Edgar Filing: ENVIRO VORAXIAL TECHNOLOGY INC

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 10-KSB

Amendment No. 1 to

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

For the fiscal year ended December 31, 2007

Commission file number 0-27445

ENVIRO VORAXIAL TECHNOLOGY, INC.
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(Name of Small Business Issuer in its Charter)

Idaho 83-0266517
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

821 NW 57th Place, Fort Lauderdale, Florida 33309
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(Address of Principal Executive Offices) (Zip Code)

(954) 958-9968
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(Issuer's Telephone Number)

Securities registered under Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered
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None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $.001 par value
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(Title of Class)

Check whether issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. [ ]

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act 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 [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 126-2 of the Exchange Act). Yes [ ] No [X]

State issuer's revenues for its most recent fiscal year. $288,431

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days ($.55 as of March 27, 2008). $9,543,405.68.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 1, 2008: 23,122,135 Shares of
Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

- None -

Transitional Small Business Disclosure Format (Check One) Yes [ ] No [X]

Table of Contents

PART I............................................................................................................1
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Item 1. Description of Business.........................................................................1

Item 2. Description of Property.........................................................................8

Item 3. Legal Proceedings...............................................................................8

Item 4. Submission of Matters to a Vote of Security Holders.............................................8

PART II...........................................................................................................8
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Item 5. Market for Common Equity and Related Stockholder Matters and Small Business
Issuer Purchases of Equity Securities...........................................................8

Item 6. Management's Discussion and Analysis of Financial Condition or Plan of
Operations.....................................................................................11

Item 7. Financial Statements...........................................................................19

Item 8. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure.....................................................................................19

PART III.........................................................................................................21
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Item 9. Directors and Executive Officers, Promoters, Control Persons, and Corporate
Governance; Compliance with Section 16(a) of the Exchange Act..................................21

Item 10. Executive compensation.........................................................................23

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters............................................................................25

Item 12. Certain Relationships and Related Transactions, and Director Independence......................26

Item 13. Exhibits.......................................................................................26

Item 14. Principal Accountant Fees and Services.........................................................26

PART I.

Item 1. Description of Business

Our History

Enviro Voraxial Technology, Inc. (the "Company") was incorporated in
Idaho on October 19, 1964, under the name Idaho Silver, Inc. In May of 1996, we
entered into an agreement and plan of reorganization with Florida Precision
Aerospace, Inc., a privately held Florida corporation ("FPA"), and its
shareholders. FPA was incorporated on February 26, 1993.

General

We believe we are emerging as a potential leader in the rapidly growing
environmental and industrial separation industries. The Company has developed
and patented the Voraxial(R) Separator ("Voraxial(R) Separator" or
"Voraxial(R)"); a proprietary technology that efficiently separates large
volumes of liquid/liquid, liquid/solids or liquid/liquid/solids fluid mixtures
with distinct specific gravities. Management believes this superior separation
quality is achieved in real-time, and in much greater volumes, with a more
compact, cost efficient and energy efficient machine than any comparable product
on the market today. The Voraxial(R) Separator operates in-line and is
scaleable. It is capable of processing volumes as low as 3 gallons per minute as
well as volumes over 10,000 gallons per minute with only one moving part. The
Company believes that the Voraxial(R) technology can help protect the
environment and its natural resources while simultaneously making numerous
industries more productive and cost effective.

The size and efficiency advantages provided by the Voraxial(R)
Separator to the end-user have provided us with a variety of market
opportunities. We have generated limited revenues to date partially because of
insufficient funds to adequately market our product; however, we have received
inquiries from parties in various industries, including the oil exploration and
production.

The Company is focusing its marketing efforts within the oil
exploration and production industry and has begun seeing some positive feedback.
The number of projects within the industry has steadily increased in the past 2
years and relationships are beginning to foster with both customers and service
companies. The Company believes that revenues from this industry will continue
to increase in 2008 and beyond.

The Voraxial is presently being reviewed by potential customers in a
variety of markets including oil-water separation, oil exploration and
production, oil refineries, marine/oil-spill clean up, stormwater, manufacturing
waste treatment and grit/sand separation.

We have sold and shipped units of the Voraxial(R) Separator on a trial
and rental basis to a number of different companies that include various
applications, including produced water applications for the oil industry (both
offshore oil rigs and onland production facilities), and liquid/liquid for the
uranium industry, to name a few. We have installed several Voraxial(R)
Separators to date including units to Transocean, ConocoPhillips, the Alaska
Department of Environmental Conservation, the US Navy, and Cameco, a leading
uranium producing company for oil/water separation at a flow rate of
approximately 400 gallons per minute. We are in dialogue with other companies to
conduct similar projects in 2008.
1

In 2006, the Company received a Letter of Intent from OMV Austria
Exploration and Production GmbH, a leading integrated oil and gas group in
Central and Eastern Europe, to evaluate the use of a Voraxial Separator to
handle its 150,000-barrel per day produced water system. OMV is a leading oil
and gas company in Central Europe with over 15 billion Euros in sales and
extensive exploration & production activities in 18 countries on five
continents. After completing the first round of trials in 2007, the Company was
invited back for a 2nd round of trials scheduled to for Q2 2008.

In 2007, the Company installed its Voraxial Deckwater Drainage System
onto Transocean semi submersible rig Sedco 702, the world's largest offshore
drilling contractor. The Sedco 702 is utilizing this uniquely efficient system
to protect the environment by separating oil from drainage water prior to
discharge that meets local environmental requirements. The Voraxial Skid will be
utilized to handle contaminated drill floor run-off water containing solids and
drilling fluids. The Voraxial(R) Separator's ability to conduct efficient
separation without the need of a pressure drop allows for easy installation and
a reduction of cost. The Voraxial-powered system provides for highly efficient
separation while providing features that are critical to offshore platform
operation: a small footprint, low energy requirement and a no-pressure drop.

In the first quarter of 2007, we received a purchase order from a
leading Scandinavian energy company, to deploy a Voraxial Skid for a drilling
operation using lightweight drilling fluids. This technique is called
"underbalanced drilling" since it maintains the drilling operations at a lower
pressure than the formation to prevent the drilling fluids from damaging the
well. The Voraxial Skid, which is comprised of a Voraxial(R) 4000 and a
Voraxial(R) 2000, operates in series to provide liquid/solid separation on an
offshore oilrig in the North Sea. The Voraxial Skid, which was leased to the
customer for a specific project, was chosen for its solids separation
efficiency, and for its ability to conduct good separation without the need of a
pressure drop.

In 2007, the Company signed a non-exclusive, comprehensive sales and
marketing agreement with TwinFilter, a leading Dutch filtration company in the
oil and gas industry. Under the terms of the agreement, the two companies will
market and promote each other's technologies while sharing the sales & marketing
expenses and engineering expertise. Furthermore, EVTN and TwinFilter will
collaborate to build and promote turnkey oil/water and liquid/solid separation
systems for the oil industry that will incorporate EVTN's Voraxial Separator and
TwinFilter's absorption systems, coalescing, other filter technology. This
agreement was finalized after many months of collaboration to build and deliver
products for various companies within the oil industry.

The turnkey system can be utilized in multiple niche applications in
the oil industry including produced water, under-balanced drilling (UBD), deck
water drainage, slopwater, FPSO and refinery markets. The integration of the two
technologies provides the oil industry with a compact and effective separation
system. The Voraxial's small footprint, low energy requirements and separation
quality coupled with TwinFilters unique filtration equipment for secondary
treatment provides the customer with a complete turnkey package that meets the
most stringent discharge levels such as OSPAR (North Sea countries <30mg/ltr)
and United States 40 CFR435 (<29 mg/ltr).

Due to the exposure from the various petroleum industry related trade
shows and the trials / demonstrations conducted over the past year, the Company
is now in discussions with various oil companies to conduct additional trials
and for purchase of units. The Company is also in discussion with several oil
service companies interested in developing a relationship with the company to
market the Voraxial(R) Separator within the industry. We anticipate that some of
these opportunities will materialize in 2008.

The Voraxial(R) Grit Separator has been designed for specific use in
the municipal wastewater industry. The Voraxial(R) generates a centrifugal that
provides for efficient separation of sand/grit and is configured for operation
at the headworks of a municipal wastewater treatment plant (WWTP). A single
Voraxial(R) Grit Separator is designed to provide for the continuous removal of
grit from screened wastewater at rates up to eight thousand (8000) gallons per
minute (11.5 mgd). We currently have designs for two models of Voraxial(R) Grit
Separators. The Voraxial(R) 4000 Grit Separator has an operating range of
three-tenths to one and three-tenths (0.3 to 1.3) million gallons per day (mgd),
powered by a ten (10) HP TEFC motor. The Voraxial(R) 8000 Grit Separator has an
operating range of three to eleven and five-tenths (3.0 to 11.5) mgd, powered by
a fifty (50) HP TEFC motor. This separation performance translates well into
other industries. The Company is receiving interest from other applications for
its Voraxial Separator to do liquid/solid separation.

Voraxial(R) Separator

In the past year the Company made some upgrades to the Voraxial
Separator that increases the "g" force generated by approximately 300%. This
increase significantly improves separation performance. These upgrades also
increase the flow rate and pump curve through the Voraxial while decreasing
energy and maintenance requirements. These improvements mark a significant
upgrade to the Voraxial Separator.

The first shipment of the upgraded unit occurred in the fourth quarter
of 2007 and additional units are being manufactured and prepared for shipment to
potential customers for delivery in 2008. These units are manufactured for both
oil/water and liquid/solid separation.

The Voraxial(R) Separator is a continuous flow turbo machine that
generates a strong centrifugal force, a vortex, capable of separating light and
heavy liquids, such as oil and water, or any other combination of liquids and
solids at extremely high flow rates. As the fluid passes through the machine,
the Voraxial(R) Separator accomplishes this separation through the creation of a
vortex. In liquid/liquid and liquid/solid mixtures, this vortex causes the
heavier compounds to gravitate to the outside of the flow and the lighter
elements to move to the center where an inner core is formed. The liquid stream
processed by the machine is divided into separate streams of heavier and lighter
liquids and solids. As a result of this process, separation is achieved.

The Voraxial(R) Separator is a self-contained, non-clogging device that
can be powered by an electric motor, diesel engine or by hydraulic power
generation. Further, the Voraxial(R) Separator's scalability allows it to be
utilized in a variety of industries and to process various amounts of liquid.
The following are the various sizes and the corresponding capacity range:

Product and Capacity Range

Model Diameter Capacity Range
Number Size Gallons Per Minute
------ ------------ ------------------
Voraxial(R)1000 1 inch 3 - 5
Voraxial(R)2000 2 inches 20 - 70
Voraxial(R)4000 4 inches 150 - 600
Voraxial(R)8000 8 inches 2,000 - 4,000

The Voraxial(R) Separator can transfer various liquids in either
direction by reversing the machine's rotation. We currently maintain an
inventory of various models of the Voraxial(R) Separator.

