Impairment of Long-Lived Assets—Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates these assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets. If the estimated undiscounted cash flows are less than the carrying value of the assets, the assets are written down to their fair value. There was no impairment of long-lived assets, or property and equipment, as of JuneSeptember 30, 2023 and December 31, 2022, respectively.

Goodwill—Goodwill represents the excess acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it can conclude the assessment. If the Company concludes otherwise, the Company is required to perform a quantitative analysis to determine the amount of impairment, if any. The Company has determined that it has one reporting unit, and based on both qualitative and quantitative analysis, it is management’s assessments at June September 30,2023,that $14,682,620 in goodwill did notexperience impairment. Therefore, the Company recorded a non-cash goodwill impairment charge of $3,392,129 for the three and nine months ended September 30, 2023, resulting in a goodwill balance of $11,290,491 at September 30, 2023. The Company recorded a non-cash goodwill impairment charge of $37,093,047 for the year ended December 31, 2022 resulting in a goodwill balance of $14,682,620 on that date.

Research and Development—Costs incurred in connection with the development of new products and manufacturing methods are charged tooperating expenses as incurred. Research and development costs were $57,924$46,734 and $128,812$175,546 during the three and sixnine months ended JuneSeptember 30, 2023. Research and development costs were $87,412$25,000 and $87,412$112,412 during the three and sixnine months ended June September 30,2022,respectively.

Stock-Based Compensation—The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, “Compensation-Stock Compensation”, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered. Non-cash stock-based compensation expense of $105,166$1,105,074 and $192,310$1,297,384 was recorded for the three and sixnine months ended June September 30,2023,respectively. Non-cash stock-based compensation expense of $0 and $1,614,845 was recorded for the three and sixnine months ended June 20, September 30,2022,respectively.

Property and Equipment— Property and equipment are stated at cost, less accumulated depreciation and amortization. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except leasehold improvements, which are being amortized over the life of the lease term. Property and equipment qualify for capitalization if the purchase price exceeds $2,000. Major repairs and replacements, which extend the useful lives of equipment, are capitalized and depreciated over the estimated useful lives of the property. All other maintenance and repairs are expensed as incurred.

Leases—The Company accounts for leases as required by ASC Topic 842. The guidance requires companies to recognize leased assets and liabilities on the balance sheet and to disclose key information regarding leasing arrangements.

Recent Accounting Pronouncements—Management has considered all recent accounting pronouncements issued, but not effective, and does not believe that they will have a significant impact on the Company’s financial statements.

Components of property and equipment, net, consist of the following as of JuneSeptember 30, 2023 and December 31, 2022:

Depreciation expense was $30,561$34,192 and $59,545$93,737 for the three and sixnine months ended June September 30,2023,respectively. Depreciation expense was $18,948$19,093 and $27,380$56,700 for the three and sixnine months ended June September 30,2022,respectively.

On June 15, 2021, the Company entered into an equipment financing agreement with Navitas Credit Corp. in connection with the purchase of certain inventory management software. The $63,576 loan is payable over twenty-four months, beginning in July 2021, with monthly payments of $2,649. The balance of this note is zero at June September 30,2023.

On July 15, 2022, the Company entered into an equipment financing agreement with Wells Fargo in connection with the purchase of facility grounds equipment. The $18,755$25,007 loan is payable over 36 months, beginning in August 2022, with monthly payments of $521. The balance of this note is $21,360$19,276 of which $6,252 is classified as Notes Payable - current and $14,066$13,024 is classified as Notes Payable - long term on the Company's consolidated balance sheets on June September 30,2023.

Effective June 15, 2022, the Company entered into a premium financing agreement with First Insurance Funding to finance certain insurance coverage. The $225,000 loan is payable over nine months, beginning in July 2022, and bears interest at 5.8% with monthly payments of $25,608. The balance of this note is zero on June September 30,2023.

Effective August 20, 2022,2023, the Company entered into a second premium financing agreement with First Insurance Funding to finance other insurance coverages. The $214,088$467,074 loan is payable over nine months, beginning in September 2022,2023, and bears interest at 6.3%8.2% with monthly payments of $24,416.$53,675. The balance of this note, including accrued interest, is zero$470,246 on JuneSeptember 30, 2023.

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 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. ThereThis line of credit was closed during the third quarter of 2023 and there was no principal amount outstanding on June 30, 2023 and there is no current plan to borrow from it.at the time of closing.

The Company’s outstanding warrants as of JuneSeptember 30, 2023 isare summarized as follows, and all were exercisable at that date.

