Inventory amounts are presented net of allowance for inventory reserves of $75,785 and $75,785 as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation. The cost of maintenance and repairs is expensed to operations as incurred. Depreciation is computed by the straight-line method over the estimated economic useful life of the assets (5-10 years). Gains and losses recognized from the sales or disposal of assets is the difference between the sales price and the recorded cost less accumulated depreciation less costs of disposal.

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 June 30,March 31, 2022 and 2021, and 2020, there were 10,000 and 10,000 shares issuable upon the exercise of options, respectively. The Company had a net loss for threethe three-month periods ended March 31, 2022 and six months ended June 30, 2021 and 2020;2021; therefore, common stock equivalent shares are excluded from the computation of net loss per share ifbecause 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.

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 (ASC) Topic 842. Operating lease assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. 

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2021MARCH 31, 2022

(UNAUDITED) 

Advertising Costs

Advertising costs are expensed as incurred and are included in general and administrative expenses. There was $3200 and $1,434168 in advertising costs during the three monthsperiods ended June 30,March 31, 2022 and March 31, 2021, and June 30, 2020, respectively. There was $484 and $3,297 in advertising costs during the six months ended June 30, 2021 and June 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 basedequity-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 June 30,March 31, 2022 and 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500, of which a total of $0 of salary and accrued salary have been paid. During the six months ended June 30, 2021, the Company incurred salary expenses for the Chief Executive Officer of the Company of $105,000, of which a total of $26,250 salary has been paid. The total unpaid balance as of June 30, 2021 is $743,065 and is included in accrued expenses – related party. During the three and six months ended June 30, 2020, the Company incurred salary expenses for the Chief Executive Officer of the Company of $52,500 and $105,00052,500, respectively. During the sixthree months ended June 30, 2020,March 31, 2022 and 2021, a total of $75,0000 and $26,250, respectively 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).have been paid. The total unpaid balance as of June 30, 2020 was March 31, 2022 and December 31, 2021 are $559,315775,565 and $723,065, respectively, which wereare 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 six months ended June 30,March 31, 2022 and 2021, and 2020, RaynardMr. Veldman, received compensation for being a member of the Company’s board of directors of $3,000 and $6,0003,000, respectively. The unpaid balance of $18,000 has been included in accrued expenses-related party. Mr. John DiBellaDi Bella 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 $2,500per month for consulting services. During the three and six months ended June 30,March 31, 2022 and 2021, and 2020, Mr. Veldman received consulting fees of $7,500 and $15,0007,500, respectively. The unpaid balance of $45,500 has been included in accrued expenses- related party. As of March 31, 2022 and December 31, 2021, the total accrued board compensation and consulting fees are $65,000 and $54,500 respectively.

DuringOn January 5, 2022, John A. DiBella, the Company’s chief executive officer, advanced the Company $30,000 pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022 and accrues interest at a rate of 4% per annum. In addition, from February 15, 2022 through March 31, 2022, Mr. DiBella has advanced the Company an additional $23,000 under the same terms as the note. From April 1, 2022 through May 13, 2022 Mr. DiBella has advanced the Company an additional $20,500 under the same terms as the note (see Note J).

NOTE E – FIXED ASSETS

Fixed assets as of March 31, 2022 and December 31, 2021 consist of:

Depreciation expense was $206 and $11,471 for the three months ended June 30, 2020, Mr. Veldman reduced his accrued fees by $10,000 to exercise his options (See Note G). As of June 30,March 31, 2022 and 2021, and December 31, 2020respectively., the total accrued compensation and consulting services are $63,500 and $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 

JUNE 30, 2021MARCH 31, 2022

(UNAUDITED) 

NOTE E – FIXED ASSETS

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

Depreciation expense was $3,827 and $11,328 for the three months ended June 30, 2021 and 2020, respectively.

Depreciation expense was $15,298 and $22,656 for the six months ended June 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. 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. 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 June 30, 2021 and December 31, 2020 the amount owed is $0 and $175,398, respectively.

