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, 2021
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)
FLORIDA | 82-0266517 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
821
NW 57th Place, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
(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:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None | not applicable | not applicable |
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.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☐ |
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, 2021, we had 4,950,125 shares of our Common Stock outstanding.
INDEX
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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:
· Financial risks, including: | ||
· | our ability to continue as a going concern; |
· | the adverse impact of Covid-19 on our company; |
· | our ability to generate revenues and report profitable operations; |
· | our ability to pay our operating expenses; and |
· | our ability to raise working capital. |
· Business risks, including: | ||
· | reliance on a limited number of customers and the Grant Back License; |
· | our ability to compete; and |
· | our dependence on our sole executive officer. |
· Risks related to our common stock, including: | ||
· | continuing material weaknesses in our disclosure controls and internal control over financial reporting; |
· | the illiquid nature of the market for our common stock; and |
· | the impact of penny stock rules on our shareholders. |
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 quarter of 2021” refers to the three months ended March 31, 2021, “first quarter of 2020” refers to the three months ended March 31, 2020, “2020” refers to the year ended December 31, 2020 and “2019” refers to the year ending December 31, 2019. 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.
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PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements. |
ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2021 (unaudited) |
December 31, 2020 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 173,337 | 336,564 | |||||
Accounts receivable, net | 35,473 | 1,176 | ||||||
Inventory, net | 113,719 | 113,335 | ||||||
Prepaid expenses | 13,939 | 12,174 | ||||||
Total current assets | 336,468 | 463,249 | ||||||
FIXED ASSETS, NET | 300,997 | 312,468 | ||||||
OTHER ASSETS | ||||||||
Operating lease asset | 188,863 | 200,066 | ||||||
Security deposit | 10,143 | 10,143 | ||||||
Total other assets | 199,006 | 210,209 | ||||||
Total assets | $ | 836,471 | 985,926 | |||||
LIABILITIES AND SHAREHOLDERS’ (DEFICIENCY) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 356,586 | 323,481 | |||||
Accrued Expenses – related party | 743,565 | 706,315 | ||||||
Loans payable, current portion | 102,545 | 65,867 | ||||||
Equipment note payable, current portion | 72,800 | 71,812 | ||||||
Operating lease liability, current portion | 47,474 | 46,255 | ||||||
Total current liabilities | 1,322,970 | 1,213,730 | ||||||
LONG-TERM LIABILITIES: | ||||||||
Operating lease liabilities, less current portion | 141,389 | 153,811 | ||||||
Equipment note payable, less current portion | 84,865 | 103,586 | ||||||
Loans payable, less current portion | 159,426 | 196,104 | ||||||
Total long-term liabilities | 385,680 | 453,501 | ||||||
Total liabilities | 1,708,650 | 1,667,231 | ||||||
COMMITMENTS AND CONTINGENCIES (See Note H) | — | — | ||||||
SHAREHOLDERS’ (DEFICIENCY): | ||||||||
Common stock, $.001 par value, 250,000,000 shares authorized; 4,950,125 and 4,950,125 shares issued and outstanding as of March 31, 2021 and December 31, 2020 |
4,951 | 4,951 | ||||||
Additional paid-in capital | 15,236,173 | 15,236,173 | ||||||
Accumulated deficit | (16,113,303 | ) | (15,922,429 | ) | ||||
Total shareholders’ (deficiency) | (872,179 | ) | (681,305 | ) | ||||
Total liabilities and shareholders’ (deficiency) | $ | 836,471 | $ | 985,926 |
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenues, net | $ | 37,755 | $ | 4,528 | ||||
Cost of goods sold | 14,844 | 765 | ||||||
Gross profit | 22,911 | 3,763 | ||||||
Costs and expenses: | ||||||||
General and administrative | 77,347 | 84,208 | ||||||
Professional fees | 38,827 | 55,212 | ||||||
Payroll expense | 90,708 | 131,370 | ||||||
Total costs and expenses | 206,882 | 270,790 | ||||||
Loss from operations | (183,971 | ) | (267,027 | ) | ||||
Other expenses: | ||||||||
Interest expense | (6,903 | ) | (3,723 | ) | ||||
Total other expense | (6,903 | ) | (3,723 | ) | ||||
Net loss before provisions for income taxes | (190,874 | ) | (270,750 | ) | ||||
Provisions for income taxes | — | — | ||||||
NET LOSS | $ | (190,874 | ) | $ | (270,750 | ) | ||
Weighted average number of common shares outstanding - basic and diluted |
4,950,125 | 3,578,625 | ||||||
Loss per common share - basic and diluted | $ | (0.04) | $ | (0.08 | ) |
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
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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)
Common Stock | Additional | |||||||||||||||||||
Shares | Par Value | Paid-In Capital |
Accumulated Deficit | Total | ||||||||||||||||
Balance - December 31, 2019 | 3,578,625 | $ | 3,579 | $ | 15,094,095 | $ | (14,891,621 | ) | $ | 206,053 | ||||||||||
Net (loss) | — | — | — | (270,750 | ) | (270,750 | ) | |||||||||||||