The Warrants issued as part of the Purchase Agreement related to the Financing contain a call provision whereby the Company, after the 13-month anniversary of the issuance date, and if the volume weighted average price of the common stock for such date exceeds four times the exercise price of the warrants for 20 consecutive trading days, may call the Warrants that have not previously been exercised, and the Warrant holders have ten trading days within which to exercise before the Warrants may be cancelled. 12,833 warrants expired during the first halfnine months of 2023.

As of JuneSeptember 30, 2023, the outstanding warrants have no intrinsic value.

The outstanding options at JuneSeptember 30, 2023 consisted of the following:

The number of options exercisable on June September 30,2023is 606,130.1,194,971.

On January 7, 2022, the Company’s Compensation Committee granted Phillip W. Oldridge, the Company’s Chief Executive Officer, options to purchase 150,000 shares of common stock at an exercise price of $2.00 per share and options to purchase 50,000 shares of common stock at an exercise price of $2.40 per share. The options vested immediately and expire on the tenth anniversary of grant.

On January 7, 2022, the Company’s Compensation Committee granted Susan M. Emry, the Company’s Executive Vice President, options to purchase 100,000 shares of common stock at an exercise price of $2.00 per share and options to purchase 40,893 shares of common stock at an exercise price of $2.40 per share. The options vested immediately and expire on the tenth anniversary of grant.

On January 31, 2022, the Company’s Compensation Committee granted Christian S. Rodich, the Company’s Chief Financial Officer, options to purchase 2,763 shares of common stock at an exercise price of $3.62 per share and options to purchase 1,111 shares of common stock at an exercise price of $9.00 per share. The options vest ratably at 1/60th per month over five years and expire on the tenth anniversary of grant. These options were forfeited three months after Mr. Rodich resigned from his employment with the Company.

On March 15, 2022, options to purchase 50,000 shares of common stock were exercised by the former President and CEO of the Company at a price of $2.40 per share, resulting in a payment to the Company of $120,000. Also on March 15, 2022, options to purchase an aggregate of 25,000 shares of common stock with an exercise price of $9.00 per share were forfeited by the former executive, as they were not exercised prior to their expiration on March 15, 2022.

On April 19, 2023 options to purchase 15,000 shares of common stock at an exercise price of $2.65 per share were granted to two employees. These options vest ratably over three years.

On July 11, 2023, the Company’s Compensation Committee granted the Board of Directors options to purchase 588,495 shares of common stock at an exercise price of $2.10 per share. The options vested immediately and expire on the tenth anniversary of grant.

As of JuneSeptember 30, 2023, the outstanding options had no intrinsic value of $25,000.value.

Restricted Shares

During the first quarter of 2023, the Company awarded 85,000 restricted shares to a vendor that will vest over a six-month period in exchange for marketing services to be provided over the same period. As a result, the Company recorded stock compensation expense of $102,991$14,713 and $190,135$204,850 during the three and sixnine months ended June September 30,2023.These restricted shares were issued as common stock in the third quarter of 2023.

The Company has entered into lease agreements with SRI Professional Services, Incorporated (“SRI”), pursuant to which the Company leases equipment used in connection with the operation of its business (the “SRI Equipment Leases”). Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, serves as an executive officer and a member of the board of directors of SRI. The SRI Equipment Leases provide for the leasing of two vehicles that commenced on January 1, 2020 and the combined rent under such leases is $3,880 per month, and a separate SRI Equipment Lease provides for a trailer lease that commenced on December 1, 2019, under which the rent is $3,891 per month. The total monthly payment obligation of the Company under the SRI Equipment Leases is $7,771. As a result of these agreements, the Company recorded rent expense of $23,312 and $46,624$69,935 for the three and sixnine months ended JuneSeptember 30, 2023, respectively.

The Company has entered into a cancelable month-to-month lease with SRI (the “SRI Office Lease”), pursuant to which EVTDS has leased office and warehouse space in the Porterville, California area for a term that commenced on January 1, 2020. The monthly rent under the SRI Office Lease is $2,730. The Company recorded rent expense of $2,730$5,460 and $8,190$13,650 for the three and sixnine months ended JuneSeptember 30, 2023, respectively, in connection with this agreement. This lease was cancelled during the second quarter of 2023.

The Company has entered into a commercial lease agreement (the “ABCI Office Lease”) with Alpha Bravo Charlie, Inc. (“ABCI”) that commenced on April 1, 2020, for the lease of office space in Porterville, California. The monthly rent for this facility is $5,000. Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, is a director of ABCI. The Company recorded rent expense of $17,800$15,000 and $38,400$53,400 for the three and sixnine months ended JuneSeptember 30, 2023, respectively, in connection with this agreement.

