☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 46-0774222 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.00001 per share |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
You should not place undue reliance on forward-looking statements. The cautionary statementsspecial note set forth in this Quarterly Report, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:
• | ability to generate demand for our zero-emission commercial fleet vehicles in order to generate revenue; |
dependence upon external sources for the financing of our operations.operations;
ability to effectively execute our business plan.plan;
• | ability and our suppliers’ ability to scale our zero-emission products assembling processes effectively and quickly from low volume production to high volume production; |
ability to manage our expansion, growth and operating expenses and reduce and adequately control the costs and expenses associated with operating our business.business;
ability and our manufacturing partners’ ability to navigate the current disruption to the global supply chain and procure the raw materials, parts, and components necessary to produce our vehicles on terms acceptable to us and our customers;
ability to obtain, retain and grow our customers.customers;
ability to enter into, sustain and renew strategic relationships on favorable terms.terms;
ability to achieve and sustain profitability.profitability;
ability to evaluate and measure our current business and future prospects.prospects;
ability to compete and succeed in a highly competitive and evolving industry.industry;
ability to respond and adapt to changes in electric vehicle technology.technology; and
ability to protect our intellectual property and to develop, maintain and enhance a strong brand.
You should read this Quarterly Report and the documents that we reference elsewhere in this Quarterly Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in greater detail, particularly in Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and in Part II, Item 1A (Risk Factors) of this Quarterly Report. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.
Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “Envirotech,” the “Company,” “we,” “our,” and “us” refer to Envirotech Vehicles, Inc. and our consolidated subsidiaries, unless the context indicates otherwise.
1
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 10,580,468 | $ | 136,222 | ||||
Restricted cash | 60,018 | 1,793,910 | ||||||
Marketable Securities | 7,007,000 | — | ||||||
Accounts receivable | 746,640 | 9,000 | ||||||
Inventory, net | 1,019,453 | — | ||||||
Prepaid expenses | 4,903,071 | — | ||||||
Total current assets | 24,316,650 | 1,939,132 | ||||||
Property and equipment, net | 299,361 | 227,561 | ||||||
Goodwill | 49,546,910 | — | ||||||
Other non-current assets | 304,828 | 242,025 | ||||||
Total assets | $ | 74,467,749 | $ | 2,408,718 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 166,282 | $ | 345,383 | ||||
Accrued liabilities | 864,545 | 2,382,660 | ||||||
Notes payable, net | 31,788 | — | ||||||
Total current liabilities | 1,062,615 | 2,728,043 | ||||||
Long-term liabilities | ||||||||
Other non-current liabilities | 35,239 | — | ||||||
Notes payable, net | 21,192 | 152,835 | ||||||
Total liabilities | 1,119,046 | 2,880,878 | ||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock, $0.00001 par value, 5,000,000 authorizedand NaN issued and outstanding as of September 30, 2021 and December 31, 2020 | 0— | 0— | ||||||
Common stock, $0.00001 par value, 350,000,000 authorized 294,317,605and issued and outstanding as of September 30, 2021 and 1 issued and outs December 31, 2020tanding as of | 2,943 | 100 | ||||||
Additional paid-in capital | 76,220,084 | — | ||||||
Accumulated deficit | (2,874,324 | ) | (472,260 | ) | ||||
Total stockholders’ equity (deficit) | 73,348,703 | (472,160 | ) | |||||
Total liabilities and stockholders’ equity (deficit) | $ | 74,467,749 | $ | 2,408,718 | ||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, 2021 | September 30, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
Sales | $ | 709,092 | $ | — | $ | 1,368,151 | $ | 88,735 | ||||||||
Cost of sales | 469,611 | — | 930,977 | 73,560 | ||||||||||||
Gross profit | 239,481 | 0 | 437,174 | 15,175 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 1,344,840 | 54,146 | 2,766,989 | 222,935 | ||||||||||||
Consulting | 36,734 | 16,800 | 142,092 | 54,101 | ||||||||||||
Total operating expenses, net | 1,381,574 | 70,946 | 2,909,081 | 277,036 | ||||||||||||
Loss from operations | (1,142,093 | ) | (70,946 | ) | (2,471,907 | ) | (261,861 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest income , net | 8,116 | — | 2,357 | — | ||||||||||||
Other income | 285,902 | — | 288,186 | 7,000 | ||||||||||||
Total other income | 294,018 | — | 290,543 | 7,000 | ||||||||||||
Loss before income taxes | (848,075 | ) | (70,946 | ) | (2,181,364 | ) | (254,861 | ) | ||||||||
Income tax expense | (2,400 | ) | — | (220,700 | ) | — | ||||||||||
Net loss | $ | (850,475 | ) | $ | (70,946 | ) | $ | (2,402,064 | ) | $ | (254,861 | ) | ||||
Net loss per share to common stockholders: | ||||||||||||||||
Basic and diluted | $ | (0.00 | ) | $ | (70,946 | ) | $ | (0.01 | ) | $ | (254,861 | ) | ||||
Weighted shares used in the computation of net loss per share: | ||||||||||||||||
Basic and diluted | 294,231,860 | 1 | 206,924,336 | 1 | ||||||||||||
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,623,099 | $ | 4,846,490 | ||||
Restricted cash | 60,131 | 60,035 | ||||||
Marketable securities | 1,976,308 | 8,002,700 | ||||||
Accounts receivable | 7,804,369 | 1,428,030 | ||||||
Inventory, net | 3,603,852 | 3,850,541 | ||||||
Inventory deposits | 4,812,439 | 4,503,079 | ||||||
Prepaid expenses | 709,621 | 332,514 | ||||||
Total current assets | 21,589,819 | 23,023,389 | ||||||
Property and equipment, net | 305,617 | 272,113 | ||||||
Goodwill | 51,775,667 | 51,775,667 | ||||||
Other non-current assets | 78,374 | 236,639 | ||||||
