U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,September 30, 2021

or

or

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _____________ to ______________

Commission File Number: 0-30454

Enviro Technologies U.S., Inc.

(Exact name of registrant as specified in its charter)

821 NW 57^th Place , Fort Lauderdale, Florida 33309

(Address of principal executive offices) (Zip Code)

(954) (954) 958-9968

(Registrant’s telephone number, including area code)

_________________________________________________

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: May 17,November 12, 2021, we had 4,950,125shares of our Common Stock outstanding.

INDEX

INDEX

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about risks associated with:

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, Part I, Item 1A. - Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021 (the “2020 10-K”) and our other filings with the SEC. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms “EVTN,” the “Company,” “we,” “our,” “us,” and similar terms refers to Enviro Technologies U.S., Inc., a Florida corporation, and our subsidiary, Florida Precision Aerospace, Inc., a Florida corporation which we refer to as “FPA.” In addition, “first“third quarter of 2021” refers to the three months ended March 31,September 30, 2021, “first“third quarter of 2020” refers to the three months ended March 31,September 30, 2020, “2020” refers to the year ended December 31, 2020 and “2019”“2021” refers to the year ending December 31, 2019.2021. We maintain a corporate website at www.evtn.com. Unless specifically set forth to the contrary, the information which appears on our website at www.evtn.com is not part of this report.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

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 OPERATIONS

(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 CHANGES IN SHAREHOLDERS’

EQUITY (DEFICIENCY)

FOR THE THREE MONTHS ENDED MARCH 31,(Unaudited)

 For the three months ended September 30, 2021 and 2020
(Unaudited)

For the nine months ended September 30, 2021 and 2020

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 STATEMENTS 

MARCH 31,SEPTEMBER 30, 2021

(UNAUDITED) 

NOTE A - ORGANIZATION AND OPERATIONS

Enviro Technologies U.S., Inc., a Florida corporation (the “Company”), is a manufacturer and provider of environmental and industrial separation technology. The Company developed, and now manufactures and sells the V-Inline Separator, 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., a Florida corporation (“FPA”), a wholly-owned subsidiary of the Company, 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”) for 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 non-exclusive, worldwide, royalty-free licenses (the “Grant Back Licenses”), to make, use, sell, offer for sale, and import products and processes embodying the Intellectual Property outside the oil and gas market.market and we entered into a Supply Agreement. Current and potential commercial applications and markets include mining, utilities, manufacturing, waste-to-energy among other industries.

FPA is used to manufacture, assemble and test the V-Inline Separator. On August 20, 2020, the Company’s shareholders approved a change of domicile of the Company from Idaho to Florida. On December 28, 2020, the Company received the file stamped Certificate of Domestication and Articles of Incorporation from 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 changed to “Enviro Technologies U.S., Inc.”.

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 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 increase our revenues in future periods 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 return to the pre-Covid revenue and profitability levels of 2019 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.

At March 31,September 30, 2021, we had a working capital deficit of $986,502,$1,119,842, an accumulated deficit of $16,113,303.$16,443,894. We do not have any external sources of liquidity. Our revenues have declined significantly from quarter ended and year ended December 31, 2019, our last full reporting period prior to the start of Covid-19 pandemic and 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 accruedcontinue to accrue a portion of management’s salary.salary, and sold under-utilized equipment. We also have begun marketing our machining capabilities to local manufactures. There are no assurances, however, that these efforts will be sufficient to permit us to pay our operating expenses. In the 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 STATEMENTS 

MARCH 31,SEPTEMBER 30, 2021

(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, 2020, as filed with the SEC on 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,September 30, 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 V-Inline Separators and some high precision manufacturing projects. We 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.

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,September 30, 2021, and December 31, 2020, respectively, there was $0 $0 of deposits from customers.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31,SEPTEMBER 30, 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,September 30, 2021 and December 31, 2020, the Company has $7,044 $7,044and $7,044 $7,044in 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,September 30, 2021 and December 31, 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,September 30, 2021 and December 31, 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,September 30, 2021 and December 31, 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,September 30, 2021 and December 31, 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,September 30, 2021 and December 31, 2020, the Company has a cash concentration in excess of FDIC limits of $0 $0and $80,014,$80,014, respectively.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31,SEPTEMBER 30, 2021

(UNAUDITED) 

Inventory

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 and disposable and 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,September 30, 2021 and December 31, 2020:

Inventory amounts are presented net of allowance for inventory reserves of $75,785 $75,785 and $75,785 $75,785 as of March 31,September 30, 2021 and December 31, 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 (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.

