NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
NOTE
A - ORGANIZATION AND OPERATIONS
Organization
Enviro Technologies,
Inc., an Idaho corporation (the “Company”), is a manufacturer of environmental and industrial separation technology.
The Company developed, and now manufactures the Voraxial
®
Separator for Schlumberger for a period of 3 years. The
Voraxial is a patented technology that was sold to Schlumberger Technology Corporation, a Texas corporation, Schlumberger Canada
Limited, a Canadian entity, and Schlumberger B.V., an entity organized under the laws of the Netherlands (collectively, “Schlumberger”)
on June 8, 2017. The Company received a Grant Back License to sell the Separation Technology in markets outside of the oil and
gas markets, which include oil exploration and production, oil refineries, oil spill, mining, sewage, manufacturing, waste-to-energy
and food processing industry.
Florida Precision
Aerospace, Inc., a Florida corporation (“FPA”), is the wholly-owned subsidiary of the Company and is used to manufacture,
assemble and test the Voraxial Separator. Effective May 10, 2017 the Company filed Articles of Amendment to its Articles of Incorporation
changing the Company’s name from “Enviro Voraxial Technology, Inc.” to “Enviro Technologies, Inc.”
and increasing its authorized common stock to 250,000,000 shares.
NOTE
B – GOING CONCERN
While the Company
has historically experienced recurring net losses, on June 8, 2017, the Company completed a Technology Purchase Agreement with
Schlumberger for the sale of the Company’s intellectual property in consideration of up to $4,000,000, of which $3,000,000
was paid at closing and $1,000,000 is payable upon the completion of both: (i) the complete transfer of the intellectually property
to Schlumberger; and (ii) the provision to transfer information, assets and services to Schlumberger, which is estimated to be
completed by the third quarter of 2018. In addition, at closing FPA entered into a Framework Agreement (the “Supply Agreement”)
with Cameron Solutions, Inc. (“Cameron Solutions”), a Houston, Texas-based company engaged in the development, manufacture
and sale of equipment used in the oil and gas industry. Under the terms of the three-year Supply Agreement, FPA is the exclusive
supplier to Cameron Solutions of certain Voraxial series products for use in the oil and gas industry. Pursuant to the Technology
Purchase Agreement, Schlumberger also granted us non-exclusive, worldwide, royalty-free licenses (the “Grant Back Licenses”)
for the sale of Voraxial products outside the oil and gas industry. Our management believes that the Grant Back License will provide
us the opportunity to possibly leverage future Schlumberger sales in the oil and gas market to penetrate the sale and use of licensed
Voraxial products to other industries, including, but not limited to mining, sewage and wastewater.
We believe that
including our current cash resources and anticipated revenue to be generated under the Grant Back Licenses and Supply Agreement,
we will have sufficient resources to continue business operations in excess of 12 months. However, we have not yet generated significant
revenues from the Supply Agreement or Grant Back License. There is no assurance that the Supply Agreement will generate sufficient
revenues and income, nor is there any assurance that we will be able to leverage the Grant Back License and generate sufficient
revenues from other industries.
At March 31,
2018, we had an accumulated deficit of $15,200,109 including a net loss of $211,315 for the three months ended March 31, 2018.
We may not be able to achieve profitability on a quarterly or annual basis. If we fail to sustain or increase our 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
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
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.
NOTE
C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim
Financial Statements
The
interim 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 interim financial statements should be read in conjunction with the company’s annual
financial statements, notes and accounting policies included in the company’s annual report on Form 10-K for the year ended
December 31, 2017, as filed with the SEC. In the opinion of management, all adjustments, which are necessary to provide a fair
presentation of financial position as of March 31, 2018, 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, 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. Actual results may differ. Significant estimates include allowance for doubtful accounts, deferred
tax asset, allowance for inventory obsolescence and valuation of stock-based compensation.
Revenue
Recognition
The
Company derives its revenue from the sale and short-term rental of the Voraxial Separator. We account for revenue in accordance
with Topic 606, which we adopted on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 did not
have a material impact on the timing or amounts of revenue recognized in our unaudited condensed consolidated financial statements
and therefore did not have a material impact on our financial position, results of operations, equity or cash flows as of the
adoption date or for the three months ended March 31, 2018. We did not recognize any cumulative-effect adjustment to retained
earnings upon adoption as the impact was immaterial. Also, the comparative information has not been restated and continues to
be reported under the accounting standards in effect for those periods.