Total assets | $ | 73,749,477 | $ | 75,307,808 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 161,545 | $ | 238,464 | ||||
Accrued liabilities | 1,154,026 | 1,280,020 | ||||||
Notes payable, net | 27,444 | 31,788 | ||||||
Total current liabilities | 1,343,015 | 1,550,272 | ||||||
Long-term liabilities | ||||||||
Other non-current liabilities | — | 2,427 | ||||||
Notes payable, net | 18,234 | 13,245 | ||||||
Total liabilities | 1,361,249 | 1,565,944 | ||||||
Stockholders’ equity (deficit): | ||||||||
Preferred stock, 5,000,000 authorized, $0.00001 par value per share, none issued and outstanding as of | ||||||||
September 30, 2022, and December 31, 2021 | — | — | ||||||
Common stock, 350,000,000 authorized, $0.00001 par value per share, 15,021,088 and 14,912,189 | ||||||||
Issued and outstanding as of September 30, 2022, and December 31, 2021, respectively | 150 | 149 | ||||||
Additional paid-in capital | 83,923,350 | 81,866,075 | ||||||
Accumulated deficit | (11,535,272 | ) | (8,124,360 | ) | ||||
Total stockholders’ equity | 72,388,228 | 73,741,864 | ||||||
Total liabilities and stockholders’ equity | $ | 73,749,477 | $ | 73,307,808 | ||||
Common Stock | Additional Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
Balance, December 31, 2020 | 1 | $ | 100 | $ | — | $ | (472,260 | ) | $ | (472,160 | ) | |||||||||
Common stock issued for cash | 142,558,000 | 1,325 | 6,413,785 | — | 6,415,110 | |||||||||||||||
Common stock issued in merger | 112,675,557 | 1,127 | 53,508,495 | — | 53,509,622 | |||||||||||||||
Offering costs netted against proceeds | — | — | (156,443 | ) | — | (156,443 | ) | |||||||||||||
Net loss | — | — | — | (658,510 | ) | (658,510 | ) | |||||||||||||
Balance, March 31, 2021 | 255,233,558 | $ | 2,552 | $ | 59,765,837 | $ | (1,130,770 | ) | $ | 58,637,619 | ||||||||||
Common stock issued for cash | 38,725,475 | 388 | 16,321,661 | — | 16,322,049 | |||||||||||||||
Offering costs netted against proceeds | — | — | (31,572 | ) | — | (31,572 | ) | |||||||||||||
Net loss | — | — | — | (893,079 | ) | (893,079 | ) | |||||||||||||
Balance, June 30, 2021 | 293,959,034 | $ | 2,940 | $ | 76,055,926 | $ | (2,023,849 | ) | $ | 74,035,017 | ||||||||||
Common stock issued for cash | 358,571 | 3 | 43,026 | — | 43,029 | |||||||||||||||
Stock based compensation | — | — | 121,132 | — | 121,132 | |||||||||||||||
Net loss | — | — | — | (850,475 | ) | (850,475 | ) | |||||||||||||
Balance, September 30, 2021 | 294,317,605 | $ | 2,943 | $ | 76,220,084 | $ | (2,874,324 | ) | $ | 73,348,703 | ||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Sales | $ | 3,882,670 | $ | 709,092 | $ | 7,078,870 | $ | 1,368,151 | ||||||||
Cost of sales | 2,046,491 | 469,611 | 3,998,533 | 930,977 | ||||||||||||
Gross profit | 1,836,179 | 239,481 | 3,080,337 | 437,174 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 1,619,210 | 1,344,840 | 6,142,194 | 2,766,989 | ||||||||||||
Consulting | 94,187 | 36,734 | 264,505 | 142,092 | ||||||||||||
Research and development | 25,000 | — | 112,412 | — | ||||||||||||
Total operating expenses, net | 1,738,397 | 1,381,574 | 6,519,111 | 2,909,081 | ||||||||||||
Income (loss) from operations | 97,782 | (1,142,093 | ) | (3,438,774 | ) | (2,471,907 | ) | |||||||||
Other income (expense): | ||||||||||||||||
Interest income, net | 30,200 | 8,116 | 37,956 | 2,357 | ||||||||||||
Other income | (1,233 | ) | 285,902 | (10,094 | ) | 288,186 | ||||||||||
Total other income | 28,967 | 294,018 | 27,862 | 290,543 | ||||||||||||
Income (loss) before income taxes | 126,749 | (848,075 | ) | (3,410,912 | ) | (2,181,364 | ) | |||||||||
Income tax expense | — | (2,400 | ) | — | (220,700 | ) | ||||||||||
Net income (loss) | $ | 126,749 | $ | (850,475 | ) | $ | (3,410,912 | ) | $ | (2,402,064 | ) | |||||
Net income (loss) per share to common stockholders: | ||||||||||||||||
Basic and diluted | $ | 0.01 | $ | (0.06 | ) | $ | (0.23 | ) | $ | (0.23 | ) | |||||
Weighted shares used in the computation of net income (loss) per share: | ||||||||||||||||
Basic and diluted | 15,013,236 | 14,715,694 | 14,981,836 | 10,349,101 | ||||||||||||
Common Stock | Additional Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
Balance, December 31, 2021 | 14,912,189 | $ | 149 | $ | 81,866,075 | $ | (8,124,360 | ) | $ | 73,741,864 | ||||||||||
Common stock issued for cash | 50,000 | 1 | 119,999 | — | 120,000 | |||||||||||||||
Common stock issued for lawsuit settlement | 38,484 | — | 197,431 | — | 197,431 | |||||||||||||||
Stock based compensation | — | — | 1,614,845 | — | 1,614,845 | |||||||||||||||
Net loss | — | — | — | (2,527,397 | ) | (2,527,397 | ) | |||||||||||||
Balance, March 31, 2022 | 15,000,673 | $ | 150 | $ | 83,798,350 | $ | (10,651,757 | ) | $ | 73,146,743 | ||||||||||
Net loss | — | — | — | (1,010,264 | ) | (1,010,264 | ) | |||||||||||||
Balance, June 30, 2022 | 15,000,673 | $ | 150 | $ | 83,798,350 | $ | (11,662,021 | ) | $ | 72,136,479 | ||||||||||
Common stock issued for lawsuit settlement | 20,415 | — | 125,000 | — | 125,000 | |||||||||||||||
Net loss | — | — | — | 126,749 | 126,749 | |||||||||||||||
Balance, September 30, 2022 | 15,021,088 | $ | 150 | $ | 83,923,350 | $ | (11,535,272 | ) | $ | 72,388,228 |
Common Stock | Additional Paid-In | Accumulated | Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity (Deficit) | ||||||||||||||||
Balance, December 31, 2020 | 1 | $ | — | $ | 100 | $ | (472,260 | ) | $ | (472,160 | ) | |||||||||
Common stock issued for cash | 7,129,887 | 72 | 6,415,139 | — | 6,415,210 | |||||||||||||||
Common stock retained in merger | 5,635,348 | 56 | 53,509,466 | — | 53,509,522 | |||||||||||||||
Offering costs netted against proceeds common stock | — | — | (156,443 | ) | — | (156,443 | ) | |||||||||||||
Net loss | — | — | — | (658,510 | ) | (658,510 | ) | |||||||||||||
Balance, March 31, 2021 | 12,765236 | $ | 128 | $ | 59,768,262 | $ | (1,130,770 | ) | $ | 58,637,619 | ||||||||||
Common stock issued for cash | 1,936,813 | 19 | 16,322,030 | — | 16,322,049 | |||||||||||||||
Offering costs netted against proceeds | — | — | (31,572 | ) | — | (31,572 | ) | |||||||||||||
Net loss | — | — | — | (893,079 | ) | (893,079 | ) | |||||||||||||