Management believes that our Voraxial(R) Separator offers substantial
applications on a cost-effective basis, including: oil exploration & production,
oil remediation services, municipal wastewater treatment, bilge water
purification, food processing waste treatment and numerous other industrial
production and environmental remediation processes. We also believe that the
quality of the water separated from the contaminant is good enough to recycle
back into the process stream (back into the plant) or discharge to the
environment. As clean water becomes less available to the ever-increasing world
population, this technology may become more valuable.

The Voraxial(R) Separator is currently manufactured and assembled at
our Fort Lauderdale, Florida facilities. The Company subcontracts some parts of
the Voraxial Separator to local manufacturers.

The Market

The need for effective and cost efficient wastewater treatment and
separation technology is global in scale. Moreover, virtually every industry
requires some type of separation process either during the manufacturing
process, prior to treatment or discharge of wastewater into the environment, for
general clean up, or emergency response capability. Separation processes,
however, are largely unknown to the average consumer. These processes are deeply
integrated in almost all industrial processes from oil to wastewater to
manufacturing. Management believes that the Voraxial(R) technology has
applications in most, if not all major separation industries. The unique
characteristics of the Voraxial(R) allow it to be utilized either as a
stand-alone unit or within an existing system to provide a more efficient and
cost effective way to handle the separation needs of the customer. We believe
the Voraxial(R) Separator can result in a cost savings and other benefits to the
customer. These benefits result in and include:

o A reduction in water and energy usage,
o Requires no pressure drop to perform separation,
o Less space needed to implement the Voraxial(R) Separator; the
Voraxial(R) Separator weighs less than existing systems,
o A reduction in time to process and separate the fluids, allowing
the customer to be more efficient,
o Creation of a more efficient and faster process to treat water to
increase the overall productivity of the end-user,

o A reduction in the amount of disposable liquids,
o Fewer employees needed to operate the system, and
o Reduction of ongoing maintenance and servicing costs.

We believe that we are the only front-end solution for the separation
industry that can offer increased productivity while reducing the physical space
and energy required to operate the unit. These advantages translate into the
potential for substantial operating cost efficiencies that would increase the
profitability of the solution's end user. The Voraxial's unique characteristic
to conduct separation without a pressure loss allows the unit to be installed in
locations other technologies cannot. For instance another separation technology
in the oil industry called a hydrocyclone requires a significant pressure loss
to perform separation. This characteristic gives the customer a more economical
way to achieve separation.

If, as we expect, environmental regulations, both domestically and
internationally, become more stringent, companies will be required to more
effectively treat their wastewater prior to discharge. We believe this offers a
great opportunity for the Company as the Voraxial(R) Separator can be utilized
in most separation applications to significantly increase the efficiency of the
separation processes while simultaneously reduce the cost to the end-user.

Management believes that the oil industry, and more specifically the
produced water market within this industry, represents a great opportunity for
significant sales growth for the Voraxial Separator. The produced water market
is worldwide and the need for effective produced water (oil/water) separation is
a major issue for both offshore and land-based oil production facilities. The
ability to efficiently separate produced water waste streams (oil and water) has
enormous economical and environmental consequences for the oil production
industry. Produced water comprises over 98% of the total waste volume generated
by the oil and gas industry, making it the largest volume waste stream
associated with oil and gas production.

Oil reservoirs frequently contain large volumes of water and as oil
wells mature (the oil field becomes depleted), the amount of produced water
increases. In the continental US, it is estimated that 7-10 barrels of water is
produced for each barrel of recovered oil. According to the Argonne National
Laboratory 2007 White Paper, "approximately 15 to 20 billion bbl (barrels; 1 bbl
= 42 U.S. gallons) of produced water are generated each year in the United
States. This is equivalent to a volume of 1.7 to 2.3 billion gallons per day."
Worldwide, the total amount of produced water generated, excluding the United
States, is approximately 50 billon barrels (approximately 6 billion gallons per
day). Produced water volumes will continue to increase as oil wells mature.

The necessity to process and efficiently separate high volumes of
liquids coupled with the more stringent environmental regulations worldwide is
increasing the demand for the Voraxial(R) Separator. The Voraxial(R) Separator
provides a cost effective way to separate large volumes of produced or
re-injection water for both on-land and offshore production facilities. The
Voraxial(R) provides superior separation while decreasing the amount of space,
energy and weight to conduct the separation. In addition to oil separation, the
Voraxial can also perform solid (sand and grit) extraction, which prevents
production damage by increasing the life of the well.

The Company also expects market opportunities to present themselves
because of increased governmental regulation and standards enforcement by the
U.S. Environmental Protection Agency ("EPA"), and the European Union Commission
on the Environment. Additionally, emerging markets worldwide are opening as
growing nations recognize the need and benefit of addressing the environmental
issues faced by population growth and industrialization, such as China, Mexico,
and South America.

Inventory

Other than our Voraxial(R) Separators, we maintain no inventory of
finished parts until we receive a customer order. We currently have various
models of the Voraxial(R) Separator in inventory, which includes certain models
located at third party facilities on a trial basis.

Competition

We are subject to competition from a number of companies who have
greater experience, research abilities, engineering capability and financial
resources than we have. Although we believe our Voraxial(R) Separator offers
applications which accomplish better or similar results on a more cost-effective
basis than existing products, other products have, in some instances, attained
greater market and regulatory acceptance. These competitors include, but are not
limited to Westfalia and AlfaLaval.

Marketing

Management is implementing a comprehensive sales and marketing program
to stimulate awareness of the Voraxial(R) Separator. Management is developing
relationships with oil service companies and representatives to promote the
Voraxial to oil industry customers. We are beginning to see the benefits of this
program as interest and opportunity for deployments and revenues are increasing.
We believe that significant revenues will begin to be realized in 2008.

We also have seen a great benefit from exhibiting at tradeshows. We
have presented the Voraxial(R) Separator at several prominent trade shows in the
past fiscal year. In April 2007, the Company was a featured exhibitor at the
Advanced Produced Water Handling & OSPAR Compliance 2007 Conference, which was
held in Aberdeen, Scotland. In late May 2007, the Company was selected by Tuv
Nel to be a guest speaker at Tuv Nel's Produced Water Workshop in Aberdeen,
Scotland. The Workshop was attended by guests from government bodies, offshore
operators, technology and equipment suppliers as well as consultancy and R&D
organizations. As stated on Tuv Nel's website, the Workshop "provides an
excellent platform for delegates to keep abreast of the latest technological and
legislative developments." The Company also displayed its Voraxial Separator at
the OTC tradeshow in Houston and the OE 2007 Tradeshow in Aberdeen, Scotland.
Both tradeshows were well attended by oil E&P companies.

The Company believes it has received a great response from potential
clients and manufacturers representatives from the above-mentioned tradeshows
and is still pursuing some of these opportunities. The Company will exhibit the
Voraxial(R) Separator at additional tradeshows in 2008.

Sources and availability of raw materials

The materials needed to manufacture our Voraxial(R) Separator have been
provided by leading companies in the industry including Motion Industries,
Baldor Electric Co., Hughes Supply Inc. and John Crane, Inc., among other
suppliers. We do not anticipate any shortage of component parts.

Intellectual property

We currently hold several patents pertaining to the Voraxial(R)
Separator and are continually working on developing other patents. The Company
owns United States Patent #6,248,231, #5,904,840 and #5,084,189. The latest
patent, Patent #6,248,231 was registered in 2001 for Apparatus with Voraxial(R)
Separator and Analyzer. Patent #5,904,840 is for Apparatus for Accurate
Centrifugal Separation of Miscible and Immiscible Media, which is for technology
invented by our president and sole director, Alberto DiBella, and registered in
1999. The other is for the Method and Apparatus for Separating Fluids having
Different Specific Gravities. This is for technology invented by Harvey Richter
and registered in 1992 to Richter Systems, Inc. In 1996, we acquired assets,
including this patent from Richter Systems, Inc. The method and apparatus for
each of these is applied in our Voraxial(R) Separator. The Company has filed for
additional patents pertaining to the Voraxial(R) Separator. These patents are
still pending.

The Company filed for additional patents in 2007 to reflect the
upgrades to the Voraxial Separator. The Company anticipates filing additional
patents in 2008.

In addition, on December 16, 2003, we received trademark protection for
the word "Voraxial".

Product liability

Our business exposes us to possible claims of personal injury, death or
property damage, which may result from the failure, or malfunction of any
component or subassembly manufactured or assembled by us. We have product
liability insurance. However, any product liability claim made against us may
have a material adverse effect on our business, financial condition or results
of operations in light of our poor financial condition, losses and limited
revenues.

We obtained directors and officers, and general insurance coverage in
2004. We obtained product liability insurance in 2005.

Research and development

In our past two fiscal years, we have spent approximately $1,115,469 on
product research and development. The Company has finalized the development of
the Voraxial(R) Separator. However, we have made modifications to the Voraxial
Separator. These modifications have resulted in a 300% increase in "g" forces
generated, an increase in fluid throughput, a decrease in energy usage and a
decrease in maintenance. Management believes these improvements are significant
and will increase the marketability of the Voraxial. Although we will
continually work on advancing the technology and applications whereby the

technology can be used, we do not anticipate devoting a significant portion of
any future funds to this area of the business in the near term.

Employees

We currently have six full time employees. All of our employees work
full-time. None of our employees are members of a union. We believe that our
relationship with our employees is favorable. We intend to add additional
employees in the upcoming year, including managers, sales representatives and
field technical engineers.

Item 2. Description of Property

During September 2007, the Company entered into a one (1) year lease
for an office and manufacturing facility located at 821 NW 57th Place, Fort
Lauderdale, FL 33309. The lease is approximately $6,100 per month for the year
of the lease. The Company has the option to renew the lease at the end of the
term.

Item 3. Legal Proceedings

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II.

Item 5. Market for Common Equity and Related Stockholder Matters and Small
Business Issuer Purchases of Equity Securities

Our common stock is traded on the NASD Over-The-Counter Bulletin Board
("OTCBB") under the symbol EVTN. The bid quotations below are provided by the
OTCBB. On March 27, 2008, the closing price for our common stock was $0.55. The
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not represent actual transactions.

Bid Quotations
--------------

Quarter Ended High Low
------------- ---- ---

March 31, 2006 $0.70 $0.50
June 30, 2006 $0.79 $0.48
September 30, 2006 $0.60 $0.46
December 31, 2006 $0.61 $0.46

March 31, 2007 $0.69 $0.45
June 30, 2007 $0.95 $0.71
September 30, 2007 $0.84 $0.55
December 31, 2007 $0.72 $0.44

We have been advised that seven member firms of the NASD are currently
acting as market makers for our common stock. There is no assurance that an
active trading market will develop which will provide liquidity for our existing
shareholders or for persons who may acquire common stock through the exercise of
warrants.