Revenues 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
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
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 equipment 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, 2018 and December 31, 2017, there was $0 and $32,090, respectively, of deposits from customers.
The Company
recognizes revenue from the short-term rental of equipment, ratably over the life of the agreement, which is usually one to twelve
months.
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,
2018 and December 31, 2017, the Company has $60,254 and $60,254 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, 2018 and December 31, 2017, approximate their fair value because of their relatively short-term nature.
“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, 2018 and December 31, 2017.
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, 2018 and December 31, 2017.
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
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, 2018 and December 31, 2017.
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, 2018 the Company has a cash concentration
of $489,989 in excess of FDIC limits.
Inventory
Inventory consists
of components for the Voraxial Separator and is priced at lower of cost or market. 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, 2018 and December 31, 2017:
|
|
March 31,
2018
|
|
December
31, 2017
|
Raw materials
|
|
$
|
34,143
|
|
|
$
|
32,074
|
|
Work in process
|
|
|
302,060
|
|
|
|
139,360
|
|
Finished goods
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
336,203
|
|
|
$
|
171,434
|
|
Inventory amounts
are presented net of impairment of $42,752 and $42,752 as of March 31, 2018 and December 31, 2017, 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.
In July
2017, the Company entered into a financing agreement for the purchase of CNC machining equipment valued at approximately
$426,000. The machining equipment was received in July 2017 and will be used for the manufacture of Voraxial Separators in
preparation of potential future orders under the Supply Agreement and sales pursuant to the Grant Back Licenses. Under the
terms of the agreement the Company made
an initial down payment of $85,661 and is
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
required to make monthly payments of $6,788
through January 2023. In addition, the Company incurred $24,281 of installation costs.
Net
Loss Per Share
In accordance
with the accounting guidance now codified as FASB ASC Topic 260, “
Earnings per Share”
basic earnings (loss)
per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each
period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of
common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
Due to the Company
had net loss for the three month period ended March 31, 2018 and 2017, the effect of 13,465,000 and 13,465,000 options, respectively
are anti-dilutive. A separate computation of diluted loss per share is not presented.
INCOME TAXES
The Company
accounts for income taxes under FASB Codification Topic 740-10-25 (“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.
Research
and Development Expenses
Research and
development costs, which includes travel expenses, consulting fees, subcontractors and salaries are expensed as incurred.
Advertising
Costs
Advertising
costs are expensed as incurred and are included in general and administrative expenses.
Stock-Based
Compensation
The Company
adopted ASC Topic 718 formerly Statement of Financial Account Standard (SFAS) No. 123(R) effective January 1, 2006. This statement
requires compensation expense relating to share-based payments to be recognized in net income using a fair-value measurement method.
Under the fair value method, the estimated fair value of awards is charged to expense on a straight-line basis over the requisite
service period, which is generally the vesting period.
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
RECLASSIFICATIONS
Certain amounts
from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact
on the Company’s net loss or cashflows.
Recent
Accounting Pronouncements
In February
2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease
liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and
(ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified
asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however,
certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently
reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial
condition.
In
August 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-14, “
Revenue from Contracts with Customers
(Topic 606): Deferral of the Effective Date”
defers the effective date ASU No. 2014-09 for all entities by one year.
Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update
2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting
period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim
reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting
periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December
15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after
December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance
in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within
annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in
ASU No. 2014-09.
The Company adopted these standards on January 1, 2018.
The
adoption did not have a material impact on the timing or amounts of revenue recognized in our unaudited condensed consolidated
financial statements and therefore did not have a material impact on our financial position, results of operations, equity or
cash flows as of the adoption date or for the three months ended March 31, 2018. We did not recognize any cumulative-effect adjustment
to retained earnings upon adoption as the impact was immaterial. Also, the comparative information has not been restated and continues
to be reported under the accounting standards in effect for those periods.
All other newly
issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.
NOTE
D - RELATED PARTY TRANSACTIONS
On January 4,
2018 the Company’s board of directors reduced the annual compensation of the Company’s chief executive officer from
$305,000 to $210,000, effective as of January 1, 2018. For the Three Months ended March 31, 2018, the Company incurred salary
expenses from the Chief Executive Officer of the Company of $52,500. Of these amounts, $0 has been paid for the Three Months ended
March 31, 2018. The total unpaid balance as of March 31, 2018 is $1,242,261 and is included in accrued expenses – related
party. For the Three Months ended March 31, 2017, the Company incurred salary expenses from the Chief Executive Officer of the
Company of $76,250. Of these amounts, $0 had been paid for the
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
Three Months ended March 31,
2017. The total unpaid balance as of March 31, 2017 is $1,541,011 and is included in accrued expenses – related party.
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, 2018 and 2017, Mr. Veldman received consulting fees of $7,500 and $0, respectively.
