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 CHANGES IN SHAREHOLDERS’
EQUITY (DEFICIENCY)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 and 2020
(Unaudited)

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)

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.

Reclassification

Certain amounts from prior periods have been reclassified to conform to the current period presentation. The reclassification had no impact on the Company’s new loss of cash flow.

Recent Accounting Pronouncements

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

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

JUNE 30, 2020

(unaudited) 

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 June 30, 2020,March 31, 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500. During the sixthree months ended June 30, 2020,March 31, 2021, a total of $75,000 of salary have been paid and $81,650 of accrued salary were used to exercise the options for Mr. DiBella, Adele DiBella, and two employees of the Company (See Note F). The total unpaid balance as of June 30, 2020 is $559,315 and is included in accrued expenses – related party. During the three months ended June 30, 2019, the Company incurred salary expenses from the Chief Executive Officer of the Company of $52,500. During the six months ended June 30, 2019, a total of $360,000$26,250 of salary and accrued salary have been paid. The total unpaid balance as of June 30, 2019March 31, 2021 is $558,761$690,565 and is included in accrued expenses – related party. For the three month ended March 31, 2020, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500. Of these amounts, $0 had been paid for the three months ended March 31, 2020. The total unpaid balance as of March 31, 2021 and December 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 and six months ended June 30,March 31, 2021 and 2020, and 2019, Mr. Veldman received consulting fees of $7,500 and $15,000,$7,500, respectively.

During the three and six months ended June 30, 2020 and 2019, Mr. Veldman, received compensation for being a member of the Company’s board of directors of $3,000 and $6,000, respectively. Mr. John DiBella does not receive compensation for being a member of the Company’s board of directors.

During the three months ended June 30, 2020, Mr. Veldman reduced his The unpaid balance has been included in accrued expense by $10,000 to exercise his options (See Note F).expenses- related party. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the total unpaid balance is $21,500accrued compensation and $10,500,consulting services are $53,000 and $42,500 respectively.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

On June 9, 2020, the Company issued 3,800,000 shares of its common stock to a related party in connection with the exercise of a stock option at an exercise price of $0.01. Mr. DiBella agreed reduce his accrued salary in the amount of $3,000 for the exercise of options and an outside consultant agreed to reduce her payable in the amount of $35,000 for the exercise of options.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

NOTE E – FIXED ASSETS

Fixed assets as of June 30, 2020March 31, 2021 and December 31, 20192020 consist of:

Depreciation expense was $11,328$11,471 and $11,265$11,328 for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively.

Depreciation expense was $22,656 and $22,529NOTE F – EQUIPMENT NOTE PAYABLE

In July 2017, the Company entered into a financing agreement for the six months ended June 30,purchase of CNC machining equipment valued at approximately $426,000. The machining equipment was received in July 2017 and was used for the manufacture of Voraxial Separators under the Supply Agreement and sales of 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 Company incurred $24,281 of installation costs. As of March 31, 2021 and December 31, 2020 the amount owed is $157,665 and 2019,$175,398, respectively.

See NOTE K “SUBSEQUENT EVENTS”.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

JUNE 30, 2020

(unaudited) 

note fG – shareholders’ equity

COMMON STOCK

On June 9, 2020, the Company issued to 350,000 shares of its common stock to employees at $0.028 per share, or $9,800, for services rendered. The Company valued these common shares based on the fair value at the date of grant.

On June 9, 2020, the Company issued 7,700,000 shares of its common stock to our Chief Executive Officer in connection with the exercise of a stock option at an exercise price of $0.01. Mr. DiBella reduced his accrued salary in the amount of $77,000 for the exercise of options.

On June 9, 2020, the Company issued 1,000,000 shares of its common stock to Raynard Veldman, a member of the Company’s board of directors in connection with the exercise of a stock option at an exercise price of $0.01. Mr. Veldman reduced his accrued consulting and Board of Director fees in the amount of $10,000 for the exercise of options.