Balance-March 31, 2020 (unaudited) | 3,578,625 | 3,579 | $ | 15,094,095 | $ | (15,162,371 | ) | $ | (64,697 | ) | ||||||||||
Balance - December 31, 2020 | 4,950,125 | $ | 4,951 | $ | 15,236,173 | $ | (15,922,429 | ) | $ | (681,305 | ) | |||||||||
Net (loss) | — | — | — | (190,874 | ) | (190,874 | ) | |||||||||||||
Balance – March 31, 2021 (unaudited) | 4,950,125 | $ | 4,951 | $ | 15,236,173 | $ | (16,113,303 | ) | $ | (872,179 | ) | |||||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net loss | $ | (190,874) | $ | (270,750 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation | 11,471 | 11,328 | ||||||
Amortization of operating lease asset | 11,203 | 10,474 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (34,297 | ) | 296,662 | |||||
Inventory | (384 | ) | (19,629 | ) | ||||
Prepaid expenses | (1,765 | ) | (4,900 | ) | ||||
Accounts payable and accrued expenses | 33,105 | (62,853 | ) | |||||
Operating lease liability | (11,203 | ) | (10,474 | ) | ||||
Accrued expenses – related party | 37,250 | 52,500 | ||||||
Net cash (used in) provided by operating activities | (145,494 | ) | 2,358 | |||||
Cash Flows from Investing Activities: | ||||||||
Purchase of equipment | — | (5,067 | ) | |||||
Net cash used in Investing activities | — | (5,067 | ) | |||||
Cash Flows from Financing Activities: | ||||||||
Repayment of equipment note payable | (17,733 | ) | (16,640 | ) | ||||
Net cash used in financing activities | (17,733 | ) | (16,640 | ) | ||||
Net decrease in cash and cash equivalents | (163,227 | ) | (19,349 | ) | ||||
Cash and cash equivalents, beginning of period | 336,564 | 674,844 | ||||||
Cash and cash equivalents, end of period | $ | 173,337 | $ | 655,495 | ||||
Supplemental Disclosures | ||||||||
Cash paid during the period for interest | $ | 2,631 | $ | 3,723 | ||||
Cash paid during the period for taxes | $ | — | $ | — | ||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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. 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, 2021, we had a working capital deficit of $986,502, an accumulated deficit of $16,113,303. 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 accrued a portion of management’s salary. 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.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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, 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, 2021, and December 31, 2020, respectively, there was $0 of deposits from customers.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(UNAUDITED)
ACCOUNTS RECEIVABLE
Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections. At March 31, 2021 and December 31, 2020, the Company has $7,044 and $7,044 in the allowance for doubtful accounts, respectively.
Fair Value of Instruments
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, inventory, accounts payable and accrued expenses at March 31, 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, 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, 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, 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, 2021 and December 31, 2020, the Company has a cash concentration in excess of FDIC limits of $0 and $80,014, respectively.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(UNAUDITED)
Inventory
Inventory primarily consists of components, including raw material and finished parts for the 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, 2021 and December 31, 2020:
March 31, 2021 |
December 31, 2020 | |||||
Raw materials | $ | 30,529 | $ | 30,145 | ||
Work in process | 10,240 | 10,240 | ||||
Finished goods | 72,950 | 72,950 | ||||
Total | $ | 113,719 | $ | 113,335 |
Inventory amounts are presented net of allowance for inventory reserves of $75,785 and $75,785 as of March 31, 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 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, 2021 and 2020, there were 10,000 and 1,346,500 shares issuable upon the exercise of options, respectively. The Company had a net loss for the periods ended March 31, 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.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(UNAUDITED)
BUSINESS SEGMENTS
The Company operates in one segment and therefore segment information is not presented.
LEASES
The Company accounts for leases in accordance with Accounting Standard Codification Topic 842.
Advertising Costs
Advertising costs are expensed as incurred and are included in general and administrative expenses. There was $168 and $1,863 in advertising costs during the periods ended March 31, 2021 and March 31, 2020, respectively.
Stock-Based Compensation
The Company accounts for stock-based instruments issued for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued. The value of the portion of a stock award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
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, 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, a total of $26,250 of salary and accrued salary have been paid. The total unpaid balance as of March 31, 2021 is $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 months ended March 31, 2021 and 2020, Mr. Veldman received consulting fees of $7,500 and $7,500, respectively. The unpaid balance has been included in accrued expenses- related party. As of March 31, 2021 and December 31, 2020, the total accrued compensation and consulting services are $53,000 and $42,500 respectively.