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.

As of March 31,September 30, 2021 and 2020, there were 10,000 and 1,346,500 10,000 shares issuable upon the exercise of options, respectively. The Company had a net loss for the periodsthree and nine months ended March 31,September 30, 2021 and 2020; therefore, common stock equivalent shares are excluded from the computation of net loss per share if their effect is 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 onesegment and therefore segment information is not presented.

LEASES

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

SEPTEMBER 30, 2021

(UNAUDITED) 

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 $151 and $1,863 $370 in advertising costs during the periodsthree months ended March 31,September 30, 2021 and March 31,September 30, 2020, respectively. There was $635 and $3,667 in advertising costs during the nine months ended September 30, 2021 and September 30, 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.

Recent Accounting Pronouncements

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

NOTE D - RELATED PARTY TRANSACTIONS

For the three months ended March 31,September 30, 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500. During the three months ended March 31, 2021,$52,500, of which a total of $26,250 $0 of salary and accrued salary have been paid. During the nine months ended September 30, 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $157,500, of which a total of $26,250 salary has been paid. The total unpaid balance as of March 31,September 30, 2021 is $690,565 $795,565 and is included in accrued expenses – related party. ForDuring the three monthand nine months ended March 31,September 30, 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$52,500 and $157,500, respectively. During the threenine months ended March 31, 2020.September 30, 2020, a total of $75,000 of salary was 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 G). The total unpaid balance as of March 31, 2021 and December 31,September 30, 2020 are $663,465 and $664,315, respectively,was $611,815, which arewere included in accrued expenses – related party.

Effective July 1, 2017, our non-employee directors receive a monthly fee of $1,000 for serving on the board of directors. During the three and nine months ended March 31,September 30, 2021 and 2020, Mr.Raynard Veldman, received compensation for being a member of the Company’s board of directors of $3,000 $3,000 and $3,000,$9,000, respectively. The unpaid balance of $21,000 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 $2,500 per month for consulting services. During the three and nine months ended March 31,September 30, 2021 and 2020, Mr. Veldman received consulting fees of $7,500 $7,500 and $7,500,$22,500, respectively. The unpaid balance of $53,000 has been included in accrued expenses- related party.

During the three months ended September 30, 2020, Mr. Veldman reduced his accrued fees by $10,000 to exercise his options (See Note G). As of March 31,September 30, 2021 and December 31, 2020, the total accrued compensation and consulting services are $53,000 $74,000 and $42,500 $42,500 respectively.

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.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31,SEPTEMBER 30, 2021

(UNAUDITED) 

NOTE E – FIXED ASSETS

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

Depreciation expense was $11,471 $206and $11,328 $11,328for the three months ended March 31,September 30, 2021 and 2020, respectively.

Depreciation expense was $15,504and $33,984for the nine months ended September 30, 2021 and 2020, respectively.

The Company sold its CNC machining equipment for a sales price of $275,000 and incurred a loss of $15,011 from the sale of equipment. See Note F below.

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.$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 $85,661 and is required to make monthly payments of $6,788 $6,788 through January 2023.2023. In addition, the Company incurred $24,281 $24,281 of installation costs. In April 2021, the Company entered into a purchase agreement to sell its CNC machining equipment for $275,000. 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. As of March 31,September 30, 2021 and December 31, 2020 the amount owed is $157,665 $0 and $175,398,$175,398, respectively. See NOTE K “SUBSEQUENT EVENTS”.

Schedule of equipment note payable

note G – shareholders’ equity

OptionsCOMMON STOCK

On June 9, 2020, the Company issued to 35,000 shares of its common stock to employees at $0.28 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 770,000 shares of its common stock to our Chief Executive Officer in connection with the exercise of a stock option at an exercise price of $0.10. Mr. DiBella reduced his accrued salary in the amount of $77,000 for the exercise of options.