On June 9, 2020, the Company issued 700,000 shares of its common stock to an outside consultant in connection with the exercise of a stock option at an exercise price of $0.01. The consultant agreed to reduce her payable in the amount of $7,000 for the exercise of options.

On June 9, 2020, the Company issued 165,000 shares of its common stock to two employees in connection with the exercise of a stock option at an exercise price of $0.01. Mr. DiBella agreed reduce his accrued salary in the amount of $1,650 for the exercise of options.

On June 9, 2020, the Company issued 3,800,000 shares of its common stock to a related party in connection with the exercise of a stock option at an exercise price of $0.01. Mr. DiBella agreed reduce his accrued salary in the amount of $3,000 for the exercise of options and an outside consultant agreed to reduce her payable in the amount of $35,000 for the exercise of options.

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.

On June 9, 2020, our Chief Executive Officer exercised 7,700,000 stock options at an exercise price of $0.01 per share. Mr. DiBella agreed to reduce his accrued salary in the amount of $77,000 for the exercise of options.

REVERSE SPLIT

On June 9,August 27, 2020 Raynard Veldman,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 memberresult of the Company’s boardReverse Stock Split, on the Effective Date each 10 shares of directors exercised 1,000,000our common stock options at an exercise priceissued and outstanding immediately prior to the Effective Date became one share of $0.01 perour 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. Mr. Veldman agreedOn the Effective Date, each certificate representing shares of pre-Reverse Stock Split common stock was deemed to reduce his accrued consulting fees in the amountrepresent one-tenth of $10,000a share of our post-Reverse Stock Split common stock, subject to rounding for the exercise of options.fractional shares.

On June 9, 2020, an outside consultant exercised 700,000 stock options at an exercise price of $0.01 per share. The consultant agreed to reduce the payables due in the amount of $7,000 for the exercise of options. In addition, a related party exercised 3,800,000 stock options at an exercise price of $0.01 per share. The consultant agreed to reduce the payables due in the amount of $35,000 for the exercise of options for the related party. In addition, Mr. DiBella agreed to reduce his accrued salary in the amount of $3,000 for the exercise of options for the related party.

On June 9, 2020, two employees exercised 165,000 stock options at an exercise price of $0.01 per share. Mr. DiBella agreed to reduce his accrued salary in the amount of $1,650 for the exercise of options for these three employees.

Information with respect to options outstanding and exercisable at June 30, 2020 is as follows:

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 June 30, 2020 is $1,490. Reverse Stock Split.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  

Notes to Condensed Consolidated Financial Statements MARCH 31, 2021

JUNE 30, 2020

(unaudited) (UNAUDITED)

NOTE GH – COMMITMENTS AND CONTINGENCIES

LOAN PAYABLESBA AND PPP LOANS

On May 4, 2020, FPA received a loan (the “PPP Loan”) from Bank of America, N.A. in the aggregate 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 Note 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 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. FPA intends to usebelieves it used the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP 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 May 5, 2020, FPA also received an $8,000 grant from the U.S. Small Business Administration. The Company recognized the grant as other income during the six months ended June 30, 2020.

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 is used for the manufacture of Voraxial and V-Inline Separators, as well as for the manufacturing of high precision parts for customers. Under the terms of the agreement the Company made an initial down payment of $85,661 and financed the remaining balance of $340,644. The Company is required to make monthly payments of $6,788 through January 2023. As of June 30, 2020, and December 31, 2019, the amount owed is $192,608 and $226,172 respectively.

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  

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

JUNE 30, 2020

(unaudited) 

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, 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. The Supply Agreement expired in June 2020. As we did not generate significant revenues from this agreement, we did not pursue Cameron for an extension under the original terms. However, we have had discussions to develop a new agreement. The Company’s non-compete agreement in the oil and gas industry also expired in June 2020.

For a period of three years following the closing of the Technology Purchase Agreement, which expired 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. As the term has expired, the Company may review opportunities in the oil and gas industry.