Holders

As of December 31, 2007, there were approximately 800 holders of record
of our common stock outstanding. Our transfer agent is Jersey Transfer & Trust
Company, Inc., Post Office Box 36, Verona, New Jersey 07044.

No prediction can be made as to the effect, if any, that future sales
of shares of common stock or the availability of common stock for future sale
will have on the market price of the common stock prevailing from time-to-time.
Sales of substantial amounts of common stock on the public market could
adversely affect the prevailing market price of the common stock.

Dividends

We have not paid a cash dividend on the common stock since current
management joined our company in 1996. The payment of dividends may be made at
the discretion of our board of directors and will depend upon, among other
things, our operations, our capital requirements and our overall financial
condition. As of the date of this report, we have no intention to declare
dividends.

Other Stockholders Matters

Common Stock
------------

In February 2007, the Company entered into a three month consulting
agreement and agreed to issue 100,000 restricted shares of common stock for
services performed by a consultant, which were valued at $40,000.

During the year ended December 31, 2007 the Company sold 1,030,000
restricted shares of common stock for $.60 per share in a private placement
offering to a total of five accredited investors, including a Water Investment
Fund. Total proceeds from the sale were $618,000.

Warrants
--------

Options extended
----------------

In January 2007, the Company extended the exercisable life of certain
options issued to an employee to purchase an aggregate of 2,000,000 shares of
common stock issued in 2002 for a period of five years. The options continue to
be exercisable at $0.15 per share, fully vested and now expire on January 31,
2012.

In January 2007, the Company extended the exercisable life of certain
options issued to a consultant to purchase an aggregate of 200,000 shares of
common stock issued in 2002 for a period of five years. The options continue to
be exercisable at $0.77 per share, fully vested and now expire on January 31,
2012.

Options granted
---------------

In January 2007, the Company granted 606,000 stock options to employees
and outside consultants, exercisable at $0.40 per share. These options vest
equally over the life of the options, which range from 1 to 5 years.

In January 2007, the Company issued 375,000 stock options to a
consultant, exercisable at $0.80 -$1.00 per share. These options are fully
vested and expired on October 31, 2007.

The issuances of the securities above were exempt from registration
under Section 4(2) of the Securities Act. The investors received information
concerning the Company and had the opportunity to ask questions concerning the
viability of the Company. The certificates representing the securities contain
legends restricting their transferability absent registration or applicable
exemption.

Small Business Issuer Purchase of Equity Securities

None.

Item 6. Management's Discussion and Analysis of Financial Condition or Plan of
Operations

General

Management's discussion and analysis contains various forward-looking
statements. These statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate" or "continue" or use of
negative or other variations or comparable terminology.

We caution that these statements are further qualified by important
factors that could cause actual results to differ materially from those
contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.

Year ended December 31, 2007 compared to year ended December 31, 2006

Revenue

We continued to focus our efforts and resources to the manufacturing,
assembling, marketing and selling of the Voraxial(R) Separator. Revenues
remained fairly constant for year ended December 31, 2007 as compared to
December 31, 2006. Revenues for the year ended December 31, 2007 were $288,431
compared to $310,376 for the year ended December 31, 2006. Although we didn't
see a significant change in revenues in 2007, we experienced more deployments,
which management believes will contribute to an increase in 2008 revenues.
Revenues in 2007 were a result of sale of the Voraxial Separator and auxiliary
parts, lease orders and trials for customers interested in buying the Voraxial
Separator. Management believes the interest for the Voraxial Separator for
liquid/liquid, liquid/solid and liquid/liquid/solid separation is increasing in
the oil exploration and production industry. We conducted more trials in 2007
than 2006 and believe deployments will increase by approximately 300% in 2008.
We forecast that the increase in deployments will increase revenues. We believe
that the relationships we are building will also lead to increase Voraxial
deployments. We believe we have increased the exposure and awareness of the
Voraxial Separator through our marketing programs and expect to increase
revenues from the sale and lease of the Voraxial Separator in 2007.

Costs and expenses

Costs and expenses increased by 109% or $1,115,033 to $2,129,189 for
the year ended December 31, 2007 as compared to $1,014,156 for the year ended
December 31, 2006. The increase was primarily due to (i) non-cash expenses
relating to the issuance of options to employees and consultants; (ii)
consulting fees; and (iii) increased professional fees and a decrease in
research and development during the year ended December 31, 2007. Research and
development was primarily due to activities in the oil industry. We continue to
focus our efforts on marketing of the Voraxial(R) Separator.

General and administrative expenses

General and Administrative expenses increased by 262% or $1,103,926 to
$1,525,901 for the year ended December 31, 2007 from $421,975 for the year ended
December 31, 2006. The increase was primarily due to (i) non-cash expenses of
approximately $186,676 relating to the issuance of options and warrants to
employees and consultants; (ii) non-cash expenses of $697,500 relating to the

extension of previously issued options; (iii) consulting fees; and (iv)
increased professional fees during the year ended December 31, 2007.

Research and development expenses

Research and Development expenses increased 2% or $11,107 to $603,288
for the year ended December 31, 2007 from $592,181 for the year ended December
31, 2006. The R&D conducted by the Company resulted with the Company upgrading
the Voraxial Separator and filing additional patents. The upgraded Voraxial
Separator now produces 300% more "g" forces, processes more liquids and utilizes
less energy. An increase in "g" forces increases separation efficiency. These
are significant upgrades as it allows the Voraxial to operate in more locations
in the oil exploration & production sector. These upgrades are receiving a
favorable response from the industry. The upgraded Voraxial 4000 Separator has
already been shipped to a customer and been in operation for several months.

Liquidity and capital resources

At December 31, 2007, we had working capital deficit $191,322, cash of
$201,066 and an accumulated deficit of $8,637,316. For the year ended December
31, 2007, we had a net loss from operations of $1,918,004, which included
non-cash expenses of $884,176 relating to (i) the issuance of warrants and
options to employees and consultants and (ii) extension of previously issued
options and warrants. Operating at a loss for the year negatively impacted our
cash position; however, funds received from the private placements completed
during 2007 improved our working capital position.

During the year ended December 31, 2007, we issued 1,030,000 shares of
the Company's restricted common stock to five investors, including a Water
Investment Fund at $0.60 per share for gross proceeds of $618,000.

We believe that including our current cash resources and anticipated
revenue to be generated by our Voraxial(R) Separators, we will have sufficient
resources to continue business operations for the next twelve months. To the
extent that these resources are not sufficient to sustain current operating
activities, we may need to seek additional capital, or adjust our operating plan
accordingly.

Continuing losses

We may be unable to continue as a going concern, given our limited
operations and revenues and our significant losses to date. Consequently, our
working capital may not be sufficient and our operating costs may exceed those
experienced in our prior years. In light of these recent developments, we may be
unable to continue as a going concern.

The Company has experienced net losses, has a working capital deficit
and sustained cash outflows from operating activities and had to raise capital
to sustain operations. There is no assurance that the Company's developmental
and marketing efforts will be successful, that the Company will ever have
commercially accepted products, or that the Company will achieve significant
revenues. If the Company is unable to successfully commercialize its Voraxial
Separator, it is unlikely that the Company could continue its business. The
Company will continue to require the infusion of capital until operations become

profitable. During 2008, the Company anticipates seeking additional capital,
increasing sales of the Voraxial Separator and continuing to restrict expenses.
However, substantial doubt exists about the ability of the Company to continue
as a going concern.

Recent Accounting Pronouncements

Accounting changes and error corrections
----------------------------------------

In May 2005, the Financial Accounting Standards Board (FASB) issued
SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS 154), which
replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes,"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements -
An Amendment of APB Opinion No. 28." SFAS 154 provides guidance on the
accounting for and reporting of accounting changes and error corrections, and it
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company had adopted SFAS 154 in the first quarter of fiscal year 2006 and
does not expect it to have a material impact on its consolidated results of
operations and financial condition.

Fair value measurements
-----------------------

In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements" (SFAS 157). SFAS 157 provides guidance for using fair value to
measure assets and liabilities. SFAS 157 addresses the requests from investors
for expanded disclosure about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value and the
effect of fair value measurements on earnings. SFAS 157 applies whenever other
standards require (or permit) assets or liabilities to be measured at fair
value, and does not expand the use of fair value in any new circumstances. SFAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2006 and was be adopted by the Company in the first quarter
of fiscal year 2007. The Company does not expect that its adoption of SFAS 157
will have a material impact on its consolidated results of operations and
financial condition.

Accounting for uncertainty in income taxes
------------------------------------------

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109"
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing the recognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The cumulative effects, if any, of applying
FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption. FIN 48 is effective for fiscal years
beginning after December 15, 2006, and the Company adopted this in the first
quarter of fiscal year 2007. The Company does not expect that its adoption of
FIN 48 will have a material impact on its consolidated results of operations and
financial condition.

Taxes collected from customer and remitted to governmental authorities
----------------------------------------------------------------------

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue
No. 06-3 (EITF 06-3), "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should Be Presented in the Income Statement (That Is,
Gross versus Net Presentation)." EITF 06-3 applies to any tax assessed by a
governmental authority that is directly imposed on a revenue producing
transaction between a seller and a customer. EITF 06-3 allows companies to
present taxes either gross within revenue and expense or net. If taxes subject
to this issue are significant, a company is required to disclose its accounting
policy for presenting taxes and the amount of such taxes that are recognized on
a gross basis. The Company currently presents such taxes net. EITF 06-3 is
required to be adopted during the first quarter of fiscal year 2008. These taxes
are currently not material to the Company's consolidated financial statements.

Accounting for rental costs incurred during a construction period
-----------------------------------------------------------------

In September 2006, the FASB issued FASB Staff Position No. FAS 13-1 (As
Amended), "Accounting for Rental Costs Incurred during a Construction Period"
(FAS 13-1). This position requires a company to recognize as rental expense the
rental costs associated with a ground or building operating lease during a
construction period, except for costs associated with projects accounted for
under SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects." FAS 13-1 is effective for reporting periods beginning after
December 15, 2005 and was adopted by the Company in the first quarter of fiscal
year 2006. The Company's adoption of FAS 13-1 will not materially affect its
consolidated results of operations and financial position.

Effects of Prior Year Misstatements when Quantifying Misstatements in the
-------------------------------------------------------------------------
Current Year Financial Statements
---------------------------------

In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006, and has been adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect the adoption of SAB 108 to have a material
impact on its consolidated results of operations and financial condition

FSP FAS 123(R)-5
----------------

in classification) of those instruments will result if both of the following
conditions are met: (a) There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b) All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. The Company does not expect the adoption of FSP FAS 123(R)-5 to have a
material impact on its consolidated results of operations and financial
condition

Business Combinations
---------------------

In December, 2007, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised
2007), "Business Combinations" (hereinafter "SFAS No. 141 (revised 2007)"). This
statement establishes principles and requirements for how an acquirer a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree, b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and c) determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The scope of SFAS No. 141
(revised 2007) is broader than the scope of SFAS No. 141, which it replaces. The
effective date of SFAS No. 141 (revised 2007) is for all acquisitions in which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The adoption of this statement
has no immediate material effect on the Company's consolidated financial
condition or results of operations.