During the first halfnine months of 2023, the Company reimbursed Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, $81,269 for use of the CEO's personal airplane for certain business-related activities.

During the second quarter of 2023, the Company purchased a vehicle from Phillip W. Oldridge for $45,216.$45,216, which remains unpaid as of September 30, 2023.

Other Agreements

On December 31, 2021, the Company entered into employment agreements with Phillip W. Oldridge (the “Oldridge Agreement”), its Chief Executive Officer, and with Susan M. Emry (the “Emry Agreement”), its Executive Vice President. According to the Oldridge Agreement, effective as of March 1, 2021, Mr. Oldridge will receive an annual base salary of $300,000, payable in semi-monthly installments consistent with the Company’s payroll practices. Mr. Oldridge will also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans. Under the Oldridge Agreement, Mr. Oldridge will also receive an amount equal to five percent of the net income of the Company on an annual basis and will be eligible for a bonus at the sole discretion of the Company’s Board of Directors (the “Board”). The Oldridge Agreement also provides for an automobile monthly allowance of $1,500. Mr. Oldridge’s employment shall continue until terminated in accordance with the Oldridge Agreement. If Mr. Oldridge is terminated without cause or if he terminates his employment for good reason, Mr. Oldridge will be entitled to receive (i) one-year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Oldridge Agreement, (iii) any bonus that would have been payable within the twelve months following the date of termination, and (iv) the value of any accrued and unused paid time off as of the date of termination. According to the Emry Agreement, effective on January 1, 2022, Mrs. Emry will receive an annual base salary of $200,000 and will be eligible for a bonus at the sole discretion of the Board. Mrs. Emry will also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans. Mrs. Emry’s employment shall continue until terminated in accordance with the Emry Agreement. If Mrs. Emry is terminated without cause or if she terminates her employment for good reason, Mrs. Emry will be entitled to receive (i) one-year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Emry Agreement, and (iii) the value of any accrued and unused paid time off as of the date of termination. There are no future minimum payments under the terms of both agreements as each party has a right to terminate the agreement without any contractual payments other than what has been stated in their respective contracts.

In March 2023, the Company entered into an agreement with Berthaphil, Inc. to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines. The term of the lease is two years and two months with a turnover date of July 1, 2023 ("turnover date") and a rental commencement of September 1, 2023. However, the warehouse building was not available for use to the Company till the early part of the fourth quarter of 2023. Therefore, the commencement date for purposes of accounting under the guidance of ASC Topic 842 - Leases, is deferred until the fourth quarter of 2023, which is when the Company was given availability to use the warehouse building. There is a grace period of two months for rental payments starting from the turnover date. The monthly rent for the first year is $15,000, escalating to $15,750 for the second year and $16,530 for the remaining term. In addition to the monthly rent, the Company is required to pay an additional 5% of the monthly rent as common area maintenance costs. The sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions. The Company intends to use the leased space as a production facility as it seeks to expand its business presence in the region and the United States. The Company will account for this lease as an operating lease under ASC Topic 842.

Future minimum payments under operating leases are not material.as follows:

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 Litigation

On December 17, 2019, GreenPower Motor Company Inc., a public company incorporated under the laws of British Columbia (“GreenPower”), of which Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, , 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. S-1914285, in the Supreme Court of British Columbia, against Phillip Oldridge, his trust, EVTDS and certain other companies affiliated therewith. The notice of civil claim alleges that Mr. Oldridge breached certain fiduciary duties owed to GreenPower by working with certain parties in direct competition with and at the expense of GreenPower. GreenPower alleges that the Company conspired with Mr. Oldridge to build its business, competing products and unfairly compete with GreenPower. GreenPower seeks general damages, special damages and punitive damages, plus interest and costs against EVTDS. Fact discovery, through document disclosure and examinations for discoveries, in this matter remain ongoing. The Company has denied all claims, believes the lawsuit is without merit, and intends to vigorously defend the action.