NOTE H - 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 and six months ended June 30, 2020 and 2019, the total lease cost was approximately $14,700 and $29,400, respectively which included variable cost of approximately $4,500 and $9,000 respectively. For the six months ended June 30, 2020 and 2019, cash paid for operating liabilities was approximately $24,000 and $29,000, respectively.

ENVIRO TECHNOLOGIES, INC. AND SUBSIDIARY

Notes to Condensed Consolidated Financial Statements

JUNE 30, 2020

(unaudited) 

NOTE I – MAJOR CUSTOMERS

During the six months ended June 30, 2020, we recorded 72% of our revenue from two customers, with each representing 60% and 12% of total revenues.

During the three months ended June 30, 2020, we recorded 86% of our revenue from two customers, with each representing 73% and 13% of total revenues.

During the three and six months ended June 30, 2019, we recorded 100% and 98% of our revenue from one customer.

As of June 30, 2020, three of the Company’s customers represents 62%, 15% and 11%, respectively, of the total accounts receivable.

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

NOTE M – SUBSEQUENT EVENTS

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. The EIDL Loan requires all requests for disbursements be made by December 23, 2020 (six months after the date of the EIDL Loan), unless the SBA, in its sole discretion, extends the disbursement period. If FPA does not request disbursements by such date, the EIDL Loan commitment will terminate and FPA will lose the ability to draw the funds. On July 16, 2020, the Company has requested $150,000 in disbursements under the EIDL Loan. The funds were received on July 20, 2020. Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date of each advance.annum. Installment payments, including principal and interest, are due monthly beginning June 23, 2021 (12 months from the date of the SBA note) in the amount of $731. The balance of principal and interest is payable 30 years from the date of the SBA Note. In connection therewith, FPA executed (i) a note for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and 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.

NOTE I - 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, 2021 and 2020, the total lease cost was $20,220 and $19,510, respectively, which includes variable lease cost of $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, 2021 and 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 STATEMENTS 

MARCH 31, 2021

(UNAUDITED) 

NOTE J – 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.

As of March 31, 2021, one of the Company’s customers represents 81% of the total accounts receivable.

As of December 31, 2020, three of the Company’s customers represents 68%, 17% and 15% of the accounts receivables.

NOTE K – SUBSEQUENT EVENTS

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 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 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. The Company can still manufacture the Voraxial and V-Inline Separators and manufacture customer specific projects with its current manufacturing equipment.

OverviewThe following 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 financial statements and the notes to those statements that are included elsewhere in this 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 these forward-looking statements as a result of a number of factors, including those set forth under Cautionary Statement Regarding Forward Looking Information in this 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.

Historically, our business wasOverview

Although we experienced significant revenue growth in 2019 mainly through the development, manufacture and sale of Voraxial Separator and V-Inline Separators, 2020 proved to be an extremely challenging and disappointing year due to the Voraxial^® Separator, proprietary technology now owned by Schlumberger that efficiently separates large volumesCovid-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 significant decline in oil prices and a drop in capital expenditures from the overall market, both the oil industry and industries outside of liquid/liquid, liquid/solids or liquid/liquid/solids fluid mixtures with distinct specific gravities. As described earlier in this report, in March 2017oil and gas hindered sales opportunities for the V-Inline Separator. Customer inquiries decreased significantly as well. The Supply Agreement we entered into a Technology Purchase Agreementsigned with Schlumberger pursuant to which we sold our intellectual property, substantially consistingin June 2017 as part of the Voraxial patents, marks, software and copyrights, to Schlumberger. In addition, pursuant to the Technology Purchase Agreement FPA entered intoexpired 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 three year Supply Agreementproject by project basis with Cameron Solutions Inc. which expired in June 2020. We have had discussions to develop a new agreement; however there is no assurances thatuntil such time a new agreement will be finalized. The Company’s non-compete agreementis reached, if at all.

