reached, if at all.

UnderWe believe there is a market for the Technology Purchase Agreement,V-Inline Separator in the mining, utilities, sewage and industrial wastewater industries, among others, which we were also granted acontinue to market under our Grant Back LicenseLicense. We intend to marketcontinue to seek opportunities for the technology into other markets outside of the oil and gas market which we plan to pursue.V-Inline Separator through our rights under our Grant Back License. We have branded our licensed products as V-Inline.the V-Inline Separator. We shipped a wastewater system to a utility company that consisted of multiple V-Inline Separators to separate solids and oil from their wastewater stream. The system is being used to process and separate oil and solids from a flow of about 100 gallons per minute. The system includes different technologies with the heart of the system being comprised of two V-Inline 2000 Separators working in parallel with a third V-Inline Separator being utilized to further dewater the reject lines from the System. We shipped the wastewater system in the fourth quarter of 2019. 

The Supply Agreement with Cameron Solutions, Inc. expires in June 2020. In 2019Going Concern

For the three months ended March 31, 2021, we reported salesa net loss of $(190,874) and net cash used in the aggregate amountoperations of $146,783 under this agreement,$145,494. At March 31, 2021, we had cash on hand of $173,337, a working capital deficit of $986,502 and salesan accumulated deficit of $0 during the first quarter$16,113,303. The report of 2020. As of the date of this report we have not received a renewal notice from Cameron Solutions, Inc. and do not know if the agreement will be renewed or renegotiated prior to its expiration. Without a Supply Agreement, we would have to redevelop our relationships with customers in the oil and gas industry to generate revenues from this industry. However, with or without a new Supply Agreement, the oil industry will potentially be challenging as the price of oil has decreased by approximately 60% from approximately $60 per barrel in January 2020 to approximately $24 per barrel by May 11, 2020. Further, with the current economic landscape defined by the COVID-19 virus, sales in 2020 may suffer as previously discussed in the overview.

The V-Inline 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 V-Inline 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.

The benefits of the V-Inline Separator include:

Impact of Covid-19independent registered public accounting firm on our Company

As described elsewhere herein, we are materially dependent on revenues from a limited number of customers. Our company’s manufacturing operations are located in Broward County, Florida which is subjectconsolidated financial statements for the year ended December 31, 2020 contains an explanatory paragraph regarding our ability to a “stay at home” order. Even before the “stay at home” order was issued, we were experiencing a significant decline in orders from our customers because of disruptions in our customers’ businessescontinue as a result of the Covid-19 pandemic. In addition, as a result ofgoing concern based upon our historic concentration on sales to customers in the oil and gas industry, the decline in oil prices has had a materially adverse impact our sales beginning with the first quarter of 2020 and continuing through the second quarter of 2020. During the first quarter of 2020 we experienced a slowdown from customer’s inquiries and we expect that trend to continue until such time as the full impact of the virus is known, travel restrictions are lifted and corporate capital expenditures are normalized. We also expect delays in our supply chain, including delivery of raw materials and component products as companies throughout the country are affected by local quarantines and disruptions

While we are able to continue operations as a non-consumer facing company that can fulfill shipments with a minimal staff that can maintain social distancing, we have reduced manufacturing hours. However, starting in April 2020, we slowly increased the manufacturing hours while taking necessary precautions for the safety of our employees in our pursuit to generate sales from the manufacturing of face guards for the medical industry and the general public. We are not certain at this time if sales generated will be sufficient. To date we have generated limited revenues. Our senior management are working remotely, and we have curtailed non-essential travel, and are seeking alternative strategies for the continuation of our company.

While the foregoing are some of the immediate impacts we are witnessing, this list is not exhaustive and we are unable to predict the overall impact on our company at this time. Our loss of revenues will materially impact our liquidity, and we do not know if we have sufficient access to working capital deficit, accumulated deficit and negative cash flows from historic sourcesoperations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our senior managementconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to raise capital, develop a source of revenues, report profitable operations or to continue as a going concern, in which event investors would lose their entire investment in our company. We estimate we require approximately $800,000 to monitormaintain our situation on a daily basis. However,operations over the next 12 months.

Subsequent to the period covered by this report, in April 2021 we expect that these factorsreceived approximately $75,000 under the 2021 PPP Loan and othersin April 2021 we have yetreceived $275,000 in consideration of selling our CNC machining equipment. A portion of the proceeds from the sale of machining equipment will be used to experience will materially adversely impact our company, its business and operationsfully pay for the foreseeable future.equipment note payable.