On or about July 18, 2021, GreenPower and GP Greenpower Industries Inc., (collectively “the GreenPower entities”) filed a counterclaim against David Oldridge, Phillip Oldridge, the Company and other companies in Supreme Court of British Columbia Action No. S207532. The counterclaim alleges that David Oldridge, Phillip Oldridge, the Company and other companies committed the tort of abuse of process by causing 42 Design Works Inc., to commence a lawsuit against the GreenPower entities. Additionally, GreenPower entities also advanced claims against David Oldridge, Phillip Oldridge, the Company and other companies for conspiracy. 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. Phillip 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 Phillip Oldridge Trust and a purported entity called EVT Motors, Inc., but has since dismissed those parties. The complaint seeks an undisclosed amount of compensatory and punitive damages, injunctive relief to prevent the alleged anti-Competitiveanti-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 pending 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 the Canadian litigation. The Court issued stay of this case pending resolution of parallel litigation in Canada between similar parties. GreenPower and defendants have agreed that the U.S. GreenPower case will not proceed while Canadian litigation is pending. The Company believes that the lawsuit is without merit and intends to vigorously defend the action.

Mollik Litigation - Resolved

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 the Company, certain of its executive officers, Edward R. Monfort, the former Chief Technology Officer and a former director of ADOMANI, Inc., and the two underwriters of the Company’s 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 the Company 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 recessionary damages; and (v) equitable relief at the discretion of the court. Plaintiff Mollik was replaced by putative class representatives Alan K. Brooks and Electric Drivetrains, LLC. Alan K. Brooks was subsequently dropped as a putative class representative.

On June 19, 2023, counsel for Electric Drivetrains and counsel for the Company participated in a mediation at which Electric Drivetrains and the Company executed a binding term sheet to completely resolve this matter. On July 18, 2023, Electric Drivetrains and all Defendantsdefendants executed a Settlement Agreement for complete resolution of the case and dismissal against all Defendantsdefendants with prejudice. No Company proceeds will be used to resolve this matter.were paid in the settlement. On September 30, 2023, the Court dismissed this action with prejudice and the matter is completely resolved.

Brooks Litigation

On June 19, 2019, Alan K. Brooks, an ADOMANI investor, filed a complaint, captioned Alan K. Brooks v. ADOMANI, Inc., et al., Case No. 1-CV-349153 in the Superior Court of California for the County of Santa Clara, against the Company, certain of the Company’s executive officers and directors, two of the underwriters of the Company’s offering of common stock under Regulation A in June 2017, and certain of the underwriters’ personnel, among others (the “Brooks Case”).others. The complaint alleges that the Company and other 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, negligent misrepresentation, (iv) elder abuse, and (v) unfair competition. The parties participated in mediation during which they resolved the matter. On March 7, 2022, the Court issued an Order approving the settlement and the parties aresettlement. The Company paid $540,000 in the processsettlement, comprised of effectuating its terms.$170,000 in common stock, $170,000 in cash and $170,000 in carrier cash. This case has now been completely dismissed.

As of December 31, 2022,September 30,2023,the Company is a party to eightnine operating leases. FiveSix of these leases are office or warehouse leases; the remaining three are equipment leases. The Company accounts for leases as required by ASC Topic 842. The Company has elected to apply the short-term lease exception to all leases of one year or less. In applying the guidance in ASC 842, the Company has determined that all current leases (except for the Philippines lease as described below) as of June September 30,2023should be classified as short-term operating leases.

The Company has entered into the SRI Equipment Leases. Rent expense under the SRI Equipment Leases was $23,312 and $46,624$69,936 for the three months and sixnine months ended JuneSeptember 30, 2023, respectively. Rent expense under the SRI Equipment Leases was $23,312 and $46,624$69,936 for the three months and sixnine months ended JuneSeptember 30, 2022, respectively.

The Company has entered into the SRI Office Lease. Rent expense under the SRI Office Lease was $2,730$5,460 and $8,190$13,650 for the three months and sixnine months ended JuneSeptember 30, 2023, 30,2023,respectively. Rent expense under the SRI Office Lease was $7,280$8,190 and $10,010$18,200 for the three months and sixnine months ended JuneSeptember 30, 2022, respectively.

The Company has entered into the ABCI Office Lease. Rent expense under the ABCI Office Leases was $17,800$15,000 and $38,400$53,400 for the three months and sixnine months ended JuneSeptember 30, 2023, respectively. Rent expense under the ABCI Office Lease was $8,400 and $16,800$25,200 for the three months and sixnine months ended JuneSeptember 30, 2022, respectively.

The Company has entered into the Toledo Jet Center Lease for office space in the Ft. Lauderdale, Florida area effective February 15, 2022. The lease has a one-year term with the option to renew after one year. Rent expense for the Toledo Jet Center Lease for the three and sixnine months ended JuneSeptember 30, 2023 was $4,500 and $9,000,$13,500, respectively. Rent expense for the Toledo Jet Center Lease for the three and sixnine months ended JuneSeptember 30, 2022 was $4,815 and $7,223,$12,038, respectively.