Noncontrolling Interests in Consolidated Financial Statements - an amendment of
-------------------------------------------------------------------------------
ARB 51
------

In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51"
(hereinafter "SFAS No. 160"). This statement establishes accounting and
reporting standards that require a) the ownership interests in subsidiaries held
by parties other than the parent be clearly identified, labeled and presented in
the consolidated statement of financial position with equity, but separate from
the parent's equity, b) the amount of consolidated net income attributable to
the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, c) changes in a
parent's ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently, d) when a subsidiary
is deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The
effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Company's consolidated financial condition or
results of operations.

Management does not expect these statements to have a material impact
on the consolidated financial statements.

Risk Factors

Our independent auditors have raised substantial doubt about our ability to
continue as a going concern.

Although we operated as a precision machine shop for a number of years,
we have only recently completed the development of the Voraxial Separator, and
we have not yet generated significant revenues from that product. As a result,
we have limited operating history in our planned business upon which you may
evaluate our business and prospects. The revenues and income potential of our
business and the markets of our separation technology are unproven. Our business
plan must be considered in light of risks, expenses, delays, problems, and
difficulties frequently encountered by development stage companies.

We have incurred operating losses since our inception, and we will
continue to incur net losses until we can produce sufficient revenues to cover
our costs. At December 31, 2007, we had an accumulated deficit of $8,637,316,
including a net loss of $1,921,780 for the year ended December 31, 2007. Even if
we achieve profitability, we may not be able to sustain or increase our
profitability on a quarterly or annual basis.

Our ability to generate future revenues will depend on a number of
factors, many of which are beyond our control. These factors include the rate of
market acceptance of our products, competitive efforts, and general economic
trends. Due to these factors, we cannot anticipate with any degree of certainty
what our revenues will be in future periods. You have limited historical
financial data and operating results with which to evaluate our business and our
prospects. As a result, you should consider our prospects in light of the early
stage of our business in a new and rapidly evolving market.

Our independent auditors have included in their audit report an
explanatory paragraph that states that our continuing losses from operations
raises substantial doubt about our ability to continue as a going concern.

We have been limited by insufficient capital, and we may continue to be so
limited.

In the past, we have lacked the required capital to market the Voraxial
Separator. Our inability to raise the funding or to otherwise finance our
capital needs could adversely affect our financial condition and our results of
operations, and could prevent us from implementing our business plan.

We may seek to raise capital through public and private equity
offerings, debt financing or collaboration, and strategic alliances. Such
financing may not be available when we need it or may not be available on terms
that are favorable to us. If we raise additional capital through the sale of our
equity securities, your ownership interest will be diluted and the terms of the
financing may adversely affect your holdings or rights as a stockholder.

Our business model is unproven.

Our business model is currently unproven and in the early stages of
development and we have not yet undertaken any substantial marketing activities.

The technological, marketing, and other aspects of our business will require
substantial resources and will undergo constant developmental change. Our
ability to develop a successful business model will be dependent upon the
relative success or failure of these respective aspects of our operations and
how effectively they work in concert with one another. If we expend significant
financial and management resources attempting to market the Voraxial Separator
to a specific industry segment, and we subsequently are unsuccessful in
generating sales from that segment, we may not have enough resources to market
to other industry segments. There are no assurances that we will successfully
develop our business model from the standpoint of successfully implementing an
efficient and effective marketing plan.

If our products do not achieve and maintain market acceptance, our business will
not be successful.

Even though our product is successfully developed, our success and
growth will depend upon its acceptance by various potential users of our
product. Acceptance will be a function of our product being more cost effective
as compared to currently existing or future technologies. If our product does
not achieve market acceptance, our business will not be successful. In addition,
even if our product achieves market acceptance, we may not be able to maintain
that market acceptance over time if new products or technologies are introduced
that are more favorably received than our product or render our products
obsolete.

If we do not develop sales and marketing capabilities or arrangements
successfully, we will not be able to commercialize our product successfully.

We have limited sales and marketing experience. We may market and sell
our product through a direct sales force or through other arrangements with
third parties, including co-promotion arrangements. Since we may market and sell
any product we successfully develop through a direct sales force, we will need
to hire and train qualified sales personnel.

Our market is subject to intense competition. If we are unable to compete
effectively, our product may be rendered non-competitive or obsolete.

We are engaged in a segment of the water filtration industry that is
highly competitive and rapidly changing. Many large companies, academic
institutions, governmental agencies, and other public and private research
organizations are pursuing the development of technology that can be used for
the same purposes as our product. We face, and expect to continue to face,
intense and increasing competition, as new products enter the market and
advanced technologies become available. We believe that a significant number of
products are currently under development and will become available in the future
that may address the water filtration segment of the market. If other products
are successfully developed, it may be marketed before our product.

Our competitors' products may be more effective, or more effectively
marketed and sold, than any of our products. Many of our competitors have:

o significantly greater financial, technical and human resources
than we have and may be better equipped to discover, develop,
manufacture and commercialize products; and
o more extensive experience in marketing water treatment products.

Competitive products may render our products obsolete or noncompetitive
before we can recover the expenses of developing and commercializing our
product. Furthermore, the development of new technologies and products could
render our product noncompetitive, obsolete, or uneconomical.

As we evolve from a company primarily involved in design and development to one
also involved in commercialization, we may encounter difficulties in managing
our growth and expanding our operations successfully.

We may experience a period of rapid and substantial growth that may
place a strain on our administrative and operational infrastructure, and we
anticipate that continued growth could have a similar impact. As our product
continues to enter and advance in the market, we will need to expand our
development, regulatory, manufacturing, marketing and sales capabilities or
contract with third parties to provide these capabilities for us. As our
operations expand, we expect that we will need to manage additional
relationships with various collaborative partners, suppliers, and other third
parties.

If we are unable to adequately protect our technology, or if we infringe the
rights of others, we may not be able to defend our markets or to sell our
product.

Our success may depend in part on our ability to continue and expand
our patent protection both in the United States and in other countries for our
product. Due to evolving legal standards relating to the patentability,
validity, and enforceability of patents covering our product and the scope of
claims made under these patents, our ability to obtain and enforce patents is
uncertain and involves complex legal and factual questions. Accordingly, rights
under any issued patents may not provide us with sufficient protection for our
product or provide sufficient protection to afford us a commercial advantage
against competitive products or processes.

Our success may also depend in part on our ability to operate without
infringing the proprietary rights of third parties. The manufacture, use, or
sale of our product may infringe on the patent rights of others. Likewise, third
parties may challenge or infringe upon our existing or future patents.
Proceedings involving our patents or patent applications or those of others
could result in adverse decisions regarding:

o the patentability of our inventions relating to our product;
and/or
o the enforceability, validity, or scope of protection offered by
our patents relating to our product.

Litigation may be necessary to enforce the patents we own and have
applied for (if they are awarded), copyrights, or other intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement. This
type of litigation could result in the expenditure of significant financial and
managerial resources and could result in injunctions preventing us from
distributing certain products. Such claims could materially adversely affect our
business, financial condition, and results of operations.

We are dependent on key personnel.

We are dependent upon the availability and the continued performance of
the services of key personnel. The loss of the services of any such personnel
could have a material adverse effect on us. In addition, the availability of
skilled personnel is extremely important to our growth strategy and our failure
to attract and retain such personnel could have a material, adverse effect on
us. We do not currently maintain any key man life insurance covering these
persons.

Our operations are subject to governmental approvals and regulations and
environmental compliance.

Our operations are subject to extensive and frequently changing
federal, state, and local laws and substantial regulation by government
agencies, including the United States Environmental Protection Agency (EPA), the
United States Occupational Safety and Health administration (OSHA) and the
Federal Aviation Administration (FAA). Among other matters, these agencies
regulate the operation, handling, transportation and disposal of hazardous
materials used by us during the normal course of our operations, govern the
health and safety of our employees and certain standards and licensing
requirements for our aerospace components that we contract manufacture. We are
subject to significant compliance burden from this extensive regulatory
framework, which may substantially increase our operational costs.

We believe that we have been and are in compliance with environmental
requirements and believe that we have no liabilities under environmental
requirements. Further, we have not spent any funds specifically on compliance
with environmental laws. However, some risk of environmental liability is
inherent in the nature of our business, and we might incur substantial costs to
meet current or more stringent compliance, cleanup, or other obligations
pursuant to environmental requirements in the future. This could result in a
material adverse effect to our results of operations and financial condition.

Our business has a substantial risk of product liability claims. If we are
unable to obtain appropriate levels of insurance, a product liability claim
against us could aversely affect our business.

Our business exposes us to possible claims of personal injury, death,
or property damage, which may result from the failure, or malfunction of any
component or subassembly manufactured or assembled by us. While we have product
liability insurance, any product liability claim made against us may have a
material adverse effect on our business, financial condition, or results of
operations in light of our poor financial condition, losses and limited
revenues.

Item 7. Financial Statements

The financial statements required by this report are included,
commencing on F-1.

Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

None.

Item 8A. Controls and Procedures

Evaluation of disclosure controls and procedures

As of the end of the period covered by this report, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. This evaluation
was done under the supervision and with the participation of our Principal
Executive Officer and Principal Financial Officer. Based upon that evaluation,
our Principal Executive Officer and Principal Financial Officer concluded that
our disclosure controls and procedures are effective in gathering, analyzing and
disclosing information needed to satisfy our disclosure obligations under the
Exchange Act.

Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate
internal control over financial reporting. A company's internal control over
financial reporting is a process designed 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. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

Management, including the Company's Chief Executive Officer and
Principal Accounting Officer, has conducted an evaluation of the effectiveness
of the Company's internal control over financial reporting as of December 31,
2007, based on the criteria for effective internal control described in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on its assessment, management
concluded that the Company's internal control over financial reporting was
effective as of December 31, 2007.

This Annual Report does not include an attestation report of the
Company's independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's independent registered public accounting firm
pursuant to temporary rules of the SEC that permit the Company to provide only
management's report in this Annual Report.

This report shall not be deemed to be filed for purposes of Section 18
of the Securities Exchange Act of 1934, or otherwise subject to the liabilities
of that section, and is not incorporated by reference into any filing of the
Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.

Changes in internal controls

There were no changes in our internal controls or in other factors that
occured during the last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, those controls over financial reporting.

Item 8B. Other Information

None.

PART III.

Item 9. Directors and Executive Officers, Promoters, Control Persons, and
Corporate Governance; Compliance with Section 16(a) of the Exchange Act

Directors and executive officers

The following sets forth the names and ages of our officers and
directors. Our directors are elected annually by our shareholders, and the
officers are appointed annually by our board of directors.