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ENVIRO TECHNOLOGIES U.S., INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021
(UNAUDITED)
NOTE E – FIXED ASSETS
Fixed assets as of March 31, 2021 and December 31, 2020 consist of:
March 31, 2021 (unaudited) |
December 31, 2020 | |||||||
Machinery and equipment | $ | 941,473 | $ | 941,473 | ||||
Furniture and fixtures | 14,498 | 14,498 | ||||||
Autos and Trucks | 5,294 | 5,294 | ||||||
Total | 961,265 | 961,265 | ||||||
Less: accumulated depreciation | (660,268 | ) | (648,797 | ) | ||||
Fixed Assets, net | $ | 300,997 | $ | 312,468 |
Depreciation expense was $11,471 and $11,328 for the three months ended March 31, 2021 and 2020, respectively.
NOTE F – EQUIPMENT NOTE PAYABLE
In July 2017, the Company entered into a financing agreement for the purchase of CNC machining equipment valued at approximately $426,000. The machining equipment was received in July 2017 and 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 $175,398, respectively. See NOTE K “SUBSEQUENT EVENTS”.
March 31, 2021 (unaudited) |
December 31, 2020 | |||
Equipment note payable | $ | 157,665 | $ | 175,398 |
Less: current portion | 72,800 | 71,812 | ||
Long-term equipment note payable | $ | 84,865 | $ | 103,586 |
note G – shareholders’ equity
Options
Information with respect to options outstanding and exercisable at March 31, 2021 is as follows:
Number Outstanding |
Exercise Price |
Number Exercisable | |
Balance, December 31, 2020 | 10,000 | $0.10 | 10,000 |
Issued | — | — | — |
Expired | — | — | — |
Forfeited | — | — | — |
Balance, March 31, 2021 | 10,000 | $0.10 | 10,000 |
Exercise Price |
Number Outstanding at March 31, 2021 |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
Number Exercisable at March 31, 2021 |
Weighted Average Exercise Price |
0.10 | 10,000 | 2.63 | $0.10 | 10,000 | $0.10 |
Total | 10,000 | — | — | 10,000 | — |
13 |
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.
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”):
• | effected a ten for one (10:1) reverse stock split of our outstanding common stock (“Reverse Stock Split”); and |
• | eliminated the existing class of preferred stock and create a new class of blank check preferred stock consisting of 5,000,000 shares. |
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.
14 |
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 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 believes 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 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 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.
March 31, 2021 (unaudited) | December 31, 2020 | |||||||
Loans payable | $ | 261,971 | $ | 261,971 | ||||
Less: current portion | (102,545 | ) | (65,867 | ) | ||||
Long-term loans payable | $ | 159,426 | $ | 196,104 |
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 57th 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.
15 |
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.
16 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The 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.
Overview
Although we experienced significant revenue growth in 2019 mainly through the sale of Voraxial Separator and V-Inline Separators, 2020 proved to be an extremely challenging and disappointing year due to the Covid-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 oil and gas hindered sales opportunities for the V-Inline Separator. Customer inquiries decreased significantly as well. The Supply Agreement we signed with Schlumberger in June 2017 as part of the Technology Purchase Agreement expired in 2020. As we did not generate significant revenues from this agreement, we did not pursue an extension of such agreement under its initial terms. However, we may continue to work together on a project by project basis with Cameron Solutions until such time a new agreement is reached, if at all.
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. 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. 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.
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 report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2020 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.
Subsequent to the period covered by this report, in April 2021 we received approximately $75,000 under the 2021 PPP Loan and in April 2021 we received $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 fully pay for the equipment note payable.
17 |
Results of Operations for the Three Months ended March 31, 2020 and 2019:
Revenue
While our revenues were nominal for the three months ended March 31, 2021, our revenues increased by approximately 734% for the three months ended March 31, 2021 from the comparable period in 2020. There are no assurances we will be able to increase our revenues to the profitability levels we experienced in fiscal year 2019 before the Covid-19 pandemic or report profitable operations in the future. Further, the lingering economic impact of the Covid-19 pandemic may have a continued negative effect on the potential for sales of V-inline Separators. Our revenues are dependent upon our ability to develop a consistent sales channel for the V-Inline Separators and potentially additional sales of the Voraxial Separator from Schlumberger. However, at this time, we have not renewed the supply agreement with Schlumberger, but we have maintained a relationship with Schlumberger and received a purchase order from Schlumberger for some auxiliary parts. As discussed earlier in this report, we believe that our revenues for the three months ended March 31, 2021 and fiscal year 2020 have been adversely impacted by the Covid-19 pandemic and the significant drop in oil prices in 2020. Even once the effects of the pandemic on our business subsides, it may take longer than expected for business in our target markets to resume normal operations. Accordingly, at this time we are unable to predict the ultimate impact to our revenues for the remaining 2021.
The majority of our sales in the first quarter of 2021 were a result of manufacturing specific machine parts for our customers, sales 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 quarter of 2020 were a result of manufacturing specific machine parts for our customers.