In February 2017, the Company signed a lease for storage space in Stockton, California to serve as a location to store vehicles and other equipment utilized for marketing and trade-show purposes. The lease is on a month-to-month basis and can be terminated by either party with 30-days’ notice. The total amount due monthly is $1,000. 

In December 2019, the Company signed a lease for combined office space and warehouse location in Corona, California. The facility had been used to conduct research and development activity, stage materials, assemble and/or manufacture vehicles, perform pre-delivery inspections, test demo vehicles, and securely store vehicles, equipment, parts and finished goods vehicle inventories prior to November 2020 when ADOMANI, Inc. vacated its former corporate office space in Corona, California, and made such facility the new corporate office location in addition to its prior use. The lease is for a period of 36 months, commencing on January 1, 2020, and terminating on December 31, 2022. The base rent for the term of the lease was $495,720, with $265 due per month for fire sprinkler alarm monitoring and landscape maintenance. The base rent amount due monthly was $13,108 at commencement and would have escalated to $13,906 by its conclusion. However, the Company vacated the premises effective March 31, 2022, and the lease was taken over on April 1, 2022 by its sublease tenant, as discussed below.

On February 4, 2020, the Company signed a sublease agreement with Masters Transportation, Inc. (“Masters”) for Masters to occupy a portion of the Corona, California, facility that the Company occupied effective January 1, 2020 (see above). The effective date of the Masters’ sublease was February 1, 2020, and it expires when the Company’s lease on the Corona, California facility expires on December 31, 2022. Under the sublease, Masters is obligated to pay the Company monthly rent payments in an amount equal to $6,000 at commencement and thereafter escalating to $6,365 by its conclusion. On April 1, 2022, Masters took over the remaining lease obligation for the facility.

As required by ASC 842, in conjunction with the Corona, California lease, the Company recognized an operating liability with a corresponding Right-Of-Use (“ROU”) asset of the same amounts based on the present value of the minimum rental payments of such lease. As of March 31, 2022, the ROU asset and related liability accounts were written off against each other due to the Company leaving the Corona California office and warehouse effective April 1, 2022 and to Masters taking over the remaining lease obligation for the facility.

In March 2023, the Company entered into an agreement with Berthaphil, Inc. to sublease approximately 3,600 squarersquare yards of a warehouse building based in the Clark Freeport Zone in the Philippines. The term of the lease is two years and two months with a turnover date of July 1, 2023 ("turnover date") and a rental commencement of September 1, 2023. TherHowever, the warehouse building was not available for use to the Company until the early part of the fourth quarter of 2023. Therefore, the commencement date for purposes of accounting under the guidance of ASC Topic 842 - Leases, is deferred until the fourth quarter of 2023, which is when the Company was given availability to use the warehouse building. There is a grace period of two months for rental payments starting from the turnover date. The monthly rent for the first year is $15,000, escalating to $15,750 for the second year and $16,530 for the remaining term. In addition to the monthly rent, the Company is required to pay an additional 5% of the monthly rent as common area maintenance costs. The sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions. The Company intends to use the leased space as a production facility as it seeks to expand its business presence in the region and the United States. The Company will account for this lease as an operating lease under ASC Topic 842.

The Company’s total net rent expense for the three and sixnine months ended JuneSeptember 30, 2023 was $59,277$59,857 and $117,540,$177,397, respectively, and for the three and sixnine months ended JuneSeptember 30, 2022 was $55,118$52,579 and $128,167,$180,746, respectively.

Quantitative information regarding the Company’s leases is as follows:

The Company evaluates subsequent events that have occurred after the balance sheet date but before the consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. There were no material transactions that occurred subsequently to JuneSeptember 30, 2023 that would require the Company to disclose in this filing.

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 10-Q (“Quarterly Report”). This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others, those identified under the “Special Note Regarding Forward-Looking Statements” above, and elsewhere in this Quarterly Report, particularly in Part II, Item 1A “Risk Factors,” below.

Overview

We are a provider of purpose-built zero-emission electric vehicles focused on reducing the total cost of vehicle ownership and helping fleet operators unlock the benefits of green technology. We serve commercial and last-mile fleets, school districts, public and private transportation service companies and colleges and universities to meet the increasing demand for light to heavy-duty electric vehicles. Our vehicles address the challenges of traditional fuel price instability and local, state and federal regulatory compliance.