Balance, June 30, 2021 | 14,702,049 | $ | 147 | $ | 76,058,720 | $ | (2,023,849 | ) | $ | 74,035,018 | ||||||||||
Common stock issued for cash | 17,934 | — | 43,028 | — | 43,028 | |||||||||||||||
Stock based compensation | — | — | 121,132 | — | 121,132 | |||||||||||||||
Net loss | — | — | — | (850,475 | ) | (850,475 | ) | |||||||||||||
Balance, September 30, 2021 | 14,719,983 | $ | 147 | $ | 76,222,880 | $ | (2,874,324 | ) | $ | 73,348,703 | ||||||||||
Nine Months Ended | Nine Months Ended September 30, | |||||||||||||||
September 30, 2021 | September 30, 2020 | 2022 | 2021 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (2,402,064 | ) | $ | (254,861 | ) | $ | (3,410,912 | ) | $ | (2,402,064 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 43,031 | — | 56,700 | 43,031 | ||||||||||||
Unrealized gain on marketable securities | (20,359 | ) | — | |||||||||||||
Unrealized loss on marketable securities | (6,033 | ) | (20,359 | ) | ||||||||||||
Stock based compensation expense | 121,132 | — | 1,614,845 | 121,132 | ||||||||||||
Provision for bad debt | 303,879 | — | 50,000 | 303,879 | ||||||||||||
Gain on debt forgiveness | (290,519 | ) | — | — | (290,519 | ) | ||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Accounts receivable | (734,267 | ) | (9,000 | ) | (6,426,339 | ) | (734,267 | ) | ||||||||
Inventory | 246,689 | (792,800 | ) | |||||||||||||
Inventory deposits | (309,360 | ) | (4,514,665 | ) | ||||||||||||
Prepaid expenses | (3,877,182 | ) | — | (377,107 | ) | 637,483 | ||||||||||
Inventory | (792,800 | ) | — | |||||||||||||
Other non-current assets | 158,265 | — | ||||||||||||||
Accounts payable | (307,488 | ) | (64,461 | ) | (76,919 | ) | (307,488 | ) | ||||||||
Accrued liabilities | (1,734,270 | ) | — | 192,093 | (1,734,270 | ) | ||||||||||
Other non-current liabilities | (226,421 | ) | — | 16,328 | (226,421 | ) | ||||||||||
Net cash used in operating activities | (9,917,328 | ) | (328,322 | ) | (8,271,750 | ) | (9,917,328 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of property and equipment, net | (27,958 | ) | (30,166 | ) | (90,204 | ) | (27,958 | ) | ||||||||
Investment in marketable securities | (12,000,000 | ) | — | (2,291,036 | ) | (12,000,000 | ) | |||||||||
Sale of marketable securities | 5,000,000 | — | 8,323,461 | 5,000,000 | ||||||||||||
Cash acquired in merger | 3,373,332 | — | — | 3,373,332 | ||||||||||||
Net cash used in investing activities | (3,654,626 | ) | (30,166 | ) | ||||||||||||
Net cash provided by (used in) investing activities | 5,942,221 | (3,654,626 | ) | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of common stock | 22,780,188 | — | 120,000 | 22,780,188 | ||||||||||||
Related-party investment | — | 49,990 | ||||||||||||||
Payments for offering costs | (188,015 | ) | — | |||||||||||||
Principal advances from (repayments on) long term debt (SBA) | (309,865 | ) | 150,000 | |||||||||||||
Payments for deferred offering costs | — | (188,015 | ) | |||||||||||||
Principal repayments on debt | (13,766 | ) | (309,865 | ) | ||||||||||||
Net cash provided by financing activities | 22,282,308 | 199,990 | 106,234 | 22,282,308 | ||||||||||||
Net change in cash, restricted cash, and cash equivalents | 8,710,354 | (158,498 | ) | |||||||||||||
Cash, restricted cash, and cash equivalents at the beginning of the period | 1,930,132 | 324,055 | ||||||||||||||
Net change in cash, restricted cash and cash equivalents | (2,223,295 | ) | 8,710,354 | |||||||||||||
Cash, restricted cash and cash equivalents at the beginning of the period | 4,906,525 | 1,930,132 | ||||||||||||||
Cash, restricted cash, and cash equivalents at the end of the period | $ | 10,640,486 | $ | 165,557 | ||||||||||||
Cash, restricted cash and cash equivalents at the end of the period | $ | 2,683,230 | $ | 10,640,486 | ||||||||||||
Supplemental cash flow disclosures: | ||||||||||||||||
Cash paid for interest expense | $ | 2,272 | $ | 4,944 | ||||||||||||
$ | 4,944 | $ | — | |||||||||||||
Cash paid for income taxes | $ | 2,400 | $ | — | $ | — | $ | 2,400 | ||||||||
Non-cash common stock lawsuit settlement | $ | 322,431 | $ | — | ||||||||||||
1. |
2. | Summary of Significant Accounting Policies |
Level 1: | Observable inputs such as quoted prices in active markets; |
Level 2: | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and |
Level 3: |
3. | Merger |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro forma combined results of operations | For the three months ended | For the nine months ended | ||||||||||||||
September 30 | September 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Sales | $ | 709,092 | $ | 0 | $ | 1,065,562 | $ | 585,821 | ||||||||
Net loss | $ | (850,475 | ) | $ | (70,946 | ) | $ | (5,045,988 | ) | $ | (3,585,539 | ) |
Pro forma combined results of operations | For the three months ended | For the nine months ended | ||||||||
September 30, 2021 | September 30, 2021 | |||||||||
Sales | $ | 709,092 | $ | 1,065,562 | ||||||
Net income (loss) | $ | (850,475 | ) | $ | (5,045,988 | ) |
4. |
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Furniture and fixtures | $ | 41,799 | $ | — | ||||
Leasehold improvements | 28,112 | 30,166 | ||||||
Machinery & equipment | 86,266 | 92,853 | ||||||
Vehicles | 252,724 | 128,999 | ||||||
Test/Demo vehicles | 15,784 | — | ||||||
Total property and equipment | $ | 424,685 | $ | 252,018 | ||||
Less accumulated depreciation | (125,324 | ) | (24,457 | ) | ||||
Net property and equipment | $ | 299,361 | $ | 227,561 | ||||
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
Furniture and fixtures | $ | 60,082 | $ | 41,799 | ||||
Leasehold improvements | 40,112 | 28,112 | ||||||
Machinery & equipment | 144,406 | 86,266 | ||||||
Vehicles | 252,725 | 252,724 | ||||||
Test/Demo vehicles | 15,784 | 15,784 | ||||||
Total property and equipment | 513,108 | 424,685 | ||||||
Less accumulated depreciation | (207,491 | ) | (152,572 | ) | ||||
Net property and equipment | $ | 305,617 | $ | 272,113 | ||||
5. | Debt |
6. | Stock Warrants |
Number of | Exercise | Remaining | Number of | Exercise | Remaining | |||||||||||||||||||