Schedule of equipment note payable

NOTE G – SHAREHOLDERS’ EQUITY

COMMON STOCKOptions

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 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.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2021

(UNAUDITED) 

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 to 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 June 30, 2021March 31, 2022 is as follows:

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 June 30, 2021March 31, 2022 is $0 asbecause the stockexercise price is higher than the exerciseclosing stock price.

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 basedequity-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.

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”):

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2021MARCH 31, 2022

(UNAUDITED) 

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.

NOTE HG – COMMITMENTS AND CONTINGENCIES

SBA AND PPP LOANS

On May 4, 2020,, FPA received a loan (the “2020 PPP“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 2020 PPP Loan, which was in the form of a promissory noteNote dated May 4, 2020 issued by FPA, matures on May 4, 2022 and bears interest at a rate of 1%1% per annum.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 2020 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, 2020.2020. FPA believes it used the entire 2020 PPP Loan amount for qualifying expenses. Under the terms of the 2020 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 are applyingapplied for forgiveness of the 2020 PPP Loan in accordance with the terms of 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 applied for forgiveness of $72,762 of the 2020 PPP loan and are waiting for forgiveness.

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 the CARES 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. The note may be prepaid by FPA at any time prior to maturity with no prepayment penalties. Fundsan approval from the 2021 PPP Loan may onlybank but there are no assurances that the full amount will be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations. FPA has used 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. We have applied for forgiveness of the 2021 PPP Loan in accordance with the terms of the CARES Act and are waiting for forgiveness. Loan payments are deferred for borrowers who apply for loan forgiveness until SBA remits the borrowers loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred to 10forgiven. months after the end of the covered period for the borrower’s loan forgiveness (between 8 and 24 weeks).

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, 2020.2020. Interest accrues at the rate of

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

JUNE 30, 2021

(UNAUDITED)  

3.75% per annum. annum . Installment payments, including principal and interest, are due monthly beginning July 16, 2022June 23, 2021 (12 months from the date of the SBA note) in the amount of $731.$731. The balance of principal and interest is payable 30 years from the date of the SBA NoteNote.. 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.

LOANS PAYABLE – RELATED PARTY

On January 5, 2022, John A. DiBella, the Company’s chief executive officer, advanced the Company $30,000 pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022 and accrues interest at a rate of 4% per annum. In addition, from February 15, 2022 through March 31, 2022, Mr. DiBella has advanced the Company an additional $23,000 under the same terms as the note.

Litigation

OnFrom time-to-time, the Company may be involved in litigation or about October 23, 2017, a claim was filedbe subject to claims arising out of its operations or content appearing on its websites in the 17th Judicial Circuit Court innormal course of business. Although the results of litigation and for Broward County in Fort Lauderdale, Florida, byclaims cannot be predicted with certainty, the plaintiff, IndustrialCompany currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and Oilfield Procurement Services, LLC, against our company. The case involves an alleged breachsettlement costs, diversion of contract between the parties relating to the purchasemanagement resources and sale of a Voraxial unit in 2015. The plaintiff has demanded a refund and damages. We are defending the case vigorously.other factors.

NOTE IH - LEASE

In December 2018,October 2021, the Company entered into a three (3) yearfirst amendment to lease agreement for a 3 three-year 3 lease renewal for an office and manufacturing facility located at 821 NW 57^th57th Place, Fort Lauderdale, FL 33309. The lease is $4,839per month, which includes common area maintenance, taxes and insurance and expires on October 31, 2021.in September 2024. The lease has a one-time renewal option for three years and an annual increased base rent of 3%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.

ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

MARCH 31, 2022

(UNAUDITED) 

For the three months ended June 30,March 31, 2022 and 2021, and 2020, the total lease cost was $20,12620,890 and $19,51020,220, respectively, which includes variable lease cost of $5,798 5,704and $4,7715,704, respectively. Variable lease cost primarily relates to common area maintenance, property taxes and insurance on leased real estate. For the sixthree months ended June 30,March 31, 2022 and 2021, and 2020, the total lease cost was $40,440 and $39,020, respectively, which includes variable lease cost of $9,064 and $9,541, respectively. For the six months ended June 30, 2021 and 2020, cash paid for operating lease liabilities was $22,596 14,949and $29,03214,516, respectively.