Name Age Position
---- --- --------

Alberto DiBella 77 President and Director
John A. DiBella 36 Executive Vice President and Director

Alberto DiBella is a graduate of the Florence Technical Institute,
Italy, where he obtained a degree in mechanical engineering in 1952. After
immigrating to the United States in 1962, Mr. DiBella worked in New Jersey for a
major tool manufacturer. From 1988 to 1993, he was the President of E.T.P., Inc,
a machining business, where he was responsible for day-to-day operations of the
company. In 1993, he relocated to Florida and founded FPA, our wholly owned
subsidiary. Since our inception he has worked in the day-to-day operations of
FPA. He has been our president and chairman since June 1996 and president and
chairman of our subsidiary, FPA, since its organization in February 1993.

John A. DiBella has served as an employee of our Company since January
2002. In August 2006 the Company expanded its board of directors to two members.
John DiBella was appointed by the board to fill the vacancy created by the
additional board seat. From 2000 through January 2002 Mr. DiBella provided
consulting services to our Company. Mr. DiBella currently serves as the
Company's Vice President. Mr. DiBella co-founded and served as President of
PBCM, a financial management company located in New Jersey from 1997 to 1999.
While at PBCM, Mr. DiBella was involved in various consulting services regarding
the development of publicly traded companies, including establishing a
management team, negotiating partnerships, licensing agreements and
investigating merger and acquisition opportunities. Prior to co-founding PBCM,
Mr. DiBella served as a Securities Analyst in the Equities and Derivatives
Department for Donaldson, Lufkin and Jenrette, a NYSE member firm. Mr. DiBella
holds a Bachelor of Science Degree in Finance and Economics from Rutgers
University. Mr. DiBella is the nephew of Alberto DiBella.

Board of Directors and Committees

During the year ended December 31, 2007, our board of directors held 4
meetings.

To date, we have not established an audit committee. Due to our
financial position, we have been unable to attract qualified independent

directors to serve on our board. Our board of directors, consisting of Alberto
DiBella and John A. DiBella, reviews the professional services provided by our
independent auditors, the independence of our auditors from our management, our
annual financial statements and our system of internal accounting controls. None
of the board members are considered a "financial expert."

Because the board of directors consists of only two members, the board
has not delegated any of its functions to committees. The entire board of
directors acts as our audit committee as permitted under Section 3(a)(58)(B) of
the Exchange Act. We do not have any independent directors who would qualify as
an audit committee financial expert. We believe that it has been, and may
continue to be, impractical to recruit such a director unless and until we are
significantly larger.

Advisory Committee

As disclosed under Description of Business, we have established an
Advisory Committee. The purpose of the Advisory Committee is to provide business
advice and recommendations to management of the Company. The Advisory Committee
consists of J. John Combs, Barry Gafner, Kevin Mulshine and Henry Schlesinger.
These individuals serve for a 2-year term.

On February 18, 2004, we issued options to purchase an aggregate of
30,000 shares of our common stock exercisable at $0.71 per share to three of the
individuals as consideration for joining our advisory committee. The options are
exercisable until February 18, 2009.

Code of Ethics

During the year ended December 31, 2003 we adopted a code of ethics.
The code of ethics was filed with the Company's Form 10-KSB annual report for
the year ended December 31, 2003. The code of ethics may be obtained by
contacting the Company's executive offices. The code applies to our officers and
directors. The code provides written standards that are designed to deter
wrongdoing and promote: (i) honest and ethical conduct; (ii) full, fair,
accurate, timely and understandable disclosure; (iii) compliance with applicable
laws and regulations; (iv) promote reporting of internal violations o the code;
and (v) accountability for the adherence to the code.

Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than ten percent of
our outstanding common stock to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock. These persons are required
by SEC regulation to furnish us with copies of these reports they file.

To our knowledge, based solely on a review of the copies of reports
furnished to us, Section 16(a) filing requirements applicable to our officers,
directors and greater than ten percent beneficial owners were not complied with
on a timely basis for the period which this report relates. Reports for the
following events during 2007 were not filed: issuance to Alberto DiBella's of
options to purchase 1,000,000 shares of common stock exercisable at $0.40 per
share; issuance to John A. DiBella of options to purchase 1,000,000 shares of
common stock exercisable at $0.40 per share.

Item 10. Executive compensation

The table below sets forth compensation for the past three years
awarded to, earned by or paid to our chief executive officer and each executive
officer whose compensation exceeded $100,000 for the year ended December 31,
2007.

Summary Compensation Table

------------------------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Stock Option Plan Compensation All Other
Name and Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
------------------------------------------------------------------------------------------------------------------------------

Alberto DiBella, 2007 $250,000(1) -- -- $30,000(7) -- -- -- $280,000
------------------------------------------------------------------------------------------------------------------------------
CEO and Principal 2006 $175,000(2) -- -- -- -- -- -- $175,000
------------------------------------------------------------------------------------------------------------------------------
Financial Officer 2005 $165,000(3) -- -- -- -- -- -- $165,000
------------------------------------------------------------------------------------------------------------------------------

John A. DiBella, 2007 $250,000(4) -- -- $30,000(7) -- -- -- $280,000
------------------------------------------------------------------------------------------------------------------------------
Executive Vice
President 2006 $175,000(5) -- -- -- -- -- -- $175,000
------------------------------------------------------------------------------------------------------------------------------
2005 $150,000(6) -- -- -- -- -- -- $165,000
------------------------------------------------------------------------------------------------------------------------------

(1) $130,000 was deferred in 2007.
(2) $74,785 was paid out during the year ended December 31, 2006 and $28,000
was paid out during the year ended December 31, 2007. Unpaid balance was
included in accrued expenses as of December 31, 2007.
(3) $43,000 was paid out during the year ended December 31, 2005. Remaining
balance was paid out during the year ended December 31, 2007 through the
issuance of options (see footnote 7).
(4) $181,000 was deferred in 2007.
(5) $129,000 was deferred in 2006. $50,000 was paid out during the year ended
December 31, 2007 through the issuance of options (see footnote 7). The
unpaid balance has been included in accrued expenses as of December 31,
2007.
(6) $145,000 was deferred as of December 31, 2005 and was paid during the year
ended December 31, 2007 through the issuance of options (see footnote 7).

(7) Options to purchase 1,000,000 shares of common stock exercisable at $0.40
pr share. The Company calculated the fair value of the options at the
grant date by using the Black-Scholes option-pricing model with the
following weighted average assumptions: no dividend yield for all the
years; expected volatility of 55%; risk-free interest rate of 5% and an
expected life of five years. This results in a fair value of approximately
$180,000, of which $150,000 was previously recorded as compensation
expense. The remaining $30,000 has been recorded as compensation expense
for the year ended December 31, 2007.

2007 Outstanding Equity Awards At Fiscal Year-End Table

---------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
---------------------------------------------------------------------------------------------------------------------

Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market
Awards: or
Equity Number Payout
Incentive of Value of
Plan Number Market Unearned Unearned
Number of Number of Awards: of Value of Shares, Shares,
Securities Securities Number of Shares Shares Units or Units or
Underlying Underlying Securities or Units or Units Other Other
Unexercised Unexercised Underlying of Stock of Stock rights rights
Options Options Unexercised Option That That That That
(#) (#) Unearned Exercise Option Have Not Have Not Have Not Have Not
------------------------------------------- Options Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable (#) ($) Date (#) ($) (#) ($)
---------------------------------------------------------------------------------------------------------------------

Alberto DiBella 110,000 -- -- $0.60 2009
---------------------------------------------------------------------------------------------------------------------
110,000 -- -- $1.00 2009 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
1,000,000 -- -- $0.40 2012 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
John DiBella 2,000,000 -- -- $0.15 2012 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
516,666 -- -- $0.60 2009 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
516,666 -- -- $1.00 2009 -- -- -- --
---------------------------------------------------------------------------------------------------------------------
1,000,000 -- -- $0.40 2012 -- -- -- --
---------------------------------------------------------------------------------------------------------------------

Employment agreements

Neither of our executive officers has a written employment agreement
with the Company. However the Company intends to enter into an employment
agreement with John A. DiBella during 2007. We currently pay our executive
officers approximately $250,000 per annum.

Director Compensation

Directors are not compensated by our Company.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Beneficial Ownership

The table below sets forth information with respect to the beneficial
ownership of our securities as of December 31, 2007 by: (1) each person known by
us to be the beneficial owner of five percent or more of our outstanding
securities, and (2) executive officers and directors, individually and as a
group.

Unless otherwise indicated, we believe that the beneficial owner has
sole voting and investment power over such shares.

Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned Ownership
---------------------- ------------------ ---------------

Alberto DiBella 4,266,666(1) 17.5%
3500 Bayview Drive
Fort Lauderdale, FL 33308

John DiBella 5,033,333(2) 18.5%
821 N.W. 57th Place
Fort Lauderdale, FL 33309

Robert Weinberg 2,000,000(3) 8.7%
11338 Clover Leaf Circle
Boca Raton, FL 33428

Peter Chiappetta 3,000,000(3) 13.0%
2299 NW 62nd Drive
Boca Raton, FL 33487

All officers and directors 9,299,999 32.8%
as a group (2 persons)

(1) Alberto DiBella's beneficial share ownership includes 10,000 shares of
common stock owned by his wife. Also includes 110,000 shares of common
stock underlying options exercisable at $.60 per share and 110,000 shares
of common stock underlying options exercisable at $1.00 per share. Also
includes 1,000,000 shares of common stock underlying options exercisable
at $0.40 per share.

(2) Includes 2,000,000 shares of common stock underlying options exercisable
at $.15 per share, 516,666 shares of common stock underlying options
exercisable at $.60 per share and 516,666 shares of common stock
underlying options exercisable at $1.00 per share. Also includes
1,000,000 shares of common stock underlying options exercisable at $0.40
per share. Excludes shares, which Mr. DiBella holds voting control, but
does not hold any power to dispose of such shares. See footnote 3.

(3) Voting rights of said shares were granted to John A. DiBella until such
time the respective percentage ownership is less than 3% of the Company.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below provides information pertaining to all compensation
plans under which equity securities of our company are authorized for issuance
as of the end of the most recent fiscal year.

Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation
outstanding options, outstanding options, plans (excluding securities
warrants and rights warrants and rights reflected in 1st column
------------------- ------------------- -----------------------

Equity compensation plans
approved by security holders 0 N/A 0

Equity compensation plans not
approved by security holders 6,335,666 $0.46 0

Total 6,335,666 0

Item 12. Certain Relationships and Related Transactions, and Director
Independence

The Company has no independent directors.