Shares | Price | Contractual Life (years) | Shares | Price | Contractual Life (years) | |||||||||||||||||||
Outstanding warrants expiring June 9, 2022 | 199,659 | $ | 6.00 | 0.71 | ||||||||||||||||||||
Outstanding warrants expiring June 9, 2022 | 350,000 | $ | 5.00 | 0.71 | ||||||||||||||||||||
Outstanding warrants expiring January 9, 2023 | 256,667 | $ | 3.75 | 1.28 | 12,833 | $ | 75.00 | 0.33 | ||||||||||||||||
Outstanding warrants expiring January 28, 2025 | 8,625,001 | $ | 0.50 | 4.25 | 431,250 | $ | 10.00 | 2.33 | ||||||||||||||||
Outstanding warrants expiring May 7, 2026 | 19,166,667 | $ | 1.00 | 4.60 | 958,334 | $ | 20.00 | 3.60 | ||||||||||||||||
Outstanding warrants on September 30, 2021 | 28,597,994 | $ | 0.96 | 4.39 | ||||||||||||||||||||
Outstanding warrants on September 30, 2022 | 1,402,417 | $ | 17.43 | 3.18 | ||||||||||||||||||||
7. |
Weighted | ||||||||||||
Average | ||||||||||||
Remaining | ||||||||||||
Number of Shares | Exercise Price | Contractual Life (years) | ||||||||||
Outstanding at March 31, 2021 | 12,992,857 | $ | 0.29 | 4.61 | ||||||||
Exercised | (750,713 | ) | $ | 0.12 | ||||||||
Cancelled / Forfeited at $0.12 Exercise Price | (67,144 | ) | $ | 0.12 | ||||||||
Cancelled / Forfeited at $0.45 Exercise Price | (210,000 | ) | $ | 0.45 | ||||||||
Cancelled / Forfeited at $1.31 Exercise Price | (195,000 | ) | $ | 1.31 | ||||||||
Outstanding Options at $0.10 Exercise Price | 5,000,000 | $ | 0.10 | 0.46 | ||||||||
Outstanding Options at $0.12 Exercise Price | 1,358,571 | $ | 0.12 | 0.46 | ||||||||
Outstanding Options at $0.45 Exercise Price | 5,770,000 | $ | 0.45 | 8.32 | ||||||||
Outstanding Options at $1.31 Exercise Price | 270,000 | $ | 1.31 | 6.30 | ||||||||
Outstanding Options at $ 0 .2753 Exercise Price | 440,000 | $ | 0.2753 | 9.84 | ||||||||
Outstanding at September 30, 2021 | 12,210,000 | $ | 0.28 | 4.49 |
Number of Shares | Exercise Price | Weighted Average Remaining Contractual Life (years) | ||||||||||
Outstanding at December 31, 2021 | 338,500 | $ | 5.80 | 6.98 | ||||||||
Options granted during 9 months ended September 30, 2022: | ||||||||||||
Options Granted at $2.00 Exercise Price | 250,000 | $ | 2.00 | |||||||||
Options Granted at $2.40 Exercise Price | 90,893 | $ | 2.40 | |||||||||
Options Granted at $3.62 Exercise Price | 2,762 | $ | 3.62 | |||||||||
Options Granted at $9.00 Exercise Price | 1,111 | $ | 9.00 | |||||||||
Exercised | (50,000 | ) | $ | 2.40 | ||||||||
Cancelled / Forfeited at $9.00 Exercise Price | (25,000 | ) | $ | 9.00 | ||||||||
Subtotal, as follows: | 608,266 | |||||||||||
Outstanding Options at $2.00 Exercise Price | 250,000 | $ | 2.00 | 9.30 | ||||||||
Outstanding Options at $2.40 Exercise Price | 90,893 | $ | 2.40 | 9.30 | ||||||||
Outstanding Options at $3.62 Exercise Price | 2,762 | $ | 3.62 | 4.34 | ||||||||
Outstanding Options at $9.00 Exercise Price | 257,861 | $ | 9.00 | 8.21 | ||||||||
Outstanding Options at $26.20 Exercise Price | 6,750 | $ | 26.20 | 5.55 | ||||||||
Outstanding at September 30, 2022 | 608,266 | $ | 5.30 | 8.77 | ||||||||
8. | Related Party Transactions |
9. | Commitments Other Agreements |
Payments due by period | Payments due by period | |||||||||||||||||||||||||||||||||||||||
Total | Less than one year | 1 - 3 years | 4 - 5 years | More than 5 years | Total | Less than one year | 1 - 3 years | 4 - 5 years | More than 5 years | |||||||||||||||||||||||||||||||
Operating lease obligations | $ | 124,055 | $ | 96,672 | $ | 27,383 | $ | — | $ | — | $ | 11,491 | $ | 10,881 | $ | 610 | $ | — | $ | — | ||||||||||||||||||||
Employment contract | 37,500 | 37,500 | — | — | — | |||||||||||||||||||||||||||||||||||
Employment contracts | 2,125,000 | 500,000 | 1,500,000 | 125,000 | — | |||||||||||||||||||||||||||||||||||
Total | $ | 161,555 | $ | 134,172 | $ | 27,383 | $ | — | $ | — | $ | 2,136,491 | $ | 510,881 | $ | 1,500,610 | $ | 125,000 | $ | — | ||||||||||||||||||||
10. | Contingencies |
11. |
Nine months ended September 30, | ||||||||
2021 | 2020 | |||||||
Lease expenses | ||||||||
Operating lease expenses | $ | 122,001 | $ | — | ||||
Short-term lease expenses | $ | 76,160 | $ | 116,683 | ||||
Total lease cost | $ | 198,161 | $ | 116,683 | ||||
Other information | ||||||||
Cash paid for the amounts included in the measurement of lease liabilities for operating leases: | ||||||||
Operating cash flows | $ | 163,707 | $ | — | ||||
Weighted-average remaining lease term (in years): | ||||||||
Operating leases | 1.28 | — | ||||||
Weighted-average discount rate: | ||||||||
Operating leases | 14 | % | — |
Nine Months Ended | ||||||||
September 30, | ||||||||
2022 | 2021 | |||||||
Lease expenses | ||||||||
Operating lease expenses | $ | 56,101 | $ | 122,001 | ||||
Short-term lease expenses | 124,645 | 76,160 | ||||||
Total lease cost | $ | 180,746 | $ | 198,161 | ||||
Other information | ||||||||
Cash paid for the amounts included in the measurement of lease liabilities for operating leases: | ||||||||
Operating cash flows | $ | 56,890 | $ | 163,707 | ||||
Weighted-average remaining lease term (in years): | ||||||||
Operating leases | 0.62 | 1.28 | ||||||
Weighted-average discount rate: | ||||||||
Operating leases | 14 | % | 14 | % |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and the results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form
Overview
We are a provider of purpose-built
As discussed in Item 1, Notes 2 and 3 to the unaudited consolidated financial statements contained in this Quarterly Report on Form
For the three months ended September 30, 2022 and 2021, we generated sales revenue of $3,882,670 and $709,092, respectively, and our net income for the three months ended September 30, 2022 was $126,749. Our net loss for the three months ended September 30, 2021 was $850,475. For the nine months ended September 30, 2022 and 2021, we generated sales revenue of $7,078,870 and $1,368,151, respectively, and our net losses were $3,410,912 and $2,402,064, respectively. The 2022 loss includes approximately $1.72 million of non-cash net expenses.