NOTE E –
FIXED ASSETS
Fixed
assets as of March 31, 2018 and December 31, 2017 consist of:
|
|
March 31, 2018
|
|
December 31, 2017
|
Machinery and equipment
|
|
$
|
933,245
|
|
|
$
|
933,245
|
Furniture and fixtures
|
|
|
14,498
|
|
|
|
14,498
|
Autos and Trucks
|
|
|
5,294
|
|
|
|
5,294
|
Total
|
|
|
953,037
|
|
|
|
953,037
|
Less: accumulated depreciation
|
|
|
(524,806
|
)
|
|
|
(513,542)
|
Fixed Assets, net
|
|
$
|
428,231
|
|
|
$
|
439,495
|
Depreciation expense was $11,264
and $5,509 for the three months ended March 31, 2018 and 2017, respectively.
In July 2017,
the Company entered into a financing agreement for the purchase of CNC machining equipment valued at approximately $426,000. The
machining equipment was received in July 2017 and will be used for the manufacture of Voraxial Separators in preparation of potential
future orders under the Supply Agreement and sales pursuant to the Grant Back Licenses. As of March 31, 2018 and December 31,
2017, the amount owed is $335,135 and $340,644 respectively.
note
f - Options
The Company
follows the provisions of ASC Topic 718, “Compensation – Stock Compensation.” ASC Topic 718 establishes standards
surrounding the accounting for transactions in which an entity exchanges its equity instruments for goods or services. ASC Topic
718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.
The
Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company’s stock options and warrants have characteristics different
from those of its traded stock, and because changes in the subjective input assumptions can materially affect the fair value estimate,
in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of such
stock options. The risk-free interest rate is based upon quoted market yields for United States Treasury debt securities with
a term similar to the expected term. The expected dividend yield is based upon the Company’s history of having never issued
a dividend and management’s current expectation of future action surrounding dividends. Expected volatility was based on
historical data for the
trading
of
our stock on the open market. The expected lives for such grants were based on the simplified method for employees and officers.
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
Information
with respect to options outstanding and exercisable at March 31, 2018 is as follows:
|
Number
Outstanding
|
Exercise
Price
|
Number
Exercisable
|
Balance,
December 31, 2017
|
13,465,000
|
$0.01
|
13,465,000
|
Issued
|
-
|
-
|
-
|
Expired
|
-
|
-
|
-
|
Forfeited
|
-
|
-
|
-
|
Balance,
March 31, 2018
|
13,465,000
|
$0.01
|
13,465,000
|
Exercise
Price
|
Number
Outstanding at March 31, 2018
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise Price
|
Number
Exercisable at March 31, 2018
|
Weighted
Average Exercise Price
|
0.01
|
13,465,000
|
5.63
|
0.01
|
13,465,000
|
0.01
|
Total
|
13,465,000
|
-
|
-
|
13,465,000
|
-
|
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, 2018 is $1,211,850.
NOTE
G – COMMITMENTS AND CONTINGENCIES
OPERATING
LEASE
In
October 2015, the Company entered into a three (3) year lease for an office and manufacturing facility located at 821 NW 57
th
Place, Fort Lauderdale, FL 33309. The lease is $6,100 per month, which includes common area maintenance, taxes and insurance.
The Company has the option to terminate the lease with three months’ notice. During the three months ended March 31, 2018
and 2017, the rent expense was $19,090 and $18,592, respectively.
EQUIPMENT
NOTE PAYABLE
In
July 2017, the Company entered into a financing agreement for the purchase of CNC machining equipment valued at
approximately $426,000. The machining equipment was received in July 2017 and will be used for the manufacture of Voraxial
Separators in preparation of potential future orders under the Supply Agreement and sales pursuant to the Grant Back
Licenses. The Company is required to make monthly payments of $6,788 through January 2023. As of March 31, 2018 and December
31, 2017, the amount owed is $335,135 and $340,644 respectively.