NOTE JI – MAJOR CUSTOMERS

During the six months ended June 30, 2021, we recorded 87% of our revenue from two customers, with each representing 71% and 16% of total revenues.

During the three months ended June 30, 2021, we recordedMarch 31, 2022, two customers represented 9063% and 14% of our revenue from two customers, with each representing 65revenues.% and 25% of total revenues.

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 recordedMarch 31, 2021, one customer represented 8676% of our revenue from two customers, with each representing 73revenues.% and 13% of total revenues.

As of June 30, 2021, twoMarch 31, 2022, one of the Company’s customers represents 63% and 3098% of the total accounts receivable.

As of December 31, 2020, three2021, two customers represented 52% and 38% of total accounts receivable.

NOTE J – SUBSEQUENT EVENTS

From April 1, 2022 through May 6, 2022, John A. Di Bella, the Company’s chief executive officer, advanced the Company $20,500 pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022 and accrues interest at a rate of 4% per annum. 

On April 12, 2022, Ray Veldman, member of the Company’s customers represents Board of Directors, advanced the Company $6820,000 %, 17pursuant to the terms of a 4% unsecured promissory note. The note is payable on December 31, 2022and 15%accrues interest at a rate of the accounts receivables.

NOTE K – SUBSEQUENT EVENTS4% per annum. 

Subsequent to June 30, 2021, FPA received a $7,000 grant from the U.S. Small Business Administration.

The following discussion of our financial condition and results of operations for the three and six months ending June 30,March 31, 2022 and 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.

Overview

AlthoughThe Covid-19 pandemic and current economic conditions have hurt our operations significantly. Prior to the Covid-19 pandemic, we experienced significant revenue growth in 2019 mainly through the sale of Voraxial Separator and V-Inline Separators,Separators. However, 2020, 2021 and early 2022 proved to be an extremely challenging and disappointing yearperiod due to the Covid-19 pandemic and the challenge to generate revenues has continued into 2021. In the first six months of 2021, our revenues were mainly derived from machining and auxiliary parts for the V-Inline and Voraxial Separators.slow economic recovery. The demand from the oil industry dried up in 2020 as we saw a significant decline in oil prices and a drop in capital expenditures from the overall market. The decrease in capital expendituresmarket, both from the oil industry and travel restrictionsindustries outside of oil and gas, coupled with the lack of a sales and marketing budget, hindered sales opportunities for the V-Inline Separator. CustomerDuring this period, we drastically decreased our sales and marketing efforts which has resulted in fewer customer inquiries. We are still experiencing the ramifications of a nominal sales and marketing budget. As such, customer inquiries decreased significantly as well during this period.have not rebounded. The overhang from these disruptions have continued to create challenges for our company to generate revenues in 2021. The supply agreementSupply Agreement we signed with Schlumberger in June 2017 as part of the Technology Purchase Agreement expired in 2020. As we did not generate significant revenues from this agreement, we did not pursue an extension of such agreement under its initial terms. However, we may continue to work together on a project by projectproject-by-project basis with Cameron Solutions until such time a new agreement is reached, if at all. As we have reduced our marketing budget for the V-Inline Separator, we have shifted our near-term focus on machining work to help stabilize our cash flow.

We believe there is a market for the V-Inline Separator in the mining, utilities, sewage and industrial wastewater industries, among others, which we continue to market under our Grant Back License.others. We intend to continue to seek opportunities for the V-Inline Separator through our rights under our Grant Back License. We have branded our licensed products as the V-Inline Separator. In the fourth quarter of 2019 we shipped2021, our customer commissioned a wastewater system toat a utility companynuclear facility 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.