Factors Affecting Our Performance
We believe that the growth and future success of our business depend on various opportunities, challenges and other factors, including the following:
COVID-19
Availability of government subsidies, rebates and economic incentives.
New customers.
Dependence on external sources of financing of our operations. We have historically depended on external sources for capital to finance ouroperations. Accordingly, our future performance will depend in part upon our ability to achieve independence from external sources for the financing of our operations.
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Investment in growth.
Zero-emission electric vehicle experience.
Market growth.
Sales revenue growth from additional products
Third-party contractors, suppliers and manufacturers.
Components of Results of Operations
Sales
Sales are recognized from the sales of new, purpose-built
Cost of Sales
Cost of sales includes those costs related to the development, manufacture, and distribution of our products. Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; labor and other costs related to the development and manufacture of our products; and other associated costs. Cost of sales also includes costs related to the valuation of inventory due to impairment, obsolescence, or shrinkage.
General and Administrative Expenses
Selling, general and administrative expenses include all corporate and administrative functions that support our company, including personnel-related expense and stock-based compensation costs; costs related to investor relations activities; warranty costs, including product recall and customer satisfaction program costs; consulting costs; marketing-related expenses; and other expenses that cannot be included in cost of sales.
Consulting and Research and Development Costs
These expenses are related to our consulting and research and development activity.
Other Income/Expenses, Net
Other income/expenses include
Provision for Income Taxes
We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) ASC 740 “Income Taxes,” which requires the recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations. Because we have incurred only losses to this point, no provision for income taxes has been made in 2021, and the income tax benefit recorded in 2020 has been reversed and effectively reserved as well.2022.
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Results of Operations
The following discussion compares operating data for the three and nine months ended September 30, 20212022 to the corresponding periods ended September 30, 2020:
Sales
Sales were $709,092$3,882,670 and $0$709,092 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $1,368,151$7,078,870 and $88,735$1,368,151 for the nine months ended September 30, 20212022 and 2020,2021, respectively. Sales for the three months ended September 30, 20212022 consisted of twothree cab and chassis trucks to a dealer and 34 logistic cargo vans and four cab & chassis trucks sold primarily to certain factory authorized representatives; one van sold to a business ownercustomers in New Jersey who utilized a voucher from the NJ Zip program; and one upfitted truck sold to a new business in the San Francisco Bay area.ZIP program. Sales for the nine months ended September 30, 20212022 consisted of the items soldsales in the third quarter plus four13 cargo vans sold to ADOMANI, Inc. prior to the closing of the Merger, a box truckfactory authorized representatives, one logistics cargo van sold to a dealer and 11 logistics cargo vans sold primarily to New Jersey customers utilizing the Pittsburg, California Unified School District, a complete cargo van and aNJ ZIP program. In addition, three cab and chassis truck soldtrucks and three used buses were also sold. Sales attributable to two different factory authorized representatives in June 2021,higher vehicle selling price were $585,125 and maintenance$746,390 for the three and inspection services provided.
Cost of Sales
Cost of sales were $469,611$2,046,491 and $0$469,611 for the three months ended September 30, 20212022 and 2020,2021, respectively, and $930,977$3,998,533 and $73,560$930,977 for the nine months ended September 30, 20212022 and 2020,2021, respectively. Cost of sales for the three and nine months ended September 30, 2022 and 2021 consisted of the costs related to the sale of the vehicles sold as described above and, in early 2022, for the costs of providing maintenance and inspection services.
General and Administrative Expenses
General and administrative expenses were $1,619,210 and $1,344,840 for the three months ended September 30, 2022 and $54,1462021, respectively, an increase of $274,370. The increase was primarily due to $143,821 of professional fees (primarily legal fees); to insurance costs of $136,252, to $100,692 of increased payroll expense; to rents of $94,952, to contract labor costs of $82,503 primarily related to engineering and technical assistance; to advertising and marketing expenses of $78,871; to travel and related expenses of $53,003 related primarily to tradeshows and sales. These increases were partially reduced by a reduction in bad debt expenses of $253,879, non cash stock-based compensation expense of $121,132, and reductions of $40,713 in other general and administrative expenses compared to the 2021 period. The third quarter 2022 general and administrative expenses include $50,000 of non-cash bad debt expense and $19,092 of non-cash depreciation expense. The general and administrative expenses for the three months ended September 30, 2021 included non-cash depreciation expense of $7,655.