Item 13. Exhibits

(a) Exhibit No. Description of Exhibit
----------- ----------------------

2 Plan of Merger (1)
3(i) Articles of Incorporation (1)
3(ii) Bylaws (1)
4 Share Certificate (1)
14 Code of Ethics (2)
21 Subsidiaries (1)
31.1 Rule 13a-14(a)/15d-4(a) Certification of Principal Financial Officer
31.2 Rule 13a-14(a)/15d-4(a) Certification of Principal Financial Officer
32.1 Section 1350 Certification of Principal Executive Officer
32.2 Section 1350 Certification of Principal Financial Officer

(1) Previously filed on Form 10-SB Registration Statement,
as amended.

(2) Previously filed on Form 10-KSB annual report for the
year ended December 31, 2003.

Item 14. Principal Accountant Fees and Services

Year ended December 31, 2006

Audit Fees: The aggregate fees, including expenses, billed by our
current principal accountant in connection with the audit of our consolidated
financial statements for the fiscal year ended December 31, 2006 and for the
review of our financial information included in our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2006 was $17,000. The aggregate fees,
including expenses in connection with the review of our financial information
included in our quarterly reports on Form 10-QSB during the fiscal year ending
December 31, 2006 was $10,500.

Audit Related Fees: The aggregate fees, including expenses, billed by
our principal accountant for services reasonably related to the audit for the
year ended December 31, 2006 were $-0-.

Tax Fees: The aggregate fees, billed by our principal accountant for
services reasonably related to tax services during the year ended December 31,
2006 were $-0-.

All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to us by our principal accountant during year 2006 was
$-0-.

Year ended December 31, 2007

Audit Fees: The aggregate fees, including expenses, billed by our
current principal accountant in connection with the audit of our consolidated
financial statements for the fiscal year ended December 31, 2007 and for the
review of our financial information included in our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007 was $15,000. The aggregate fees,
including expenses, billed by our principal accountant in connection with the
review of our financial information included in our quarterly reports on Form
10-QSB during the fiscal year ending December 31, 2007 was $13,500.

Audit Related Fees: The aggregate fees, including expenses, billed by
our principal accountant for services reasonably related to the audit for the
year ended December 31, 2007 were $-0-.

Tax Fees: The aggregate fees, billed by our principal accountant for
services reasonably related to tax services during the year ended December 31,
2007 were $-0-.

All Other Fees: The aggregate fees, including expenses, billed for all
other services rendered to us by our principal accountant during year 2005 was
$-0-.

The Company's Board of Directors acts as an audit committee. The Board
of Directors has considered whether the provisions of the services covered above
under the captions is compatible with maintaining the auditor's independence and
approved such services prior to the services being provided.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, the registrant caused this report to be signed on its
behalf by the undersigned and duly authorized on October 1, 2008.

ENVIRO VORAXIAL TECHNOLOGY, INC.

By: /s/ Alberto DiBella
-------------------------------------
Alberto DiBella
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)

ENVIRO VORAXIAL TECHNOLOGY, INC.
AND SUBSIDIARY

FINANCIAL STATEMENTS

DECEMBER 31, 2007

Table of Contents

Report of Independent Registered Public Accounting Firm................................. F - 2

Balance Sheet ......................................................................... F - 3

Statements of Operations ............................................................... F - 4

Statements of Changes in Shareholders' Deficiency....................................... F - 5

Statements of Cash Flows ............................................................... F - 6

Notes to Financial Statements........................................................... F - 7 - 21

F-1

Report of Independent Registered Public Accounting Firm

To The Shareholders and Board of Directors of
Enviro Voraxial Technology, Inc.

We have audited the accompanying consolidated balance sheet of Enviro Voraxial
Technology, Inc and Subsidiary as of December 31, 2007 and the related
consolidated statements of operations, changes in shareholders' deficiency and
cash flows for years end December 31, 2007 and 2006. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enviro Voraxial Technology, Inc
and Subsidiary as of December 31, 2007 and 2006, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming
that Enviro Voraxial Technology, Inc and Subsidiary will continue as a going
concern. As discussed in Note B to the financial statements, Enviro Voraxial
Technology, Inc and Subsidiary has suffered recurring losses from operations,
which raises substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note B. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Jewett, Schwartz, Wolfe & Associates

Hollywood, Florida
March 27, 2008

F-2

ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET

December 31,
2007
------------

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 201,066
Inventory, net 295,267
-----------

Total current assets 496,333

FIXED ASSETS, NET 226,242

OTHER ASSETS 13,695
-----------

Total assets $ 736,270
===========

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 656,819
Current portion of note payable 30,836
-----------

Total current liabilities 687,655

LONG TERM NOTE PAYABLE 141,953
-----------

Total liabilities 829,608
-----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' DEFICIENCY:
Common stock, $.001 par value, 42,750,000 shares authorized
23,122,135 shares issued and oustanding 23,121
Additional paid-in capital 8,520,857
Accumulated deficit (8,637,316)
-----------

Total shareholders' deficiency (93,338)
-----------

Total liabilities and shareholders' deficiency $ 736,270
===========

The accompanying notes are an integral part of the consolidated financial
statements.

F-3

ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,
------------------------------
2007 2006
------------ -------------

Revenues, net $ 288,431 $ 310,376

Cost of goods sold 77,246 134,499
------------ ------------

Gross profit 211,185 175,877

Costs and expenses:
General and administrative 641,725 301,975
Consulting services paid in
stock in lieu of cash 884,176 120,000
Research and development 603,288 592,181
------------ ------------

Total costs and expenses 2,129,189 1,014,156
------------ ------------

Loss from operations (1,918,004) (838,279)
------------ ------------

Other expenses (incomes):
Interest expense (3,776) (4,748)
------------ ------------

Total other expense (3,776) (4,748)
------------ ------------

NET LOSS $ (1,921,780) $ (833,531)
============ ============

Weighted average number of common shares
outstanding-basic & diluted 18,282,808 18,257,808
============ ============

Basic and diluted loss per common share $ (0.11) $ (0.05)
============ ============

The accompanying notes are an integral part of the consolidated financial
statements.

F-4

ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY

Common Stock Additional
------------------------ Paid-in Deferred Accumulated
Shares Amount Capital Compensation Deficit Total
----------- --------- ----------- ------------ ------------ -----------

Balance - December 31, 2005 19,459,735 $ 19,459 $ 5,709,343 $ (53,437) $ (5,882,005) $ (206,640)

Issuance of common stock for investments 2,232,500 2,232 890,768 - - 893,000
Issuance of options for services - - - - - -
Issuance of restricted common stock at
$.40 per share 300,000 300 119,700 (13,333) - 106,667
Amortization of deferred compensation - - - 53,437 - 53,437
Net loss - - - - (833,531) (833,531)
----------- --------- ----------- ---------- ------------ -----------

Balance - December 31, 2006 21,992,235 $ 21,991 $ 6,719,811 $ (13,333) $ (6,715,536) $ 12,933

Issuance of options for accrued salary - - 360,000 - - 360,000
Issunace of options for services - - 86,676 - - 86,676
Issuance of common stock for
consulting services 100,000 100 39,900 (13,333) - 26,667
Extension of options issued - - 697,500 - - 697,500
Amortization of deferred compensation - - - 13,333 - 13,333
Issuance of common stock 780,000 780 467,220 - - 468,000
Amortization of deferred compensation - - - 13,333 - 13,333
Issuance of common stock 250,000 250 149,750 - - 150,000

Net loss - - - - (1,921,780) (1,921,780)
----------- --------- ----------- ---------- ------------ -----------

Balance - December 31, 2007 23,122,235 $ 23,121 $ 8,520,857 $ - $ (8,637,316) $ (93,338)
=========== ========= =========== ========== ============ ===========

The accompanying notes are an integral part of the consolidated financial
statements.
F-5

ENVIRO VORAXIAL TECHNOLOGY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,
--------------------------------
2007 2006
----------- ------------

Cash Flows From Operating Activities:
Net loss $(1,921,780) $ (833,531)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 11,880 583
Common stock issued for services 40,000 120,000
Amortization of deferred compensation - 53,437
Deferred compensation 13,333 (13,333)
Common stock options issued for accrued salary 60,000
Issuance of common stock consulting services 86,676 -
Extension of stock options issued 697,500 -
Changes in assets and liabilities:
Accounts receivable 61,341 (61,341)
Inventory (97,121) (72,112)
Accounts payable and accrued expenses 305,117 226,999
----------- -----------

Net cash used in operating activities (743,054) (579,298)
----------- -----------

Cash Flows From Investing Activities:
Purchase of equipment (233,367) -
Purchase of other assets (3,695)
----------- -----------

Net cash provided by investing activities (237,062) -
----------- -----------

Cash Flows From Financing Activities:
Proceeds from issuance of notes payable, net 172,789 -
Proceeds from sales of common stock 618,000 893,000
----------- -----------

Net cash provided by financing activities 790,789 893,000
----------- -----------

Net increase (decrease) in cash and cash equivalents (189,327) 313,702

Cash and cash equivalents, beginning of period 390,393 76,691
----------- -----------

Cash and cash equivalents, end of period $ 201,066 $ 390,393
=========== ===========

Supplemental Disclosures

Cash paid during the year for interest $ - $ -
=========== ===========
Cash paid during the year for taxes $ - $ -
=========== ===========
Common stock options issued for conversion of accrued salary $ 360,000 $ -
=========== ===========
Common stock options issued for services $ 86,676 $ -
=========== ===========
Common stock issued for consulting services $ 40,000 $ 120,000
=========== ===========
Extension of common stock options $ 697,500 $ -
=========== ===========

The accompanying notes are an integral part of the consolidated financial
statements.
F-6

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

NOTE A - ORGANIZATION AND OPERATIONS

Organization
------------
Enviro Voraxial Technology, Inc. (the "Company") is a provider of environmental
and industrial separation technology. The Company has developed and patented the
Voraxial(R) Separator, which is a technology that efficiently separates solids
and liquids with distinct specific gravities. Potential commercial applications
and markets include oil exploration and production, oil refineries, mining,
manufacturing and municipal wastewater industry.

The Company currently operates within one segment, which is the manufacture and
sale of the Voraxial(R) Separator.

Florida Precision Aerospace, Inc. (FPA) is the wholly-owned subsidiary of the
Company and is used to manufacture, assemble and test the Voraxial Separator.

NOTE B - GOING CONCERN

The Company has experienced net losses, has negative cash flows from operating
activities, and has to raise capital to sustain operations. There is no
assurance that the Company's developmental and marketing efforts will be
successful, that the Company will ever have commercially accepted products, or
that the Company will achieve a level of revenue sufficient to provide cash
inflows to sustain operations. The Company will continue to require the infusion
of capital until operations become profitable. During 2008, the Company
anticipates seeking additional capital, increasing sales of the Voraxial(R)
Separator and continuing to restrict expenditures. As a result of the above, the
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the parent
company, Enviro Voraxial Technology, 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.