Cost of Goods
Our cost of goods increased by approximately 1,840% for the three months ended March 31, 2021 from the comparable period 2020. This increase is mainly due to an increase in revenues we experienced and the different manufacturing projects we completed during the three months ended 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 24% for the three months ended March 31, 2021 from the comparable period 2020 as we continue to reduce expenditures as a result of Covid-19 pandemic. Included in this decrease was a decrease of approximately 8% in general and administrative expenses in the first quarter of 2021 from the first quarter of 2020, including decrease in repair and maintenance and insurance expense. In addition, payroll expense decreased approximately 31% during the first quarter of 2021 as compared to the first quarter of 2020 as we reduced the number of employees and overtime hours due to slower economic activity. Professional fees decreased by approximately 30% as we continue to reduce expenses due to the Covid-19 pandemic.
Liquidity and Capital Resources:
Cash at March 31, 2021 was $173,337 as compared to $336,564 at December 31, 2020. Our working capital deficit at March 31, 2021 was $986,502 as compared to a working capital deficit at December 31, 2020 of $750,481. At March 31, 2021, we had an accumulated deficit of $16,113,303. Our current assets decreased by 27% at March 31, 2021 as compared to December 31, 2020, which reflects decreases in our cash and cash equivalents, partially offset by increases in our accounts receivables. Increases in accounts receivable is due to an increase in manufacturing projects completed during the period. Our current liabilities increased by 9% at March 31, 2021 as compared to December 31, 2020, which reflects an increase in accounts payable and accrued expenses and accrued expenses – related party. Increases in accrued expenses – related party is due to the accrual of management’s salary. Accounts payable and accrued expenses increased due to professional fees.
We do not have any external sources of liquidity and we do not have any capital commitments.
18 |
Summary of cash flows
The following table summarizes our cash flows: | ||||||||
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
Cash flow data: | ||||||||
Cash (used in) provided by operating activities | $ | (145,494 | ) | $ | 2,358 | |||
Cash used in investing activities | $ | — | $ | (5,067 | ) | |||
Cash used in financing activities | $ | (17,733 | ) | $ | (16,640 | ) |
Net cash used in operating activities in the three months ended March 31, 2021 was primarily attributable to an increase in accounts receivable offset in part by increases in accrued expenses – related party and accounts payable and accrued expenses.
Net cash provided by operating activities in the three months ended March 31, 2020 was primarily attributable to a decrease in accounts receivable and an increase in accrued expenses – related party offset in part by decreases in accounts payable and accrued expenses.
Net cash used in financing activities during the three months ended March 31, 2021 and 2020 was primarily attributable to the repayment of the equipment note payable.
Net cash used in investing activities during the three months ended March 31, 2020 was primarily attributable to the purchase of equipment. There were no comparable activity during the three months ended March 31, 2021.
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 2021 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 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 consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.
19 |
Critical Accounting Estimates
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Note C of the Notes to Consolidated Financial Statements appearing later in this report describes the significant accounting policies used in the preparation of the consolidated financial statements. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.
A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates have the following attributes: 1) we are required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates we could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on our financial condition or results of operations.
Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our consolidated financial statements are fairly stated in accordance with U.S. GAAP, and present a meaningful presentation of our financial condition and results of operations. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our consolidated financial statements:
Accounts Receivable
Accounts receivable are presented net of an allowance for doubtful accounts. The company maintains allowances for doubtful accounts for estimated losses. The company reviews the accounts receivable on a periodic basis and makes general and specific allowance when there is a doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, and its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collections.
Inventory
Inventory primarily consists of components, including raw material and finished parts for the V-Inline Separator and face shields and is priced at lower of cost or net realizable value. Net realizable value is defined as sales price less cost of completion, disposable and transportation. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.
Income Taxes
The Company accounts for income taxes under ASC 740-10-25. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Contingencies
The Company is involved in a legal proceeding. The Company assessed the probability of occurrence and whether any loss or range of loss can be reasonably estimated for the legal proceeding. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. If a loss or an additional loss has at least a reasonable possibility of occurring and the impact on the consolidated financial statements would be material, the Company provides disclosure of the loss contingency in the footnotes to the consolidated financial statements. The Company reviews the status of the legal proceeding at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or the range of the loss can be made.
20 |
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.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable to smaller reporting company.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer who also serves as our Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) as of March 31, 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, 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.
21 |
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.
22 |
Item 1. | Legal Proceedings |
None.
Item 1A. | Risk Factors |
We incorporate by reference the risk factors disclosed in Part I, Item 1A of our 2019 Form 10-K.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosure |
Not applicable to our company.