Results of Operations for the Three Months ended March 31, 2020 and 2019:

Revenue

OurWhile our revenues decreased by approximately 7%were nominal for the three months ended March 31, 20202021, our revenues increased by approximately 734% for the three months ended March 31, 2021 from the comparable period in 2019.2020. There are no assurances we will be able to increase our revenues to the profitability levels we experienced in fiscal year 2019 before the Covid-19 pandemic or report profitable operations in the future. Further, the lingering economic impact of the Covid-19 pandemic may have a continued negative effect on the potential for sales of V-inline Separators. Our revenues are dependent upon sales to Schlumberger and our ability to develop a consistent sales channel for the V-Inline Separators.Separators and potentially additional sales of the Voraxial Separator from Schlumberger. However, at this time, we have not renewed the supply agreement with Schlumberger, but we have maintained a relationship with Schlumberger and received a purchase order from Schlumberger for some auxiliary parts. As discussed earlier in this report, we believe that our revenues for the three months ended March 31, 2021 and fiscal year 2020 werehave been adversely impacted by the Covid-19 pandemic and the attendant significant drop in oil prices.prices in 2020. Even once the effects of the pandemic on our business subsides, it may take longer than expected for business in our target markets to resume normal operations. Accordingly, at this time we are unable to predict the ultimate impact to our revenues for the remaining 2020. Further, we have reorganized2021.

The majority of our sales in the first quarter of 2021 were a result of manufacturing specific machine parts for our customers, sales to explore the opportunity of selling face shieldsSchlumberger related to the medical industryVoraxial Separator, and general public starting in April 2020. Although we may generate revenues fromsales of auxiliary equipment and parts of the sale of face shields, at this time we cannot predict how successful we will be in penetrating this market.

V-Inline Separator. The majority of revenues in the first quarter of 2020 were a result of manufacturing specific machine parts for our customers. The majority of our sales in the first quarter of 2019 were a result of sales of auxiliary equipment and parts.

Cost of Goods

Our cost of goods decreasedincreased by approximately 69%1,840% for the three months ended March 31, 20202021 from the comparable period 2019.2020. This decreaseincrease is mainly due to the shiftan increase in revenues towe experienced and the different manufacturing projects we experiencedcompleted during the three months ended March 31, 2020 and some of the customers supplying the raw material for these projects.2021. Our cost of goods continues to be reviewed by management in effort to obtain the best available pricing while maintaining high quality standards.

Costs and Expenses

Total costs and expenses increaseddecreased by approximately 9%24% for the three months ended March 31, 20202021 from the comparable period 2019.2020 as we continue to reduce expenditures as a result of Covid-19 pandemic. Included in this increasedecrease was an increasea decrease of approximately 11%8% in general and administrative expenses in the first quarter of 20202021 from the first quarter of 2019,2020, including increasesdecrease in insurance which reflects the commencement of paid health benefits for our employees in July 2019, and repair and maintenance which reflects basic manufacturing upkeep.and insurance expense. In addition, payroll expense increaseddecreased approximately 12%31% during the first quarter of 20202021 as compared to the first quarter of 20192020 as we experienced a higher absorption costs into our manufacturing activities in 2019.reduced the number of employees and overtime hours due to slower economic activity. Professional fees were relatively flat from perioddecreased by approximately 30% as we continue to period.reduce expenses due to the Covid-19 pandemic.

Liquidity and Capital Resources:

Cash at March 31, 20202021 was $655,495$173,337 as compared to $674,844$336,564 at December 31, 2019.2020. Our working capital deficit at March 31, 20202021 was $321,562$986,502 as compared to a working capital deficit at December 31, 20192020 of $38,544.$750,481. At March 31, 2020,2021, we had an accumulated deficit of $15,162,371.$16,113,303. Our current assets decreased by 26%27% at March 31, 20202021 as compared to December 31, 2019,2020, which reflects decreases in accounts receivablesour cash and cash equivalents, partially offset by increases in our inventory and prepaid expenses.accounts receivables. Increases in accounts receivable is due to an increase in manufacturing projects completed during the period. Our current liabilities decreasedincreased by 1%9% at March 31, 20202021 as compared to December 31, 2019,2020, which reflects a decreasean increase in accounts payable and accrued expenses offset by increaseand accrued expenses – related party. Increases in accrued expenses – related party.party is due to the accrual of management’s salary. Accounts payable and accrued expenses increased due to professional fees.

We do not have any external sources of liquidity and we do not have any capital commitments. On May 4, 2020, FPA received a $111,971 PPP Loan as described in Note M to the unaudited condensed consolidated financial statements appearing earlier in this report. We are using the proceeds from the PPP Loan for qualifying expenses under the CARES Act. In addition, on May 5, 2020, FPA also received an $8,000 grant from the U.S. Small Business Administration. We are using those proceeds for working capital.

Summary of cash flows

Net cash used in operating activities in the three months ended March 31, 2021 was primarily attributable to an increase in accounts receivable offset in part by increases in accrued expenses – related party and accounts payable and accrued expenses.

Net cash provided by operating activities in the three months ended March 31, 2020 was primarily attributable to a decrease in accounts receivable and an increase in accrued expenses – related party offset in part by decreases in accounts payable and accrued expenses. ..