We believe there is a market for the V-Inline Separator in the oilmining, utilities, sewage and gas industry also expired in June 2020. Without a Supply Agreement,industrial wastewater industries, among others, which we will have to redevelop our relationships with customers in the oil and gas industry to generate revenues from this industry. Regardless of our ability to negotiate a new Supply Agreement, the oil industry will potentially be challenging as the price of oil futures reached a negative $40 per barrel in 2020. Further, with the current economic landscape defined by the COVID19 virus, sales in 2020 may continue to suffer.market under our Grant Back License. We planintend to continue to support Schlumbergerseek opportunities for the V-Inline Separator through our rights under new terms on a per project basis.

Under the Technology Purchase Agreement, we were also granted aour Grant Back License to market the technology into other markets outside of the oil and gas market which we plan to pursue.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 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.Going Concern

For the three months ended March 31, 2021, we reported a net loss of $(190,874) and net cash used in operations of $145,494. At March 31, 2021, we had cash on hand of $173,337, a working capital deficit of $986,502 and an accumulated deficit of $16,113,303. The benefits of the V-Inline Separator include:

Manufacturing

With the softening for high end capital expenditures projects in markets that can utilize the Voraxial and V-Inline  

separator, we are exploring leveraging our manufacturing capabilities to pursue high precision manufacturing projects. Further, we designed our version of a face shield which we manufactured and sold during the quarter ended June 30, 2020 to the medical industry and general public. Although we achieved 63%report of our revenues inindependent registered public accounting firm on our consolidated financial statements for the quarteryear ended June 30,December 31, 2020 from the sale of face shields, we do not anticipate this market opportunitycontains an explanatory paragraph regarding our ability to continue as the supply chain and margins are challenging with many companies entering this market. We continue to marketa going concern based upon our manufacturing capabilities.

Impact of Covid-19 on our Company

As described elsewhere herein, we are materially dependent on revenues from a limited number of customers. On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 within the United States, federal, state and local governments throughout the country have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. These measures have begun to have a significant adverse impact upon many sectors of the economy, including our industry.

In response to these measures, the “stay at home” order issued in April 2020 by the Governor of the State of Florida where our business is located, and for the protection of our employees and customers, we eliminated non-essential travel, and altered work schedules at our manufacturing facility. In addition, our senior management began working remotely. On May 4, 2020 the Florida “stay at home” order was lifted and the phased reopening of the State of Florida began.

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’ businesses as a result of the Covid-19 pandemic. In addition, as a result of 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 six months of 2020 we experienced a slowdown from customer’s inquiries in all industries 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. 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 and Six Months ended June 30,March 31, 2020 and 2019:

Revenue

OurWhile our revenues decreased by approximately 85% and approximately 82%, respectively,were nominal for the three and six months ended June 30, 2020March 31, 2021, our revenues increased by approximately 734% for the three months ended March 31, 2021 from the comparable periodsperiod 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 have beenare dependent in the past few years on sales to Schlumberger andupon 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 June 30,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, which at this moment we do not know when this may occur, 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. We continue to try to leverage our manufacturing capabilities by exploring different opportunities, such as high precision manufacturing and manufacturing of face shields. In the three and six months ended June 30, 2020, we derived 

76% and 63%, respectively, of our revenues from the sale of face shields to the medical industry and general public. We do not expect additional sales of face shields as the supply chain and margins proved to be challenging.2021.

The majority of revenues in the second quarter and first six months of 2020 were a result of high precision manufacturing for our customers and the sale of face shields. The majority of our sales in the secondfirst quarter and first six months of 20192021 were a result of manufacturing specific machine parts for our customers, sales to Schlumberger related to the Voraxial salesSeparator, and sales of auxiliary equipment and parts of the V-Inline Separator. The majority of revenues in the first quarter of 2020 were a result of manufacturing specific machine parts for our customers.