Item 5. | Other Information |
On April 5, 2021, FPA received a loan (the “2021 PPP Loan”) from Cross River Bank. in the aggregate amount of $75,085, pursuant to the PPP under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The 2021 PPP Loan, which was in the form of a promissory note dated April 5, 2021 issued by the FPA, has a 60 month term and matures on April 5, 2026 and bears interest at a rate of 1.00% per annum, payable monthly commencing on April 5, 2022. The note may be prepaid by the FPA at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations. FPA intends to use the entire 2021 PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the 2021 PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
In April 2021, the Company entered into a purchase agreement to sell its CNC machining equipment for $275,000. The machining equipment was received in July 2017 and was used for the manufacture of customer specific projects along with the largest Voraxial and V-Inline Separators. The Company sold the equipment as the utilization of the CNC machining equipment for customer specific projects and the separation equipment decreased due to the Covid-19 pandemic.
23 |
Item 6. | Exhibits |
Incorporated by Reference | Filed or | |||||||||
No. | Exhibit Description | Form | Date Filed |
Exhibit Number |
Furnished Herewith | |||||
2 | Agreement and Plan of Reorganization | 10 | 11/03/99 | 2 | ||||||
3(i) | Articles of Incorporation | 10 | 11/03/99 | 3(i) | ||||||
3(ii) | Bylaws | 10-K | 3/31/21 | 3(ii) | ||||||
3(iii) | Articles of Amendment to the Articles of Incorporation | 8-K | 11/13/17 | 3.2 | ||||||
3(iv) | Articles of Amendment to the Articles of Incorporation | 8-K | 9/9/20 | 3(iv) | ||||||
3(v) | Statement of Domestication filed in the State of Idaho | 8-K | 12/28/20 | 3(iv) | ||||||
3(vi) | Certificate of Domestication and Articles of Incorporation filed in the State of Florida | 8-K | 12/28/20 | 3(v) | ||||||
31.1 | Rule 13a-14(a)/15d-4(a) Certification of Chief Executive Officer | Filed | ||||||||
31.2 | Rule 13a-14(a)/15d-4(a) Certification of Chief Financial Officer | Filed | ||||||||
32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | Filed | ||||||||
101.INS | XBRL Instance Document | Filed | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed | ||||||||
101.CAL | XBRL Taxonomy Calculation Linkbase Document | Filed | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed |
24 |
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.
Enviro Technologies U.S., Inc. | ||
By: | /s/ John A. Di Bella | |
John A. Di Bella | ||
Chief Executive Officer and Chief Financial Officer | ||
DATED: May 17, 2021
25 |
EXHIBIT 31.1
CERTIFICATION
I, John A. Di Bella, certify that:
1. I have reviewed this report on Form 10-Q for the period ended March 31, 2021 of Enviro Technologies U.S., Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 17, 2021
/s/ John A. Di Bella | |
John A. Di Bella | |
Chief Executive Officer, principal executive officer |
EXHIBIT 31.2
CERTIFICATION
I, John A. Di Bella, certify that:
1. I have reviewed this report on Form 10-Q for the period ended March 31, 2021 of Enviro Technologies U.S., Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or cause such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditor and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 17, 2021
/s/ John A. Di Bella | |
John A. Di Bella | |
Chief Financial Officer, principal financial and accounting officer |
EXHIBIT 32.1
SECTION 1350 CERTIFICATION
CERTIFICATION
PURSUANT TO
13 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Enviro Technologies U.S., Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John A. Di Bella, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 13 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 17, 2021
/s/ John A. Di Bella | |
John A. Di Bella | |
Chief Executive Officer and Chief Financial Officer |
Cover - shares |
3 Months Ended | |
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Mar. 31, 2021 |
May 17, 2021 |
|
Cover [Abstract] | ||
Entity Registrant Name | Enviro Technologies U.S., Inc. | |
Entity Central Index Key | 0001043894 | |
Document Type | 10-Q | |
Entity Incorporation, State or Country Code | ID | |
Entity File Number | 000-30454 | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Reporting Status Current | Yes | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Small Business | true | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 4,950,125 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 250,000,000 | 250,000,000 |
Common stock, issued | 4,950,125 | 4,950,125 |
Common stock, outstanding | 4,950,125 | 4,950,125 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Income Statement [Abstract] | ||
Revenues, net | $ 37,755 | $ 4,528 |
Cost of goods sold | 14,844 | 765 |
Gross profit | 22,911 | 3,763 |
Costs and expenses: | ||
General and administrative | 77,347 | 84,208 |
Professional fees | 38,827 | 55,212 |
Payroll expense | 90,708 | 131,370 |
Total costs and expenses | 206,882 | 270,790 |
Loss from operations | (183,971) | (267,027) |
Other expenses: | ||
Interest expense | (6,903) | (3,723) |
Total other expense | (6,903) | (3,723) |
Net loss before provisions for income taxes | (190,874) | (270,750) |