Net cash provided by operating activities in the three months ended March 31, 2019 was primarily attributable to a decrease in accrued expenses – related party and an increase in inventory and prepaid expenses offset in part by increases in deposit from customer and accounts payable and accrued expense. Increases in our inventory, prepaid expenses, accounts payable and accrued expenses are a result of the units we are manufacturing in fulfillment of orders we received. Increase in deposit from customer is primarily attributable to deposit received on a purchase order we received from a utility company and an order we received under the Supply Agreement.

Net cash used in financing activities during the three months ended March 31, 20202021 and 20192020 was primarily attributable to the repayment of the equipment note payable.

Net cash used in investing activities during the three months ended March 31, 2020 was primarily attributable to the purchase of equipment. There were no comparable activity during the three months ended March 31, 2021.

Continuing LossesLooking Forward

As a result of the uncertainties facing our company as discussed elsewhere in this report, including the impact of the Covid-19 pandemic, we are unable to predict the overall impact in 20202021 and beyond on our company at this time. Our loss of revenues will materially impact our liquidity, and we do not expect to be able to access the capital markets for additional working capital in the near future. Our senior management will continue to monitor our situation on a daily basis, however, we expect that these factors and others we have yet to experience will materially adversely impact our company, its business and operations for the foreseeable future. Our management has also begun exploring possible opportunities for the Company involving mergers, acquisitions or other business combination transactions in an effort to diversify our business. We are not currently a party to any agreement or understandings with any third parties, and there are no assurances even if our management locates an opportunity which it believes will be in the best interests of our shareholders what we will ever consummate such a transaction. Accordingly, investors should not place undue reliance on these efforts.

Our ability to generate future revenues, generate sufficient cash flow to pay our operating expenses and report profitable operations in future periods will depend on a number of factors, many of which are beyond our control. Our independent auditors have included in their audit report included in our 2019 10-K an explanatory paragraph that states that our working capital deficits and accumulated deficit raises substantial doubt about our ability to continue as a going concern. If we fail to achieve profitability on a quarterly or annual basis, or to raise additional funds when needed, or do not have sufficient cash flows from sales, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection. As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Critical Accounting Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note C of the Notes to Consolidated Financial Statements appearing later in this report describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our consolidated financial statements are fairly stated in accordance with U.S. GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:

Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections.

Inventory

Inventory primarily consists of components, including raw material and finished parts for the V-Inline Separator and face shields and is priced at lower of cost or net realizable value. Net realizable value is defined as sales price less cost of completion, disposable and transportation. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

Income Taxes

The Company accounts for income taxes under ASC 740-10-25. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Contingencies

The Company is involved in a legal proceeding. The Company assessed the probability of occurrence and whether any loss or range of loss can be reasonably estimated for the legal proceeding. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the consolidated financial statements would be material, the Company provides disclosure of the loss contingency in the footnotes to the consolidated financial statements. The Company reviews the status of the legal proceeding at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or the range of the loss can be made.

Recent Accounting Pronouncements

All newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.

Off Balance Sheet Arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Not applicable to smaller reporting company.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer who also serves as our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 2020.2021. Based upon continuing material weakness in the Company’s internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, our management concluded that the Company’s disclosure controls and procedures were ineffective as of the end of the period covered by this report.

We will continue to monitor our internal control over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow. We do not, however, expect that the material weaknesses in our disclosure controls will be remediated until such time as we have added additional personnel, including additional accounting and administrative staff, allowing improved internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 PART II.      OTHER INFORMATION

On or about October 23, 2017, a claim was filed in the 17^th Judicial Circuit Court in and for Broward County in Fort Lauderdale, Florida, by the plaintiff, Industrial and Oilfield Procurement Services, LLC, against our company.  The case involves an alleged breach of contract between the parties relating to the purchase and sale of a Voraxial unit in 2015. The plaintiff has demanded a refund and damages. We are defending this action, as we believe this claim is without merit.None.

We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2019 Form 10-K.

None.

None.

Not applicable to our company.

None.On April 5, 2021, FPA received a loan (the “2021 PPP Loan”) from Cross River Bank. in the aggregate amount of $75,085, pursuant to the PPP under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The 2021 PPP Loan, which was in the form of a promissory note dated April 5, 2021 issued by the FPA, has a 60 month term and matures on April 5, 2026 and bears interest at a rate of 1.00% per annum, payable monthly commencing on April 5, 2022. The note may be prepaid by the FPA at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations. FPA intends to use the entire 2021 PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the 2021 PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

In April 2021, the Company entered into a purchase agreement to sell its CNC machining equipment for $275,000. The machining equipment was received in July 2017 and was used for the manufacture of customer specific projects along with the largest Voraxial and V-Inline Separators. The Company sold the equipment as the utilization of the CNC machining equipment for customer specific projects and the separation equipment decreased due to the Covid-19 pandemic.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned as a duly authorized.

DATED: May 15, 202017, 2021