Going Concern 

For the sixthree months ended June 30, 2021,March 31, 2022, we reported a net loss of $415,582$122,167 and net cash used in operations of $239,592.$53,861. At June 30, 2021,March 31, 2022, we had cash on hand of $271,659,$10,879, a working capital deficit of $937,819$1,283,845 and an accumulated deficit of $16,338,011.$16,758,688. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 20202021 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our working capital deficit, accumulated deficit and negative cash flows from operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated 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 maintain our operations over the next 12 months.

Results of Operations for the Three Months ended March 31, 2022 and Six Months ended June 30, 2021 and 2020:2021:

Revenue

While our revenues were nominal for the three and six months ended June 30,March 31, 2022 and 2021, our revenues increaseddecreased by approximately 28% and 145%, respectively46% for the three and six months ended June 30, 2021March 31, 2022 from the comparable period in 2020.2021. There are no assurances we will be able to increase our revenues to the profitability levels we experienced in fiscal year 2019 before the Covid-19 pandemic or report profitable operations in the future. Further, the lingering economic impact of the Covid-19 pandemic may have a continued negative effect on the potential for sales of V-inline Separators. Our revenues are dependent upon our ability to develop a consistent sales channel for the V-Inline Separators and potentially additional sales of the Voraxial Separator from Schlumberger. Although we received a purchase order from Schlumberger in the first quarter of 2021 for some auxiliary parts, there are no assurances that we will receive additional orders in the future. As discussed earlier in this report, we believe that our revenues for the sixthree months ended June 30, 2021March 31, 2022 and fiscal year 20202021 have been adversely impacted by the Covid-19 pandemic and the significant drop in oil prices in 2020.current economic conditions. Even once the effects of the pandemic on our business subsides and economy improves, 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 2021.2022.

The majority of our sales in the six months ended June 30, 2021first quarter of 2022 were a result of manufacturing specific machine parts for our customers,customers. In the first quarter of 2021, we generated additional revenues from the sales of auxiliary equipment and parts to Schlumberger related to the Voraxial Separator and sales of auxiliary equipment and parts of the V-Inline Separator. The majority of revenues in the first half of 2020 were a result of manufacturing specific machine parts for our customers and face masks. We ceased manufacturing facemasks in the third quarter of 2020, as it was not profitable to our Company.

Cost of Goods SOLD

Our cost of goods sold decreased by approximately 7% and increased by approximately 86%, respectively,39% for the three and six months ended June 30, 2021March 31, 2022 from the comparable period 2020. As COVID-19 disrupted our business, we are selling different components and products in our pursuit to develop a consistent sales channel. The changes in our COGS2021. This increase is mainly due to a fluctuationlower margin in revenues we experienced and the differentgenerated from manufacturing projects in 2022 as compared to the higher margins we completedexperience with the sales to Schlumberger related to the auxiliary equipment and parts of the Voraxial Separator, and sales of auxiliary equipment and parts of the V-Inline Separator during the three and six months ended June 30,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 decreased by approximately 23%41% for each of the second quarter and first sixthree months of 2021ended March 31, 2022 from the comparable period 20202021 as we continue to reduce expenditures as a result of Covid-19 pandemic.pandemic and cash flow restraints. Included in this decrease was a decrease of approximately 44% and 28%, respectively,50% in general and administrative expenses in the three and six months ended June 30, 2021first quarter of 2022 from the comparable period in 2020. The decrease is attributable to afirst quarter of 2021, including decrease in repair and maintenance and insurance expense during the three and six months ended June 30, 2021.expense. In addition, payroll expense decreased approximately 1% and 16% in23% during the three and six months ended June 30,first quarter of 2022 as compared to the first quarter of 2021 from the comparable period in 2020 as we reduced the number of employees and overtime hours due to slower economic activity. Professional fees decreased by approximately 35% and 32%, respectively, in the three and six months ended June 30, 2021 from the comparable period in 202067% as we continue to reduce expenses due to the Covid-19 pandemic.