Provisions for income taxes | ||
NET LOSS | $ (190,874) | $ (270,750) |
Weighted average number of common shares outstanding - basic and diluted (in shares) | 4,950,125 | 3,578,625 |
Loss per common share - basic and diluted (in dollars per share) | $ (0.04) | $ (0.08) |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY) (Unaudited) - USD ($) |
Common Stock [Member] |
Additional Paid-In Capital [Member] |
Accumulated Deficit [Member] |
Total |
---|---|---|---|---|
Balance at beginning at Dec. 31, 2019 | $ 3,579 | $ 15,094,095 | $ (14,891,621) | $ 206,053 |
Balance at beginning (in shares) at Dec. 31, 2019 | 3,578,625 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income (loss) | (270,750) | (270,750) | ||
Balance at ending at Mar. 31, 2020 | $ 3,579 | 15,094,095 | (15,162,371) | (64,697) |
Balance at ending (in shares) at Mar. 31, 2020 | 3,578,625 | |||
Balance at beginning at Dec. 31, 2020 | $ 4,951 | 15,236,173 | (15,922,429) | (681,305) |
Balance at beginning (in shares) at Dec. 31, 2020 | 4,950,125 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Net income (loss) | (190,874) | (190,874) | ||
Balance at ending at Mar. 31, 2021 | $ 4,951 | $ 15,236,173 | $ (16,113,303) | $ (872,179) |
Balance at ending (in shares) at Mar. 31, 2021 | 4,950,125 |
ORGANIZATION AND OPERATIONS |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND OPERATIONS | 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. 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.”. |
GOING CONCERN |
3 Months Ended |
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Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
GOING CONCERN | 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, 2021, we had a working capital deficit of $986,502, an accumulated deficit of $16,113,303. 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 accrued a portion of management’s salary. 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. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | |||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, 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, 2021, and December 31, 2020, respectively, there was $0 of deposits from customers.
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, 2021 and December 31, 2020, the Company has $7,044 and $7,044 in the allowance for doubtful accounts, respectively.
Fair Value of Instruments
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, inventory, accounts payable and accrued expenses at March 31, 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, 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, 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, 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, 2021 and December 31, 2020, the Company has a cash concentration in excess of FDIC limits of $0 and $80,014, respectively.
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, 2021 and December 31, 2020:
Inventory amounts are presented net of allowance for inventory reserves of $75,785 and $75,785 as of March 31, 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 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, 2021 and 2020, there were 10,000 and 1,346,500 shares issuable upon the exercise of options, respectively. The Company had a net loss for the periods ended March 31, 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.
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.
Recent Accounting Pronouncements
All newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable. |
RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Mar. 31, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE D - RELATED PARTY TRANSACTIONS
For the three months ended March 31, 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, a total of $26,250 of salary and accrued salary have been paid. The total unpaid balance as of March 31, 2021 is $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 months ended March 31, 2021 and 2020, Mr. Veldman received consulting fees of $7,500 and $7,500, respectively. The unpaid balance has been included in accrued expenses- related party. As of March 31, 2021 and December 31, 2020, the total accrued compensation and consulting services are $53,000 and $42,500 respectively. |
FIXED ASSETS |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FIXED ASSETS | NOTE E – FIXED ASSETS
Fixed assets as of March 31, 2021 and December 31, 2020 consist of:
Depreciation expense was $11,471 and $11,328 for the three months ended March 31, 2021 and 2020, respectively. |
EQUIPMENT NOTE PAYABLE |
3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||
Notes Payable [Abstract] | |||||||||||||||||||||
EQUIPMENT NOTE PAYABLE | 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. As of March 31, 2021 and December 31, 2020 the amount owed is $157,665 and $175,398, respectively. See NOTE K “SUBSEQUENT EVENTS”.
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SHAREHOLDERS' EQUITY |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY | note G – shareholders’ equity
Options
Information with respect to options outstanding and exercisable at March 31, 2021 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 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.