F-7

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007
Revenue Recognition
-------------------
The Company derives its revenue from the sale and short-term rental of the
Voraxial (R) Separator. The Company presents revenue in accordance with Staff
Accounting Bulletin (SAB) No. 104 "Revenue Recognition in Financial Statements".
Under SAB 104, revenue is realized when persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or determinable and
collectability is reasonably assured.

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 acceptance, revenue
is deferred until we have evidence of customer acceptance and all terms of the
agreement have been complied with. There were no agreements with such provisions
as of December 31, 2007.

The Company recognizes revenue from the short term rental of equipment, ratably
over the life of the agreement, which is usually three to six months.

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 December
31, 2007, approximate their fair value because of their relatively short-term
nature.

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
limits.

Inventory
---------

Inventory consists of components for the Voraxial(R) Separator and is priced at
lower of cost or market. Inventory may also include units being rented on a
short term basis and 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 user does not have a contractual obligation to
purchase the equipment. Upon completion of the agreement, the equipment is
returned back to the Company. The user is responsible for any damages incurred
to the equipment. For units that is used for demonstration purposes, it is
included as inventory as the Company continues to retain ownership and expects
that it can be sold at some point in the future.

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.
F-8

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Net Loss Per Share
------------------
Basic and diluted loss per share has been computed by dividing the net loss
available to common stockholders by the weighted average number of common shares
outstanding. The warrants and stock options have been excluded from the
calculation since they would be anti-dilutive.

Such equity instruments may have a dilutive effect in the future and include the
following potential common shares:

Warrants 5,589,367
Stock options 6,335,666
----------
11,925,033
==========
Income Taxes
------------
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.

Research and Development Expenses
---------------------------------
Research and development costs, which consist of 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. Amounts incurred for advertising were not material as
of December 31, 2007 or 2006.

Stock-Based Compensation
------------------------
The company adopted 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 income on a
straight-line basis over the requisite service period, which is generally the
vesting period. The company elected the modified prospective method as
prescribed in SFAS No. 123 (R) and therefore, prior periods were not restated.
Under the modified prospective method, this statement was applied to new awards
granted after the time of adoption, as well as to the unvested portion of
previously granted equity-based awards for which the requisite service has not
been rendered as of January 1, 2006.

F-9

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Prior to January 1, 2006, the Company accounted for stock-based employee
compensation under Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," and SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure,"
which was released in December 2002 as an amendment of SFAS No. 123. The Company
currently accounts for stock-based compensation under the fair value method
using the Black-Scholes option pricing model as indicated in Note G.

Accounting for the Impairment of Long-Lived Assets
--------------------------------------------------

The long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of assets exceeds the fair value of the assets. Assets to be disposed of
are reported at the lower of the carrying amount or fair value less costs to
sell. There were no impairments of long-lived assets in 2007.

Recent Accounting Pronouncements
--------------------------------

Accounting changes and error corrections
----------------------------------------

In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No.
154, "Accounting Changes and Error Corrections" (SFAS 154), which replaces
Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS
No. 3, "Reporting Accounting Changes in Interim Financial Statements - An
Amendment of APB Opinion No. 28." SFAS 154 provides guidance on the accounting
for and reporting of accounting changes and error corrections, and it
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The Company has adopted SFAS 154 in the first quarter of fiscal year 2006 and
does not expect it to have a material impact on its consolidated results of
operations and financial condition.

F-10

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Fair value measurements
-----------------------

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS
157). SFAS 157 provides guidance for using fair value to measure assets and
liabilities. SFAS 157 addresses the requests from investors for expanded
disclosure about the extent to which companies measure assets and liabilities at
fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2006 and has been adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect that its adoption of SFAS 157 will materially
impact its consolidated results of operations and financial condition.

Accounting for uncertainty in income taxes
------------------------------------------

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing the recognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The cumulative effects, if any, of applying
FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption. FIN 48 is effective for fiscal years
beginning after December 15, 2006, and the Company is required to adopt it in
the first quarter of fiscal year 2007. The Company does not expect that its
adoption of FIN 48 will have a material effect on its consolidated results of
operations and financial condition.

Taxes collected from customer and remitted to governmental authorities
----------------------------------------------------------------------

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 06-3
(EITF 06-3), "How Taxes Collected from Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement (That Is, Gross versus
Net Presentation)." EITF 06-3 applies to any tax assessed by a governmental
authority that is directly imposed on a revenue producing transaction between a
seller and a customer. EITF 06-3 allows companies to present taxes either gross
within revenue and expense or net. If taxes subject to this issue are
significant, a company is required to disclose its accounting policy for
presenting taxes and the amount of such taxes that are recognized on a gross
basis. The Company currently presents such taxes net. EITF 06-3 is required to
be adopted during the first quarter of fiscal year 2008. These taxes are
currently not material to the Company's consolidated financial statements.

F-11

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Accounting for rental costs incurred during a construction period
-----------------------------------------------------------------

In September 2006, the FASB issued FASB Staff Position No. FAS 13-1 (As
Amended), "Accounting for Rental Costs Incurred during a Construction Period"
(FAS 13-1). This position requires a company to recognize as rental expense the
rental costs associated with a ground or building operating lease during a
construction period, except for costs associated with projects accounted for
under SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects." FAS 13-1 is effective for reporting periods beginning after
December 15, 2005 and was adopted by the Company in the first quarter of fiscal
year 2007. The Company's adoption of FAS 13-1 will not materially affect its
consolidated results of operations and financial position.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006, and will be adopted by the Company in the first quarter of fiscal year
2007. The Company does not expect the adoption of SAB 108 to have a material
impact on its consolidated results of operations and financial condition

FSP FAS 123(R)-5
----------------

FSP FAS 123(R)-5 was issued on October 10, 2006. The FSP provides that
instruments that were originally issued as employee compensation and then
modified, and that modification is made to the terms of the instrument solely to
reflect an equity restructuring that occurs when the holders are no longer
employees, then no change in the recognition or the measurement (due to a change
in classification) of those instruments will result if both of the following
conditions are met: (a). There is no increase in fair value of the award (or the
ratio of intrinsic value to the exercise price of the award is preserved, that
is, the holder is made whole), or the antidilution provision is not added to the
terms of the award in contemplation of an equity restructuring; and (b). All
holders of the same class of equity instruments (for example, stock options) are
treated in the same manner. The provisions in this FSP shall be applied in the
first reporting period beginning after the date the FSP is posted to the FASB
website. The Company does not expect the adoption of FSP FAS 123(R)-5 to have a
material impact on its consolidated results of operations and financial
condition

F-12

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Business Combinations
---------------------

In December, 2007, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007),
"Business Combinations" (hereinafter "SFAS No. 141 (revised 2007)"). This
statement establishes principles and requirements for how an acquirer a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the
acquiree, b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and c) determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. The scope of SFAS No. 141
(revised 2007) is broader than the scope of SFAS No. 141, which it replaces. The
effective date of SFAS No. 141 (revised 2007) is for all acquisitions in which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The adoption of this statement
has no immediate material effect on the Company's consolidated financial
condition or results of operations.

Noncontrolling Interests in Consolidated Financial Statements - an amendment of
-------------------------------------------------------------------------------
ARB 51
------

In December, 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51" (hereinafter
"SFAS No. 160"). This statement establishes accounting and reporting standards
that require a) the ownership interests in subsidiaries held by parties other
than the parent be clearly identified, labeled and presented in the consolidated
statement of financial position with equity, but separate from the parent's
equity, b) the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, c) changes in a parent's ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, d) when a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value and e) entities provide
sufficient disclosures that clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. The
effective date of this standard is for fiscal years and interim periods
beginning on or after December 15, 2008. The adoption of this statement had no
immediate material effect on the Company's consolidated financial condition or
results of operations.

NOTE D - CONCENTRATION OF CREDIT RISK

One customer accounted for approximately 63% of revenue for the years end
December 31, 2007. There were no outstanding receivables from this customer as
of December 31, 2007.

F-13

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

NOTE E - FIXED ASSETS

Fixed assets as of December 31, 2007 consists of:
2007
-----------------
Machinery and equipment $ 500,666
Furniture and fixtures 14,498
-----------------
Total 515,164
Less: accumulated depreciation (288,922)
-----------------
Fixed Assets, net $ 226,242
=================

Depreciation expense for the years ended December 31, 2007 and 2006 amounted to
$11,880 and $583 respectively.

NOTE F - NOTES PAYABLE

Notes payable to finance companies, due in monthly
installments of $3,695, including principal and
interest at prime plus .25% collateralized by
certain equipment $ 172,789

Less current portion (30,836)
-----------------
Long term debt $ 141,953
=================

The Company has recorded interest expense of $3,776 for the year ended December
31, 2007.

Payments of long term debt over the next five years are due as follows:

Year Ending
2008 $ 33,561
2009 36,528
2010 39,757
2011 32,107
----------------
Thereafter $ 141,953
================

NOTE G - RELATED PARTY TRANSACTIONS

For the year ended December 31, 2007, the Company incurred consulting expenses
from the chief executive officer and majority stockholder of the Company of
$250,000. Of these amounts, $120,000 has been paid out for the year ended
December 31, 2007. The unpaid balance has been included in accrued expenses.

F-14

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

NOTE H - CAPITAL TRANSACTIONS

Common stock
------------

In January 2006, the Company entered into a six month consulting agreement and
agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000.

In August 2006, the Company entered into a three month consulting agreement and
agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000.

In November 2006, the Company entered into a three month consulting agreement
and agreed to issue 100,000 shares for services performed by a consultant, which
were valued at $40,000.

During fiscal year 2006, the Company received gross proceeds of $893,000 from 19
accredited investors, including five investment funds to purchase an aggregate
of 2,232,500 shares of the Company's restricted common stock at $0.40 per share.
The shares contain legends restricting their transferability absent registration
or applicable exemption.

In February 2007, the company entered into a three month consulting agreement
and agreed to issue 100,000 shares of common stock for services preformed by a
consultant which were valued at $40,000.

During the year ended December 31, 2007 the Company sold 780,000 shares of
common stock for $.60 per share in a private placement offering. Total proceeds
from the sale were $468,000.

During the year ended December 31, 2007 the Company sold 250,000 shares of
common stock for $.60 per share in a private placement offering. Total proceeds
from the sale were $150,000.

Warrants
--------

In January 2007, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 243,200 shares of common stock
issued in 2000 for a period of one year. The warrants now expire in February
2008. The purchase price of these warrants ranges from $6.00 - $9.00 per share.
The Company calculated the fair value of the extended warrants by using the
Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield for all the years; expected volatility of 55%;
risk-free interest rate of 5% and an expected life of five years. No increase in
fair value was noted and, therefore, no adjustment has been made to the
financial statements as of December 31, 2007.