Liquidity and Capital Resources:

Cash at June 30, 2021March 31, 2022 was $271,659$10,879 as compared to $336,564$11,740 at December 31, 2020.2021. Our working capital deficit at June 30, 2021March 31, 2022 was $937,819$1,283,845 as compared to a working capital deficit at December 31, 20202021 of $750,481.$1,160,325. At June 30, 2021,March 31, 2022, we had an accumulated deficit of $16,338,011.$16,758,688. Our current assets decreased by 13%3% at June 30, 2021March 31, 2022 as compared to December 31, 2020,2021, which reflects decreases in our cashprepaid expenses and cash equivalents, partially offset by increase in our accounts receivables. IncreaseDecreases in accounts receivable is due to an increase in manufacturing projects completed during the period. Our current liabilities increased by 10%9% at June 30, 2021March 31, 2022 as compared to December 31, 2020,2021, which reflects an increase in accounts payable, loansloan payable – current portion and

accrued expensesrelated party and accrued expenses – related party. IncreaseIncreases in accrued expenses – related party is due to the accrual of management’s salary consulting and board fees for oneBoard’s compensation.

From January 2022 through May 16, 2022, our CEO, John Di Bella, and Ray Veldman, a member of our membersBoard of boardDirectors, have advanced the Company an aggregate of directors. Accounts payable and accrued expenses increased due to professional fees. Increases in loans payable, current portion is due to the 2020 PPP Loan becoming current during the period. FPA believes it used the 2020 PPP Loan amount for qualifying expenses. Under the terms of the 2020 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 have applied for forgiveness of $72,762 of the 2020 PPP loan in accordance with the terms of the CARES Act and are waiting for forgiveness.

On April 5, 2021, FPA received a loan (the “2021 PPP Loan”) from Cross River Bank. in the aggregate amount of $75,085,$93,500 pursuant to the PPP under Division A, Title I of the CARES Act. FPA has used 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. We have applied for forgiveness of the 2021 PPP Loan in accordance with the terms of the CARES Act and are waiting for forgiveness.4% promissory notes due on December 31, 2022.

We do not have any external sources of liquidity and we do not have any capital commitments.

Summary of cash flows

Net cash used in operating activities in the sixthree months ended June 30,March 31, 2022 was primarily attributable to decreases in accounts receivable and prepaid expenses offset by increases in accrued expenses – related party accounts payable and accrued expenses.

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

Net cash used in operatingprovided by financing activities in the sixthree months ended June 30, 2020 was primarily attributable to our net loss for the period, 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 used in investing activities during the six months ended June 30, 2021 was primarily attributable to the sale of equipment. Net cash used in investing activities during six months ended June 30, 2020March 31, 2022 was attributable to the purchase of equipment.

loans provided to the company by our CEO. Net cash used in financing activities during the sixthree months ended June 30,March 31, 2021 was primarily attributable to the repayment of the equipment note payable offset by the proceeds from the 2021 PPP loan. Net cash provided by financing activities during the six months ended June 30, 2020 was primarily attributable to proceeds from the 2020 PPP loan offset by the repayment of the equipment note payable.

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.

Looking 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 20212022 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,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 an explanatory paragraph that states that our working capital deficits and accumulated deficit raises substantial doubt about our ability to continue as a going concern. If we fail to achieve profitability on a quarterly or annual basis, or to raise additional funds when needed, or do not have sufficient cash flows from sales, we may be required to scale back or cease operations, sell or liquidate our assets and possibly seek bankruptcy protection. As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.

Critical Accounting Estimates

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

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

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

Accounts Receivable

Accounts receivable are presented net of an allowance for doubtful accounts. The Companycompany 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-worthinesscreditworthiness and current economic trends. Accounts are written off after exhaustive efforts at collections.

Inventory

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

Leases

The Company accounts for leases in accordance with Accounting Standard Codification (ASC) Topic 842. Operating lease assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases.

Income Taxes

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

Contingencies

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