General and 2020,administrative expenses were $6,142,194 and $2,766,989 for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1,290,694.$3,375,205. The increase was primarily related to bad debt$1,493,713 non-cash stock-based compensation expense recorded with respect to the stock options granted during the first quarter of $303,879 unrelated to trade accounts receivable;2022. Other increases were due to payroll-related expenses of $281,184;$643,101; to investor relations expenses of $123,433; to
Consulting Expenses
Consulting expenses were $2,766,989$94,187 and $222,935$36,735 for the three months ended September 30, 2022 and 2021, respectively, and $264,505 and $142,092 for the nine months ended September 30, 2022 and 2021, and 2020, respectively, an increase of $2,544,054.respectively. The increase in the current year period was relateddue primarily to increasespayments to an Arkansas state relationship and incentive consulting firm that assisted the Company in legalsecuring the manufacturing facility in Osceola, Arkansas and professional feesto the cost of $561,701, of which approximately $290,000the ASC 805 valuation report related to the Merger. Increases in payroll-related expenses of $531,355; bad debt expense unrelated to trade accounts receivables of $303,879; insurance of $221,412; investor relations expense of $167,911;
Research and related expenses of $110,457 primarily related to locating a United States manufacturing facility; marketingDevelopment Expenses
Research and advertising expense of $85,650 accounting services of $83,487; rent expense of $81,479; contract labor of $66,323 primarily related to engineering and technical assistance; depreciation of $43,031; and $166,237 in other general and administrative expenses accounted for the remainder of the increase. The nine month 2021 general and administrative expenses include $468,042 in non-cash charges, including $303,879 in bad debt expense unrelated to trade accounts receivable, $121,132 in stock-based compensation expense and $43,031 in depreciation expense.
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Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 20212022 and 2020:
Nine Months Ended | ||||||||
September 30, 2021 | September 30, 2020 | |||||||
Consolidated Statements of Cash Flow Data: | ||||||||
Net cash used in operating activities | $ | (9,917,328 | ) | $ | (328,322 | ) | ||
Net cash used in investing activities | (3,654,626 | ) | (30,166 | ) | ||||
Net cash provided by financing activities | 22,282,308 | 199,990 | ||||||
Net change in cash and cash equivalents | $ | 8,710,354 | $ | (158,498 | ) | |||
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows (used in), provided by operating activities | $ | (8,271,750 | ) | $ | (9,917,328 | ) | ||
Cash flows provided by investing activities | 5,942,221 | (3,654,626 | ) | |||||
Cash flows provided by financing activities | 106,234 | 22,282,308 | ||||||
|
|
|
| |||||
Net change in cash, restricted cash and cash equivalents | $ | (2,223,295 | ) | $ | 8,710,354 | |||
|
|
|
|
Operating Activities
Cash used in(used in) operating activities is primarily the result of our operating losses, reduced by the impact of
Net cash used in operating activities increased by $9,298,486 to $9,626,808for the nine months ended September 30, 2022 was $8,271,750 versus net cash used in operating activities of $9,917,328 for the nine months ended September 30, 2021, compared to net cash used in operating activitiesa decrease of $328,322 for the nine months ended September 30, 2020.$1,645,578. The increasedecrease in net cash used in operating activities was due primarily to ourdecreases in the cash used for inventory deposits of $4,205,305; increases in net loss for the nine months ended September 30, 2021 increasingnon cash items of $1,558,348 (primarily stock-based compensation expense of $1,493,713), a decrease in cash used to $2,402,064 over the net lossreduce accrued liabilities of $254,861 for the nine months ended September 30, 2020, or by $2,147,203, and$1,926,363; a decrease in cash used to purchase inventory of $1,039,489; a netdecrease in cash used to increase in operating assets andother non-current liabilities that required the use of $7,672,428 of cash, reduced by net
We expect cash used in operating activities to fluctuate significantly in future periods as a result of a number of factors, some of which are outside of our control, including, among others: the success we achieve in generating revenue; the success we have in helping our customers obtain financing to subsidize their purchases of our products; our ability to efficiently develop our dealer and service network; the costs of batteries and other materials utilized to make our products; the extent to which we need to invest additional funds in research and development; and the amount of expenseexpenses we incur to satisfy future warranty claims.
Investing Activities
Net cash usedprovided by investing activities during the nine months ended September 30, 2021 was $3,654,6262022 increased by $9,596,847 to $5,942,221, as compared to $30,166cash used in investing activities of $3,654,626 during the nine months ended September 30, 2021. The increase in net cash provided by investing activities during the nine months ended September 30, 2020. The $3,624,460 increase in net cash used by investing activities during the nine months ended September 30, 20212022 is primarily due to a decrease in investments in marketable securities of $9,708,964 and the net $7.0 million purchaseincreased sale of marketable securities reducedof $3,323,461, partially offset by the absence in 2022 of the $3,373,332 of cash acquired in the Mergermerger in 2021 and reduced by thean increase of $62,246 in capital expenditures decrease of $2,208.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2021 was $22,282,308 as compared2022 decreased by $22,176,074 to $199,990 provided by financing activities during the nine months ended September 30, 2020, an increase of $22,082,318. Net$106,234 from cash provided by financing activities duringin 2021 of $22,282,308. The decrease consisted primarily of the nine months ended September 30, 2021 consisted ofpre-merger $6,415,110 proceeds from the issuance of common stock raised by EVTDS in 2021 in anticipation of the Merger; a second common stock offering post-merger which raised $16,274,991, and $16,365,078$90,087 raised in 2021 from the issuance of stock for stock options that were exercised versus $120,000 raised in 2022 from the issuance of stock for stock options that were exercised. The 2021 cash provided was reduced by offering costs of $188,015; there were no offering costs incurred in the 2022 period. The proceeds from the issuance of common stock were further reduced in 2022 by the Company making installment payments of which $16,275,001 related to the second closing of the Financing discussed above$13,766 on its debt, and the remaining $90,077 was received from the exercise of stock options in June and July of 2021. The net Financing proceeds of $16,275,001 were reduced2021 by offering costs of $188,015 and were further reduced by both EVTDS and ADOMANI, Inc. both repaying their SBA EIDL loans and accrued interest in the amountscombined amount of $152,835$309,865.
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Liquidity and $157,030, respectively.
On February 2022, the Company announced Osceola, Arkansas as the site of its state-of-the-art manufacturing facility and new corporate offices. The Company has moved into an approximately 580,000 square foot facility and is currently in final stages of due diligence and contract negotiation with the City of Osceola and the Arkansas Economic Development Commission. However, additional debt and/or equity capital will be required in order to purchase related equipment and set up production lines and is expected to require up to $80 million of additional investment through 2027. Investments and employee hiring requirements over the next 10 years will provide an opportunity for the Company to obtain local tax incentives granted to the Company of up to $27 million, provided that the qualifying expenditures are made. The Company is not currently contractually obligated to make the expenditures.