F-15

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

In January 2007, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 200,000 shares of common stock
issued in 2001 for a period of one year. The warrants now expire in April 2008.
The purchase price of the stock under these warrants ranges from $3.00-$4.00 per
share. The Company calculated the fair value of the extended warrants by using
the Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield for all the years; expected volatility of 55%;
risk-free interest rate of 5% and an expected life of five years. No increase in
fair value was noted and, therefore, no adjustment has been made to the
financial statements as of December 31, 2007.

In October 2007, the Company extended the exercisable life of certain warrants
issued to investors to purchase an aggregate of 1,033,333 shares of common stock
issued in 2002 for a period of one year. The warrants now expire in October
2008. The purchase price of these warrants ranges from $1.00 - $1.25 per share.
The Company calculated the fair value of the extended warrants by using the
Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield for all the years; expected volatility of 55%;
risk-free interest rate of 5% and an expected life of one years. No increase in
fair value was noted and, therefore, no adjustment has been made to the
financial statements as of December 31, 2007.

In January 2008, the Company issued 50,000 warrants to an individual for
consulting services. The warrants were valued at $21,000 on the date of issuance
and expire in 2007. During 2008, the warrants were extended for a one year
period. The Company calculated the fair value of the extended warrants by using
the Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield for all the years; expected volatility of 55%;
risk-free interest rate of 5% and an expected life of one year. No increase in
fair value was noted and, therefore, no adjustment has been made to the
financial statements as of December 31, 2007.

Information with respect to warrants outstanding and exercisable at December 31,
2007 is as follows:

Number Range of Exercise Number
Outstanding Price Exercisable
-------------------------------------------------------------------------------
Balance, December 31, 2006 5,589,367 $0.75 - $9.00 5,389,367
Issued - -

-------------------------------------------------------------------------------
Balance, December 31, 2007 5,589,367 $0.75-$9.00 5,389,367
-------------------------------------------------------------------------------

Options extended
----------------

In January 2007, the Company extended the exercisable life of certain options
F-16

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

issued to an employee and consultant to purchase an aggregate of 2,000,000
shares of common stock issued in 2002 for a period of five years. The options
continue to be exercisable at $0.15 per share, fully vested and now expire on
January 31, 2012. The Company calculated the fair value of the options at the
extended grant date by using the Black-Scholes option-pricing model with the
following weighted average assumptions: no dividend yield for all the years;
expected volatility of 55%; risk-free interest rate of 5% and an expected life
of five years. This result in fair value of approximately $687,000, which has
been recorded as compensation expense for the year ended December 31, 2007.

In January 2007, the Company extended the exercisable life of certain options
issued to an employee and consultant to purchase an aggregate of 200,000 shares
of common stock issued in 2002 for a period of five years. The options continue
to be exercisable at $0.77 per share, fully vested and now expire on January 31,
2012. The Company calculated the fair value of the options at the extended grant
date by using the Black-Scholes option-pricing model with the following weighted
average assumptions: no dividend yield for all the years; expected volatility of
55%; risk-free interest rate of 5% and an expected life of five years. No fair
value was associated with these options as a result and no adjustment has been
made to the financial statements as of December 31, 2007.

In January 2007, the Company extended the exercisable life of certain options
issued an employee to purchase an aggregate of 45,000 shares of common stock
issued in 2001 for a period of five years. The options now expire in February
2011. These options are fully vested and continue to be exercisable at $0.30 per
share. The Company calculated the fair value of the options at the extended
grant date by using the Black-Scholes option-pricing model with the following
weighted average assumptions: no dividend yield for all the years; expected
volatility of 55%; risk-free interest rate of 5% and an expected life of five
years. This resulted in a fair value of approximately $10,500, which has been
recorded as compensation expense for the year ended December 31, 2007.

Options granted
---------------

In January 2007, the Company granted 2,000,000 stock options to officers to
reduce the amount of accrued salaries and consulting fees due to them by
$300,000. The options are exercisable at $0.40 per share. These options are
fully vested and expire on January 31, 2012. The Company calculated the fair
value of the options at the grant date by using the Black-Scholes option-pricing
model with the following weighted average assumptions: no dividend yield for all
the years; expected volatility of 55%; risk-free interest rate of 5% and an
expected life of five years. This results in a fair value of approximately
$360,000, of which $300,000 was previously recorded as compensation expense. The
remaining $60,000 has been recorded as compensation expense for the year ended
December 31, 2007.

In January 2007, the Company granted 606,000 stock options to employees or
outside consultants, exercisable at $0.40 per share. These options vest equally
over the life of the options, which range from 1 to 5 years. The Company
calculated the fair value of the options at the grant date by using the
Black-Scholes option-pricing model with the following weighted average
assumptions: no dividend yield for all the years; expected volatility of 55%;
risk-free interest rate of 5% and an expected life of 1 to 5 years, resulting in
a fair value of approximately $86,000.

F-17

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

In January 2007, the Company issued 375,000 stock options to a consultant,
exercisable at $0.80 -$1.00 per share. These options are fully vested and expire
on October 31, 2007. The Company calculated the fair value of the options at the
grant date by using the Black-Scholes option-pricing model with the following
weighted average assumptions: no dividend yield for all the years; expected
volatility of 55%; risk-free interest rate of 5% and an expected life of 10
months. Based on the above, the options were not considered to have a fair value
associated with them. These options have expired as of December 31, 2007.

Information with respect to employee stock options outstanding and employee
stock options exercisable at December 31, 2007 is as follows:

---------------------------------------------------------------------------------------------------------------
Weighted Average
Exercise Price
Options Vested Exercise Price Per Per Option
Outstanding Shares Common Share Outstanding
---------------------------------------------------------------------------------------------------------------

Balance, December 31, 2006 3,729,666 3,709,666 $0.15-$1.00 $0.52
---------------------------------------------------------------------------------------------------------------
Granted/vested during the year ended
December 31, 2007 2,981,000 2,981,000 $0.40 $0.40
---------------------------------------------------------------------------------------------------------------
Expired during 2007 (375,000) (375,000) ($.80-$1.00) ($.90)
---------------------------------------------------------------------------------------------------------------

Balance, December 31, 2007 6,335,666 5,830,866 $0.15-$1.00 $0.46
---------------------------------------------------------------------------------------------------------------

The following table summarizes information about the stock options outstanding
at December 31, 2007:

------------------------------------------------------------------------------------------------------------------
Weighted
Number Average
Outstanding at Remaining Weighted
Exercise December 31, Contractual Average Number Exercisable Weighted Average
Price 2007 Life Exercise Price at December 31, 2007 Exercise Price
------------------------------------------------------------------------------------------------------------------

0.30 45,000 3.25 0.30 45,000 0.30
------------------------------------------------------------------------------------------------------------
0.77 200,000 4.25 0.77 200,000 0.77
------------------------------------------------------------------------------------------------------------
0.15 2,000,000 4.25 0.15 2,000,000 0.15
------------------------------------------------------------------------------------------------------------
1.00 10,000 .08 1.00 10,000 1.00
------------------------------------------------------------------------------------------------------------
0.60 697,333 1.25 0.60 697,333 0.60
------------------------------------------------------------------------------------------------------------
1.00 697,333 1.25 1.00 697,333 1.00
------------------------------------------------------------------------------------------------------------
1.00 50,000 3.00 1.00 50,000 1.00
------------------------------------------------------------------------------------------------------------
0.71 30,000 .25 0.71 30,000 0.71
0.40 2,606,000 4.25 0.40 2,981,000 0.40

--------- ---------
6,335,666 6,710,666
--------- ---------

------------------------------------------------------------------------------------------------------------

F-18

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

NOTE I - INCOME TAXES

The provision (benefit) for income taxes from continued operations for the years
ended December 31, 2007 and 2006 consist of the following:

December 31,
-----------------------------
2007 2006
-------------- -------------
Current:
Federal $ - $ -
State $ - -
-------------- -------------
- -
Deferred:
Federal $ (653,500) $ (283,560)
State (115,300) (50,040)
-------------- -------------
(768,800) (333,600)
Benefit from the operating
loss carryforward 768,800 333,600
-------------- -------------
Benefit for income taxes, net $ - $ -
============== =============

The difference between income tax expense computed by applying the federal
statutory corporate tax rate and actual income tax expense is as follows:

December 31,
--------------------------
2007 2006
----------- ----------
Statutory federal income tax rate 34.0% 34.0%
Decrease in valuation allowance (40.0)% (40.0)%
State income taxes 6.0% 6.0%
----------- ----------
Effective tax rate (0)% (0)%
=========== ==========

Deferred income taxes result from temporary differences in the recognition of
income and expenses for the financial reporting purposes and for tax purposes.
The net deferred tax assets and liabilities are comprised of the following:

2007
---------------
Deferred income tax asset:
Net operating loss carry-forwards $ 3,454,800
Valuation allowance (3,454,800)
---------------
Deferred income tax asset $ -
===============

F-19

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

The tax effect of these temporary differences representing deferred tax asset
and liabilities result principally from the following:

2007
-------------------
Deferred tax assets
Current $ -
Non-current 3,454,800
-------------------
Net deferred income tax asset $ 3,454,800
===================

The Company has a net operating loss carryforward of approximately $8,637,000
available to offset future taxable income through 2019.

The Company has made a 100% valuation allowance of the deferred income tax asset
at December 31, 2006, as it is not expected that the deferred tax assets will be
realized. The net increase in valuation allowance during the year ended December
31, 2006 was $336,000.

NOTE J - COMMITMENTS AND CONTINGENCIES

Employment Agreements
---------------------

The Company entered into an employment agreement dated January 17, 2002 with an
individual to serve as the Vice President and Director of Business Development.
The agreement provides for a contingent bonus to be paid to this employee in the
amount of $300,000 to improve the financial condition of the Company. Such bonus
is payable upon the Company obtaining a total of $3 million of financing or when
revenue exceeds $1 million. In 2002, this individual was granted stock options
to purchase 2 million shares of common stock with an exercise price of $0.15 per
share. The market price at the date of grant was $0.12 per share.

The Company hired two employees under employment agreements that commenced in
January 2003. The combined salaries for 2003 are $215,000 subject to annual
increases beginning in 2004. Both agreements have a term of 5 years. One
agreement provided for the granting of up to 300,000 cashless exercise warrants
to purchase common stock at $1 per share which may result in a significant
charge to operations in the future. This agreement was terminated by mutual
agreement on December 31, 2004, and only 150,000 warrants were vested and are
exercisable. The other agreement provides for the granting of 10,000 stock
options to purchase common stock at $1 per share exercisable ratably over two
years from the date of grant.

F-20

ENVIRO VORAXIAL TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2007

Operating Lease
---------------
The Company leases office and warehouse space in Ft. Lauderdale, Florida under a
business lease agreement for a three-year term ending in August 2007. The
Company has extended the lease for an additional twelve months, with the option
to cancel the lease with sufficient notice. The Company expects to pay
approximately $49,000 toward this lease in 2008 prior to its expiration in
August 2008.

Rent expense charged to operations amounted to $71,752 in 2007.

F-21