Cost of Goods

Our cost of goods decreasedincreased by approximately 86%1,840% for each of the second quarter and first sixthree months of 2020ended March 31, 2021 from the comparable periods 2019.period 2020. This decreaseincrease is mainly due to the significant declinean increase in revenues and shift in revenues to manufacturing high precision components and face shields we experienced and the different manufacturing projects we completed during the three and six months ended June 30, 2020 as compared to Voraxial Separator in 2019.March 31, 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 13% and approximately 11%, respectively,24% for the second quarter and first sixthree months of 2020ended March 31, 2021 from the comparable periods 2019.period 2020 as we continue to reduce expenditures as a result of Covid-19 pandemic. Included in this increasedecrease was an increasea decrease of approximately 8% in general and administrative expenses in the first quarter of 2021 from the first quarter of 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 31% during the 2020 periodsfirst quarter of 2021 as compared to the 2019 periodsfirst quarter of 2020 as we experienced a higher absorption costs into our manufacturing activitiesreduced the number of Voraxial Separator in 2019 which was offset by a non-cash expense for issuance of stockemployees and overtime hours due to our employees in 2020.slower economic activity. Professional fees decreased by approximately 30% as we continue to minimize expenses.reduce expenses due to the Covid-19 pandemic.

TOTAL OTHER INCOME (EXPENSE)

During the second quarter of 2020 we received a $8,000 grant from the Small Business Association for working capital which is reflected as other income during the period. We did not have comparable income during the 2019 period. Interest expense represents the amounts due under the financing agreement for the CNC machine.

Liquidity and Capital Resources:

Cash at June 30, 2020March 31, 2021 was $507,709$173,337 as compared to $674,844$336,564 at December 31, 2019.2020. Our working capital deficit at June 30, 2020March 31, 2021 was $391,364$986,502 as compared to a working capital deficit at December 31, 20192020 of $38,544.$750,481. At June 30, 2020,March 31, 2021, we had an accumulated deficit of $15,433,327.$16,113,303. Our current assets decreased by 39%27% at June 30, 2020March 31, 2021 as compared to December 31, 2019,2020, which reflects decreases in our cash accounts receivables and prepaid expensescash equivalents, partially offset by increases in our inventory.accounts receivables. Increases in accounts receivable is due to an increase in manufacturing projects completed during the period. Our current liabilities decreasedincreased by 7%9% at June 30, 2020March 31, 2021 as compared to December 31, 2019,2020, which reflects a decreasean increase in accounts payable and accrued expenses and accrued expenses – related party. Increases in accrued expenses – related party offset byis due to the noteaccrual of management’s salary. Accounts payable issued during the quarter.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 G 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. Lastly, in July, 2020 FPA also received a $150,000 EIDL Loan from the SBA at a per annum interest rate of 3.75%. Installment payments, including principal and interest, of $731.00 monthly, will begin 12 months from the date of the promissory note. The proceeds from the EIDL Loan may be used for our general operating expenses.

Summary of cash flows

The following table summarizes our cash flows: 

Net cash used in operating activities in the sixthree months ended June 30, 2020March 31, 2021 was primarily attributable to our net loss for the period,an increase in inventory and decrease in accounts payable and accrued expenses. These were offset by decreases in accounts receivable and accrued expenses- related parties.

Net cash usedoffset in operating activities in the six months ended June 30, 2019 was primarily attributable to our net loss for the period, a decreasepart by increases in accrued expenses – related party and increasesaccounts payable and accrued expenses.

Net cash provided by operating activities in inventorythe three months ended March 31, 2020 was primarily attributable to a decrease in accounts receivable and prepaidan increase in accrued expenses – related party offset in part by an increasedecreases in deposit from customer. Increaseaccounts payable and accrued expenses.

Net cash used in deposit from customer isfinancing activities during the three months ended March 31, 2021 and 2020 was primarily attributable to deposit received on a purchase order we received from a utility company.the repayment of the equipment note payable.

Net cash used in investing activities during sixthe three months ended June 30,March 31, 2020 was primarily attributable to the purchase of equipment. We did not have aThere were no comparable expense inactivity during the 2019 period.three months ended March 31, 2021.