Line of Credit
Effective August 4, 2022, EVT secured a line of credit from Centennial Bank. Borrowings under the line of credit bear interest at 2.75% annually. There is no maturity date for the line, but Centennial Bank may at any time, in its sole discretion and without cause, demand the Company to immediately repay any and all outstanding obligations under the line of credit in whole or in part. The line is secured by the cash and cash equivalents maintained by the Company in its Centennial Bank accounts. Borrowings under the line may not exceed cash, cash equivalents, and marketable securities balances up to $1,000,000. There was no principal amount outstanding on September 30, 2022 and there is no current plan to borrow from it
Capital Expenditures
We do not have any
Contractual Obligations
Other than as disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements are prepared in this Quarterly Reportaccordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on Form
We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to be measuredmake subjective estimates and recorded at fair valuejudgments about matters that are uncertain and are likely to have a material impact on a recurring basis.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company,” as defined in the JOBS Act. TheJumpstart Our Business Startups Act, or JOBS Act, contains provisions that, among other things, reduceand may take advantage of certain exemptions from various reporting requirements for emerging growth companies. We have irrevocably elected notthat are applicable to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We have chosencompanies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to relyhold non-binding advisory votes on the other exemptionsexecutive compensation and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company we are not required to, among other things, (i) being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussiongolden parachute payments and Analysis of Financial Condition and Results of Operations” disclosure, (ii) not being required to comply withexemption from the auditor attestation requirementsrequirement in the assessment of our internal control over financial reporting, (iii) not being required to comply with any requirement thatreporting. We may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (iv) reduced disclosure obligations regarding executive compensation or (v)take advantage of these exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We are also a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the endmost recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million as of the last business day of our most recently completed second fiscal year in which our annual revenues exceed $1.07 billion, (iii)quarter. If we are a smaller reporting company at the datetime we cease to be an emerging growth company, we may continue to rely on which we issue more than $1 billion in
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risks in the ordinary course of our business. We do not currently face material market risks such as interest rate fluctuation risk and foreign currency exchange risk. Our cash and cash equivalents include cash in readily available checking and money market accounts. These investments are not dependent on interest rate fluctuations that may cause the principal amount of these investments to fluctuate, and we do not expect such fluctuation will have a material impact on our financial conditions. If we issue additional debt in the future, we will be subject to interest rate risk. The majority of our expenses are denominated in the U.S. dollar.
We may face risks associated with the costs of raw materials, primarily batteries, as we go into production. To the extent these and other risks materialize, they could have a material effect on our operating results or financial condition. We currently anticipate that our international selling, marketing and administrative costs related to foreign sales, if any, will be largely denominated in United States dollars, which may create foreign currency exchange risk exposure.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules
Changes in Internal Control over Financial Reporting
Due to the staff reductions and voluntary resignations, we experienced beginning in the fourth quarter of 2020 and continuing through the closingdate of the Merger in March 2021,this filing, we increased our reliance on outsourced accounting help during such periods and for all periods thereafter through the date of this filing. As a result of such changes, we have been unable to maintain the levels of segregation of duties during such periods at the levels of prior periods, and such changes to our disclosure controls and procedures have significantly affected our internal control over financial reporting during the three and nine months ended September 30, 2021.2022. We have yet to fully resolve such deficiencies as of the date of this filing. We have engaged, and continue to seek additional, experienced accounting professionals with relevant expertise to provide additional accounting services intended to supplement our efforts and mitigate the negative effects of such recent changes to our disclosure controls and procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as set forth below, we know of no material, existing or pending, legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
GreenPower Actions:
On December 17, 2019, GreenPower Motor Company Inc., a public company incorporated under the laws of British Columbia (“GreenPower”), of which Phillip W. Oldridge, ourthe Company’s Chief Executive Officer and Chairman of the Board, and a member of ourits board of directors, previously served as a senior officer and a member of its board of directors, filed a notice of civil claim, captioned GreenPower Motor Company Inc. v. Phillip Oldridge et al., Action No.
On or about July 18, 2021, GreenpowerGreenPower and GP Greenpower Industries Inc., (collectively “the GreenPower entities”) filed a counterclaim against Phillip W. Oldridge, our Chief Executive Officer and a member of our board of directors, David Oldridge, our Chief Technology Officer andPhillip Oldridge, the brother of Phillip W. Oldridge, EVTDS WyomingCompany and other companies in Supreme Court of British Columbia Action No. S207532. The counterclaim alleges that David Oldridge, Phillip Oldridge, EVTDS Wyomingthe Company and other companies committed the tort of abuse of process by causing 42 Design Works Inc., to commence a lawsuit against Greenpower and GP Greenpower Industries Inc.the GreenPower entities. Additionally, Greenpower and GP Greenpower Industries Inc. claimGreenPower entities also advanced claims against David Oldridge, Phillip W. Oldridge, EVTDS Wyomingthe Company and the other companies for conspiracy. EVTDS Wyoming,The pleadings in this lawsuit have not closed and we intend to vigorously defend the counterclaim.
On February 8, 2022, GreenPower Motor Company, Inc., a Delaware Corporation, and GreenPower Motor Company Inc., a Canadian Corporation, filed a complaint captioned GreenPower Motor Company, Inc. v. Philip Oldridge, et al., Case No. 5:22-cv-00252 in the United States District Court for the Central District of California. The complaint names the Company and the following affiliated entities, officers, or directors: Phillip Oldridge, Envirotech Electric Vehicles Inc., Envirotech Drive Systems Incorporated US, Envirotech Drive Systems Incorporated Canada, Sue Emry, David Oldridge, S&P Financial and Corporate Services, Inc. GreenPower also named the other companies have filedPhilip Oldridge Trust and a purported entity called EVT Motors, Inc., but has since dismissed those parties. The complaint alleges (i) RICO violations, (ii) conspiracy to commit RICO violations, (iii) breach of fiduciary duties, (iv) breach of an applicationemployment contract, (v) conversion of GreenPower property, (vi) violation of the Defend Trade Secrets Act, and (vii) violations of California’s Business and Profession Code. The complaint seeks an undisclosed amount of compensatory and punitive damages, injunctive relief to strikeprevent the alleged anti- Competitive behavior, restitution for harm, an award of treble damages, and associate fees and costs. The complaint’s allegations are centered around the same assertions in the counterclaim regarding abusepending Canadian litigation.
On May 10, 2022, the Company, together with other defendants, filed a Motion to Dismiss and/or Stay the lawsuit pending the outcome of processthe Canadian litigation. While hearing on this Motion was set for October 7, 2022, on October 4 the Court cancelled the hearing and conspiracy.indicated it would rule on the Motion without argument. The court applicationCourt’s ruling on the Motion is scheduledstill pending. We believe that the lawsuit is without merit and intend to be heard on November 12, 2021.