On June 9, 2020, the Company issued 100,000 shares of its common stock to Mr. Veldman in connection with the exercise of a stock

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

SEPTEMBER 30, 2021

(UNAUDITED)  

option at an exercise price of $0.10. 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 70,000 shares of its common stock to a consultant in connection with the exercise of a stock option at an exercise price of $0.10. 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 16,500 shares of its common stock to two employees in connection with the exercise of a stock option at an exercise price of $0.10. 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 380,000 shares of its common stock to a related party in connection with the exercise of a stock option at an exercise price of $0.10. 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,September 30, 2021 is as follows: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,September 30, 2021 is $1,500.$585.

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.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

SEPTEMBER 30, 2021

(UNAUDITED) 

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 Reverse Stock Split also affected the Company’s outstanding stock options which resulted in the underlying shares of such instruments being reduced and exercise price being increased proportionally to the Reverse Stock Split ratio. All shares and per share data have been retroactively adjusted for all periods presented to reflect the effects of the Reverse Stock Split.

 ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2021

(UNAUDITED)

NOTE H – COMMITMENTS AND CONTINGENCIES

SBA AND PPP LOANS

On May 4, 2020, FPA received a loan (the “PPP“2020 PPP Loan”) from Bank of America, N.A. in the aggregate amount of $111,971,$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 2020 PPP Loan, which was in the form of a Notepromissory 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.annum. 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 believes it used the entire 2020 PPP Loan amount for qualifying expenses. Under the terms of the PPP Loan, certain amounts of the 2020 PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. We intend to applyapplied for forgiveness of the PPP Loan in accordance with the terms of the CARES Act.

On June 23, 2020, FPA executedAct and are in discussions with Bank of America. Loan payments are deferred for borrowers who apply for loan forgiveness until SBA remits the standardborrowers 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 principalforgiveness 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 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. 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.lender.

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,$75,085, pursuant to the PPP under Division A, Title I of the CARES Act, which was enacted March 27, 2020.Act. 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.annum. 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. Loan payments are deferred for borrowers who apply for loan forgiveness until SBA remits the borrowers loan forgiveness amount to the lender. We have been forgiven for the full amount of the PPP Loan in accordance with the terms of the CARES Act. In accounting for the terms of the PPP Loan, the Company is guided by ASC 470 Debt, and ASC 450-30 Gain contingency. Accordingly, the Company derecognized the PPP Loan liability and related interest of $75,352 and recorded it as Other Income, as the forgiveness was certain.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

SEPTEMBER 30, 2021

(UNAUDITED) 

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 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. Installment payments, including principal and interest, are due monthly beginning July 16, 2022 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. As of September 30, 2021, the accrued interest on these loans was $8,461.

On July 2, 2021 and July 7, 2021 we received an SBA Grant in the amount of $5,000 and $2,000 respectively, under the COVID-19 Economic Injury Disaster Loan (EIDL) program. These grants do not need to be repaid and recognized as Other Income on our condensed consolidated statements of operations.

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. On October 7, 2021, we entered into a settlement agreement with the plaintiff. See Note K below.

NOTE I - LEASE

In April 2021,December 2018, the Company entered into a purchase agreement to sell its CNC machining equipmentthree (3) year lease for $275,000.an office and manufacturing facility located at 821 NW 57^th Place, Fort Lauderdale, FL 33309. The machining equipment was received in July 2017lease is $4,839 per month, which includes common area maintenance, taxes and was usedinsurance and expires on October 31, 2021. The lease has a one-time renewal option for the manufacturethree years and an increased base rent of customer specific projects along with the largest Voraxial and V-Inline Separators.3%. The Company soldhas the equipment asoption to terminate the utilization of the CNC machining equipment for customer specific projects and the separation equipment decreased due to the Covid-19 pandemic.lease with three months’ notice. The Company can still manufacture accounts for lease in accordance with ASC Topic 842. On October 28, 2021, the Voraxialcompany executed the option to extend the lease for three (3) more years. The future lease payments under the renewal options are included in the operating lease asset and V-Inline Separatorsliability as of September 30, 2021. No modification is expected to be made.

For the three months ended September 30, 2021 and manufacture customer specific projects2020, the total lease cost was $20,100 and $14,000, respectively, which includes variable lease cost of approximately $8,000 and $1,700, respectively. Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. For the nine months ended September 30, 2021 and 2020, the total lease cost was $61,000 and$53,000, respectively, which includes variable lease cost of $17,100 and $11,000, respectively. For the nine months ended September 30, 2021 and 2020, cash paid for operating lease liabilities was approximately $34,000 and$32,000, respectively.