Net cash provided by financing activities during the six months ended June 30, 2020 was primarily attributable to proceeds from the PPP loan offset by the repayment of the equipment note payable. Net cash used in financing activities during the 2019 period reflected the repayment of the equipment note payable.

Continuing Losses and Going ConcernLooking 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.

Application of Critical Accounting PoliciesEstimates

The Company’s condensed consolidated unauditedOur financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. CertainAmerica (“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 have a  

significant impact on amounts reportedused in the preparation of the consolidated financial statements. A summaryCertain of these significant accounting policies canare considered to be found in Note Ccritical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the Company’spresentation 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 Company’s 2019 10-K.  Amongestimate 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 significantcircumstances. 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 made in preparationand uncertainties affecting the application of the Company’sthose 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 determinationfollowing critical accounting policies reflect our more significant estimates and assumptions used in the preparation of theour 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 equity instrumentscompletion, disposable and adjustmentstransportation. 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 inventory valuations. These adjustmentsexisting assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are made each quartermeasured using enacted tax rates expected to apply to taxable income in the ordinary courseyears 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 accounting.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 June 30, 2020.March 31, 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, and our subsequent filings with the SEC, subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K and our subsequent filings. We expect that these risks will continue to be exacerbated by the impact of the Covid-19 pandemic on our company and any worsening of the economic environment.10-K.

Our loan under the Paycheck Protection Program may not be forgiven.

We have received loan proceeds in the amount of approximately $111,971 under the PPP. Under the terms of the CARES Act, PPP loan recipients can apply for loan forgiveness. The potential loan forgiveness for all or a portion of the PPP Loan is determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. The amount of loan forgiveness will be reduced if PPP loan recipients terminate employees or reduce salaries during the covered period. While we currently believe that our use of the loan proceeds will meet the conditions for forgiveness of the PPP Loan, there can be no assurance that forgiveness for any portion of the PPP Loan will be obtained.

We have granted the SBA a blanket security interest in our assets under the terms of the EIDL Loan.

Under the terms of the EIDL Loan, FPA granted the SBA in blanket security interest in its assets which represent substantially all of our assets. In the event we should default under the EIDL Loan it is possible that the SBA may foreclose on all our assets. In that event, our ability to continue our business and operations as presently conducted would cease and investors would likely loose their entire investment in our company.

On June 9, 2020, the Company issued 350,000 shares of its common stock to five employees at $0.028 per share, or $9,800, for services rendered. The shares were issued pursuant to the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended.  The shares contain a legend restricting their transferability absent registration or applicable exemption. The employees are sophisticated investors and had access to business and financial information concerning the company.None.

None.

Not applicable to our company.

On June 23, 2020,April 5, 2021, FPA executedreceived a loan (the “2021 PPP Loan”) from Cross River Bank. in the standard loan documents required for securingaggregate 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 $150,000 EIDL Loanpromissory 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 SBA. Pursuant to that certainPPP Loan Authorization and Agreement, with proceeds tomay only be used for working capital purposes. The EIDLpayroll 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 requires all requestsamount for disbursements be made by December 23, 2020 (six months afterqualifying expenses. Under the dateterms of the EIDL Loan), unlessPPP, certain amounts of the SBA,2021 PPP Loan may be forgiven if they are used for qualifying expenses as described in its sole discretion, extends the disbursement period. IfCARES Act.

In April 2021, the Company does not request disbursements by such date,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 EIDL Loan commitment will terminatemanufacture of customer specific projects along with the largest Voraxial and FPA

will loseV-Inline Separators. The Company sold the ability to drawequipment as the funds. On July 16, FPA has accepted to receive the loan amount of $150,000 under the EIDL Loan. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning July 16, 2021 (12 months from the dateutilization of the SBA note) inCNC machining equipment for customer specific projects and the amount of $731. The balance of principal and interest is payable 30 years fromseparation equipment decreased due to the date of the SBA note. In connection therewith, FPA executed (i) a note for the benefit of the SBA which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of FPA, which also contains customary events of default.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: August 14, 2020May 17, 2021