Mollick/Electric DriveTrain Action:
On August 23, 2018, a purported class action lawsuit captioned M.D. Ariful Mollik v. ADOMANI, Inc. et al., Case No. RIC 1817493, was filed in the Superior Court of the State of California for the County of Riverside against us, certain of our executive officers, Edward R. Monfort, the former Chief Technology Officer and a former director of ADOMANI, Inc., and the two underwriters of our offering of common stock under Regulation A in June 2017. This complaint alleges that documents related to our offering of common stock under Regulation A in June 2017 contained materially false and misleading statements and that all defendants violated Section 12(a)(2) of the Securities Act, and that we and the individual defendants violated Section 15 of the Securities Act, in connection therewith. The plaintiff seeks on behalf of himself and all class members: (i) certification of a class under California substantive law and procedure; (ii) compensatory damages and interest in an amount to be proven at trial; (iii) reasonable costs and expenses incurred in this action, including counsel fees and expert fees; (iv) awarding of rescission or rescissionaryrecessionary damages; and (v) equitable relief at the discretion of the court.
Plaintiff’s counsel has subsequently filed a first amended complaint, a second amended complaint, a third amended complaint, and a fourth amended complaint. Plaintiff Mollik was replaced by putative class representatives Alan K. Brooks and Electric Drivetrains, LLC.LLC (“Electric Drivetrains”). Alan K. Brooks was subsequently dropped as a putative class representative. On October 27, 2020, wethe Company answered the fourth amended complaint, generally denying the allegations and asserting affirmative defenses. On November 5, 2019, Network 1 and Boustead Securities (together the “Underwriters”) filed a cross-complaint against the Company seeking indemnification under the terms of the underwriting agreement the Company and the Underwriters entered for the Company’s initial public offering (the “Underwriting Agreement”). On December 10, 2019, the Company filed its answer to the Underwriters’ cross-complaint, generally denying the allegations and asserting affirmative defenses. Also on this date, the Company filed a cross-complaint against the Underwriters seeking indemnification under the terms of the Underwriting Agreement. On January 14, 2020, Mr. Monfort filed a cross-complaint against the Underwriters seeking indemnification under the terms of the Underwriting Agreement. On January 15, 2020, Mr.
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On July 13, 2021, Electric Drivetrains’ counsel moved to be relieved as counsel and on August 23, 2021, the court granted this motion. Also onOn August 23, 2021, the Clerk of Court issued an order to show cause why the complaint should not be stricken and matter dismissed for failure to retain new counsel to Electric Drivetrains. On October 28, 2021, Electric Drivetrains filed a substitution of attorney, substituting J. Ryan Gustafson of Good Gustafson Aumais LLP as its new counsel. A case management conference and hearing onOn December 10, 2021, the Court vacated the order to show cause are set for December 13, 2021. We believe thatcause. Over the purported classtenure of the action, lawsuit is without merit and intend to vigorously defend the action.
On January 20, 2022, Mr. Monfort dismissed his cross-complaint for indemnification against the Company certain ofin the Company’s executive officersMollik action. On April 8, 2022, the Company and directors, two ofBoustead Securities, LLC (“Boustead”) settled their respective cross-claims against each other in both the underwriters ofMollik action and Brooks action in exchange for the Company’s offeringCompany paying fifty thousand dollars ($50,000) in cash and 20,415 shares of common stock under Regulation Aand mutual releases between parties. On August 5, 2022, the Santa Clara Superior Court approved this Settlement rendering it finally effective, with consideration being forthcoming. There are no longer any cross claims pending in June 2017,the Mollik action.
On August 31, 2022, Electric Drivetrains filed its Fifth Amended Complaint, which: i) drops certain class allegations; ii) adds certain state law claims; iii) and drops certain offactual allegations but leaves the underwriters’ personnel, among others. The complaint alleges thatremaining claims against defendants intact. On October 6, 2022, the Company and otherremaining defendants breached the terms of an agreement between Mr. Brooks and the Company by refusing to release 1,320,359 shares of ADOMANI, Inc. stock to Mr. Brooks. Mr. Brooks seeks damages of $13,500,000.00 plus interest and attorney’s fees. On September 20, 2019, Mr. Brooks filed his first amended complaint (“FAC”) reasserting his breach of contract claim and alleging five additional claims for (i) violations of Cal. Corp. Code Section 25401, (ii) fraud, (iii) negligent misrepresentation, (iv) elder abuse, and (v) unfair competition. We answered the FAC on November 12, 2019, generallytheir respective answer denying the allegations in the FAC and asserting affirmative defenses. Fact discovery in this matter remains ongoing.counterclaims. On August 10, 2021, we filedthe same day, the Company cross claimed against Electric Drivetrains and its managing member. The Court has set a motion for summary judgement and dismissal of plaintiff’s FAC. The hearing on the motion for summary judgement as well as the trial setting conference is set for November 23, 2021.on December 21, 2022. We believe that the lawsuit is without merit and intend to vigorously defend the action.
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ITEM 1A. RISK FACTORS
There were no material changes from the risk factors previously disclosed in the audited financial statements of Envirotech Drive Systems,Vehicles, Inc. for the year ended December 31, 2020 included in the Company’s Current Report on Form
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In connection with the settlement of the Mollik action and Brooks action, the Company issued 20,415 shares to Mr. Brooks on July 12, 2022. These securities were issued in reliance on the exemption under Section 3(a)(10) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
A list of exhibits is set forth at the end of this Quarterly Report on Form
Exhibit Number | Incorporated by Reference | |||||||||||||||||||||||||||||
Exhibit Description | Form | File No. | Exhibit | Filing Date | Filed Herewith | |||||||||||||||||||||||||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | X | ||||||||||||||||||||||||||||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | X | ||||||||||||||||||||||||||||
32.1# | 18 U.S.C. Section 1350 Certification of Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||||||||||||
32.2# | 18 U.S.C. Section 1350 Certification of Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||||||||||||||||||
101.INS | Inline XBRL Instance Document* | X | ||||||||||||||||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document* | X | ||||||||||||||||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document* | X | ||||||||||||||||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document* | X | ||||||||||||||||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document* | X | ||||||||||||||||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document* | X | ||||||||||||||||||||||||||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
# | The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Quarterly Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference. |
* | In accordance with Rule 402 of Regulation S-T, this interactive data file is deemed not filed or part of this Quarterly Report for purposes of Sections 11 or 12 of the Securities Act or Section 18 of the Exchange Act and otherwise is not subject to liability under these sections. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Envirotech Vehicles, Inc. | ||||||
Date: November | 14, 2022 | By: | /s/ Phillip W. Oldridge Phillip | |||
W. Oldridge Chief | ||||||
Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Date: November | 14, 2022 | By: | /s/ | |||
Christian S. Rodich Chief | ||||||
Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
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