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. |
COMMITMENTS AND CONTINGENCIES |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | NOTE H – COMMITMENTS AND CONTINGENCIES
SBA 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 believes 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 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 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. |
LEASE |
3 Months Ended |
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Mar. 31, 2021 | |
Leases [Abstract] | |
LEASE | 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 57th 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. |
MAJOR CUSTOMERS |
3 Months Ended |
---|---|
Mar. 31, 2021 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | 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. |
SUBSEQUENT EVENTS |
3 Months Ended |
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Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 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. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | 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, 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. |
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PRINCIPLES OF CONSOLIDATION | 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. |
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ESTIMATES | 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. |
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REVENUE RECOGNITION | 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, 2021, and December 31, 2020, respectively, there was $0 of deposits from customers. |
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ACCOUNTS RECEIVABLE | 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, 2021 and December 31, 2020, the Company has $7,044 and $7,044 in the allowance for doubtful accounts, respectively. |
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FAIR VALUE OF INSTRUMENTS | 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, 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, 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, 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, 2021 and December 31, 2020. |
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CASH AND CASH EQUIVALENTS | Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash balances with various financial institutions. Balances at these institutions may at times exceed the Federal Deposit Insurance Corporate (“FDIC”) limits. As of March 31, 2021 and December 31, 2020, the Company has a cash concentration in excess of FDIC limits of $0 and $80,014, respectively. |
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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, 2021 and December 31, 2020:
Inventory amounts are presented net of allowance for inventory reserves of $75,785 and $75,785 as of March 31, 2021 and December 31, 2020, respectively. |
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FIXED ASSETS | 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. |
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NET LOSS PER SHARE | 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, 2021 and 2020, there were 10,000 and 1,346,500 shares issuable upon the exercise of options, respectively. The Company had a net loss for the periods ended March 31, 2021 and 2020; therefore, common stock equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive. |
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INCOME TAXES | 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. |
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BUSINESS SEGMENTS | BUSINESS SEGMENTS
The Company operates in one segment and therefore segment information is not presented. |
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LEASES | LEASES
The Company accounts for leases in accordance with Accounting Standard Codification Topic 842. |
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ADVERTISING COSTS | 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. |
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STOCK-BASED COMPENSATION | 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. |
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RECENT ACCOUNTING PRONOUNCEMENTS | Recent Accounting Pronouncements
All newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of inventory | Therefore, these units are included in the inventory of the Company. As of March 31, 2021 and December 31, 2020:
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FIXED ASSETS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fixed assets | Fixed assets as of March 31, 2021 and December 31, 2020 consist of:
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EQUIPMENT NOTE PAYABLE (Tables) |
3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||
Notes Payable [Abstract] | |||||||||||||||||||||
Schedule of future minimum payments | As of March 31, 2021 and December 31, 2020 the amount owed is $157,665 and $175,398, respectively. See NOTE K “SUBSEQUENT EVENTS”.
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SHAREHOLDERS' EQUITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Schedule of options | Information with respect to options outstanding and exercisable at March 31, 2021 is as follows:
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COMMITMENTS AND CONTINGENCIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of loans payables | The balance of principal and interest is payable 30 years from the date of the SBA Note. In connection therewith, FPA executed (i) a note for the benefit of the SBA, which contains customary events of default and (ii) a Security Agreement, granting the SBA a security interest in all tangible and intangible personal property of FPA, which also contains customary events of default.
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GOING CONCERN (Details Narrative) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounting Policies [Abstract] | ||
Working capital deficit | $ 986,502 | |
Accumulated deficit | $ (16,113,303) | $ (15,922,429) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Accounting Policies [Abstract] | ||
Raw materials | $ 30,529 | $ 30,145 |
Work in process | 10,240 | 10,240 |
Finished goods | 72,950 | 72,950 |
Total | $ 113,719 | $ 113,335 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) |
3 Months Ended | ||
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Mar. 31, 2021
USD ($)
Number
shares
|
Mar. 31, 2020
USD ($)
shares
|
Dec. 31, 2020
USD ($)
|
|
Customer deposits | $ 0 | $ 0 | |
Allowance for doubtful accounts | 7,044 | 7,044 | |
Excess of FDIC limits | $ 0 | 80,014 | |