Litigation
On or about
October 23, 2017, a claim was filed in the 17
th
Judicial Circuit Court in and for Broward County in Fort Lauderdale,
Florida, by the plaintiff, Industrial and Oilfield Procurement Services, LLC, against our company. The case involves an
alleged breach of contract between the parties relating to the purchase and sale of a Voraxial unit in 2015. The plaintiff
has demanded a refund and damages. We are defending this action, as we believe this claim is without merit.
ENVIRO TECHNOLOGIES,
INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
SALE OF INTELLECTUAL
PROPERTY
On June 8, 2017,
the Company and FPA, our wholly owned subsidiary (collectively, the “Sellers”), closed the transactions contemplated
by the Technology Purchase Agreement dated March 13, 2017 with Schlumberger Technology Corporation, a Texas corporation, Schlumberger
Canada Limited, a Canadian entity, and Schlumberger B.V., an entity organized under the laws of the Netherlands (collectively,
(“Schlumberger”).
At closing,
we sold our intellectual property (the “Purchased Intellectual Property”), substantially consisting of the Voraxial
patents, marks, software and copyrights, to Schlumberger in consideration of up to $4,000,000, of which $3,000,000 was paid to
us at closing and $1,000,000 is payable upon the completion of both: (i) the complete transfer of the Purchased Intellectually
Property to Schlumberger; and (ii) the provision to transfer information, assets and services to Schlumberger, which is estimated
to be approximately 12 months from the closing date. We recognized a gain on the sale of our intellectual property of $3,000,000
less direct costs of $80,000, consisting of the Termination Fee and consulting fees.
We utilized
a portion of the proceeds from this transaction to pay some of our outstanding debt and are using the balance for general working
capital. We are also using some of the proceeds to buy additional manufacturing equipment to meet potential future sales.
As part of the
agreement, Schlumberger granted us a non-exclusive, worldwide, royalty-free licenses (the “Grant Back Licenses”),
to make, use, sell, offer for sale, and import products and processes embodying the Purchase Intellectual Property outside the
oil and gas market. In addition to the proceeds from the sale of our intellectual property, our management believes that the Grant
Back License will provide for the potential increase of revenues through the sale of Voraxial Separators, possibly leveraging
future sales by Schlumberger in the oil and gas market to penetrate the sale and use of licensed Voraxial products to other industries,
including, but not limited to mining, sewage and wastewater.
In addition,
at closing FPA entered into a Framework Agreement (the “Supply Agreement”) with Cameron Solutions, Inc. (“Cameron
Solutions”), a Houston, Texas-based company engaged in the development, manufacture and sale of equipment used in the oil
and gas industry. Under the terms of the three-year Supply Agreement, FPA is the exclusive supplier to Cameron Solutions of certain
Voraxial series products for use in the oil and gas industry. Sales will be made from time to time in accordance with the terms
of purchase orders. The Supply Agreement is cancellable by Cameron Solutions upon 15 days’ notice if FPA fails to meet delivery
or performance schedules or breaches any of the terms of the agreement, including the warranties. Cameron Solutions may also cancel
the Supply Agreement without notice in the event FPA becomes insolvent or commits any act of bankruptcy. The Supply Agreement
contains customary indemnification and confidentiality provisions.
For a period
of three years following the closing of the Agreement, the Company and Raynard Veldman and John Di Bella have agreed to not participate
or cause participation in the oil-and-gas market in relation to phase or constituent sensing or separation which is defined as,
liquid-liquid, liquid-solid or liquid-gas separation and gas or liquid sensing, including all product lines and services related
thereto and including the Voraxial product line and services, except to the extent necessary to: (i) repair or service, but not
remanufacture, any goods the Company sold to third persons prior to closing; (ii) fulfill, on or after closing, any customer obligation;
or (iii) comply with any term or condition of the Agreement. In addition, the Company shall take all reasonable measures to ensure
the confidentiality and prevent the improper use of all trade secrets.
ENVIRO
TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,
2018
(Unaudited)
NOTE
H – MAJOR CUSTOMERS
During the Three
Months ended March 31, 2018, we recorded 85% of our revenue from one customer.
During the Three
Months ended March 31, 2017, we recorded 87% of our revenue from one customer.
As of March
31, 2018, one of the Company’s customers represents 98% of the total accounts receivable.
As of December
31, 2017, one of the Company’s customers represents 98% of the total accounts receivable.
NOTE I –
SUBSEQUENT EVENTS
On April
16, 2018, we entered into a 12-month business advisory consulting agreement. Under the terms of the agreement, the Company
issued 250,000 shares of common stock for services.