Anti-dilutive option | shares | 10,000 | 1,346,500 | |
Advertising costs | $ 168 | $ 1,863 | |
Allowance for inventory reserves | $ 75,785 | $ 75,785 | |
Number of reportable segments | Number | 1 | ||
Minimum [Member] | |||
Estimated useful life of assets | 5 years | ||
Maximum [Member] | |||
Estimated useful life of assets | 10 years |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
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Jul. 01, 2017 |
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Consulting services | $ 38,827 | $ 55,212 | ||
Chief Executive Officer [Member] | ||||
Compensation and salary | 52,500 | 52,500 | ||
Salary and accured salary paid | 26,250 | |||
Salary paid | 0 | |||
Accrued expenses - related party | 690,565 | 663,465 | $ 664,315 | |
Raynard Veldman [Member] | ||||
Compensation and salary | 3,000 | 3,000 | ||
Consulting services | $ 2,500 | 7,500 | $ 7,500 | |
Accrued compensation and consulting services | $ 53,000 | $ 42,500 |
FIXED ASSETS (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Total | $ 961,265 | $ 961,265 |
Less: accumulated depreciation | (660,268) | (648,797) |
Fixed Assets, net | 300,997 | 312,468 |
Machinery and Equipment [Member] | ||
Total | 941,473 | 941,473 |
Furniture and Fixtures [Member] | ||
Total | 14,498 | 14,498 |
Autos and Trucks [Member] | ||
Total | $ 5,294 | $ 5,294 |
FIXED ASSETS (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 11,471 | $ 11,328 |
EQUIPMENT NOTE PAYABLE (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
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Notes Payable [Abstract] | ||
Equipment note payable | $ 157,665 | $ 175,398 |
Less: current portion | 72,800 | 71,812 |
Long-term equipment note payable | $ 84,865 | $ 103,586 |
EQUIPMENT NOTE PAYABLE (Details Narrative) - USD ($) |
1 Months Ended | ||
---|---|---|---|
Jul. 31, 2017 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|
Equipment note payable | $ 157,665 | $ 175,398 | |
Financing Agreement [Member] | CNC Machining [Member] | |||
Equipment value | $ 426,000 | ||
Initial payment | 85,661 | ||
Monthly payments | 6,788 | ||
Installation cost | $ 24,281 | ||
Maturity Terms | January 2023 |
SHAREHOLDERS' EQUITY (Details) |
3 Months Ended |
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Mar. 31, 2021
$ / shares
shares
| |
Number Outstanding | |
Balance at beginning | 10,000 |
Issued | |
Expired | |
Exercised | |
Forfeited | |
Balance at ending | 10,000 |
Range of Exercise Price | |
Balance at beginning | $ / shares | $ 0.10 |
Issued | $ / shares | |
Expired | $ / shares | |
Exercised | $ / shares | |
Forfeited | $ / shares | |
Balance at ending | $ / shares | $ 0.10 |
Number Exercisable | |
Balance at beginning | 10,000 |
Issued | |
Expired | |
Forfeited | |
Balance at ending | 10,000 |
SHAREHOLDERS' EQUITY (Details 1) |
3 Months Ended |
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Mar. 31, 2021
$ / shares
shares
| |
Exercise Price | |
Number Outstanding | shares | 10,000 |
Weighted Average Remaining Contractual Life | |
Outstanding Weighted Average Exercise Price | |
Exercise Price 0.10 [Member] | |
Exercise Price | $ 0.10 |
Number Outstanding | shares | 10,000 |
Weighted Average Remaining Contractual Life | 2 years 7 months 17 days |
Outstanding Weighted Average Exercise Price | $ 0.10 |
Number Exercisable | shares | 10,000 |
Exercisable Weighted Average Exercise Price | $ 0.10 |
SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) |
Aug. 27, 2020 |
Mar. 31, 2021 |
---|---|---|
Stockholders' Equity Note [Abstract] | ||
Aggregate intrinsic value | $ 1,500 | |
Description of reverse stock split | • effected a ten for one (10:1) reverse stock split of our outstanding common stock (“Reverse Stock Split”); and • eliminated the existing class of preferred stock and create a new class of blank check preferred stock consisting of 5,000,000 shares. |
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Loans payable | $ 261,971 | $ 261,971 |
Less: current portion | (102,545) | (65,867) |
Long-term loans payable | $ 159,426 | $ 196,104 |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
1 Months Ended | ||
---|---|---|---|
May 04, 2020 |
Jul. 16, 2020 |
Jun. 23, 2020 |
|
Economic Injury Disaster Loan [Member] | Agreement [Member] | |||
Principal amount | $ 150,000 | ||
Disbursements amount | $ 150,000 | ||
Interest rate | 3.75% | ||
Description of payment | 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. | ||
Dated | Jul. 20, 2020 | ||
Florida Precision Aerospace, Inc. [Member] | PPP Loan [Member] | Bank of America, N.A. [Member] | |||
Loan receivable | $ 111,971 | ||
Maturity terms | May 04, 2022 | ||
Payment start date | Nov. 06, 2020 | ||
Dated | May 04, 2020 | ||
Description of debt obligations | 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. |
LEASE (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Dec. 31, 2018 |
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Leases [Abstract] | |||
Description of termination of use agreement | In December 2018, the Company entered into a three (3) year lease for an office and manufacturing facility located at 821 NW 57th 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. | ||
Lease term | 3 years | ||
Rent | $ 4,839 | ||
Lease expiration | Oct. 31, 2021 | ||
One-time renewal term | 3 years | ||
Percentage of increased base rent | 3.00% | ||
Total lease | $ 20,220 | $ 19,510 | |
Operating lease liabilities | 14,516 | 14,516 | |
Variable lease cost | $ 5,704 | $ 4,771 |
MAJOR CUSTOMERS (Details Narrative) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
|
Sales Revenue [Member] | Customer One [Member] | |||
Percentage of revenue from Major customer (in percent) | 76.00% | 57.00% | |
Sales Revenue [Member] | Customer Two [Member] | |||
Percentage of revenue from Major customer (in percent) | 96.00% | 39.00% | |
Accounts Receivable [Member] | Customer One [Member] | |||
Percentage of revenue from Major customer (in percent) | 81.00% | 68.00% | |
Accounts Receivable [Member] | Customer Two [Member] | |||
Percentage of revenue from Major customer (in percent) | 17.00% | ||
Accounts Receivable [Member] | Customer Three [Member] | |||
Percentage of revenue from Major customer (in percent) | 15.00% |
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) |
Apr. 30, 2021 |
Apr. 05, 2021 |
---|---|---|
Purchase agreement [Member] | ||
Purchase machining equipment | $ 275,000 | |
PPP Loan [Member] | Cross River Bank [Member] | ||
Principal amount | $ 75,085 | |
Maturity terms | Apr. 05, 2026 | |
Dated | Apr. 05, 2021 | |
Description of debt obligations | 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 | |
Interest rate | 1.00% |
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