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 pandemic. Global health concerns related to the ongoing COVID-19 pandemic have resulted in social, economic and labor instability in the countries in which we or the third parties with whom we engage operate, and resulted in unexpected legal and regulatory changes, such as travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions that have negatively impacted our ability to procure and sell our products and provide our services. Accordingly, our future performance will depend in part upon our ability to successfully respond and adapt to these challenges. We have developed, and continue to develop, plans to address the ongoing effects and help mitigate the potential negative impact of the pandemic on our business.

Availability of government subsidies, rebates and economic incentives. We believe that the availability of government subsidies, rebates, and economic incentives is currently a critical factor considered by our customers when purchasing our zero-emission systems or converting their existing vehicles to zero-emission-electric or hybrids, and that our growth depends in large part on the availability and amounts of these subsidies and economic incentives. As an alternative to being dependent on such funding, however, we are exploring the possibility of leasing our vehicles to our customers as well.

New customers. We are competing with other companies and technologies to help fleet managers and their districts/companies more efficiently and cost-effectively manage their fleet operations. Once these fleet managers have decided they want to buy from us, we still face challenges helping them obtain financing options to reduce the cost barriers to purchasing. We may also encounter customers with inadequate electrical services at their facilities that may delay their ability to purchase from us.

Dependence on external sources of financing of our operations. We have historically depended on external sources forof capital to finance our operations. Accordingly, our future performance will depend in part upon our ability to achieve independence from external sources for the financing of our operations.

Investment in growth. We plan to continue to invest for long-term growth. We anticipate that our operating expenses will increase in the foreseeable future as we invest in research and development to enhance our zero-emission electric vehicles and systems; design, develop and manufacture our commercial fleet vehicles and their components; increase our sales and marketing to acquire new customers; and increase our general and administrative functions to support our growing operations. We believe that these investments will contribute to our long-term growth, although they will adversely affect our results of operations in the near term. In addition, the timing of these investments can result in fluctuations in our annual and quarterly operating results.

Zero-emission electric vehicle experience. Our dealer and service network is not currently completely established, although we do have certain agreements in place. One issue they may have, and we may encounter, is finding appropriately trained technicians with zero-emission electric fleet vehicle experience. Our performance will depend on having a robust dealer and service network, which will require appropriately trained technicians to be successful. Because vehicles that utilize our technology are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in zero-emission electric vehicles may not be available to hire, and we may need to expend significant time and expense training the employees we do hire. If we are not able to attract, assimilate, train or retain additional highly qualified personnel in the future, or do so cost-effectively, our performance would be significantly and adversely affected.

Market growth. We believe the market for all-electric solutions for alternative fuel technology, specifically all-electric vehicles, will continue to grow as more purchases of new zero-emission vehicles and as more conversions of existing fleet vehicles to zero-emission vehicles are made. However, unless the costs to produce such vehicles decrease dramatically, purchasespurchasers of our products will continue to depend in large part on financing subsidies from government agencies. We cannot be assured of the continued availability, the amounts of such assistance to our customers, or our ability to access such funds.

Sales revenue growth from additional products. We seek to add to our product offerings additional zero-emission vehicles of all sizes to be marketed, sold, warrantied and serviced through our developing distribution and service network, as well as add other ancillary products discussed elsewhere in this report.

Third-party contractors, suppliers and manufacturers. We rely upon third parties to supply us with raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to us.

Components of Results of Operations

Sales

Sales are recognized from the sales of new, purpose-built zero-emission electric vehicles and from providing vehicle maintenance and safety inspection services. Sales are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606, as discussed in Note 2 to our unaudited consolidated financial statements included in this Quarterly Report.

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 non-operating income and expenses, including interest income and expense.

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 2023.

Results of Operations

The following discussion compares operating data for the three and sixnine months ended JuneSeptember 30, 2023 to the corresponding periods ended JuneSeptember 30, 2022:

Sales

Sales for the three months ended JuneSeptember 30, 2023 and 2022 were $2,132,880$100,024 and $1,505,910,$1,029,280, respectively. Sales for both the three months ended JuneSeptember 30, 2023 consisted of 19 logistics cargo vans and one cab and chassis truck while sales for the three months ended JuneSeptember 30, 2022 consisted of 14 logistics cargo vans. The increasedecrease in sales was primarily due to an increasedelays in the number of units sold as a result of favorable market conditions. A significant number of these sales were primarilycertain administrative processes due to customers in New Jersey who utilized a voucher from the NJ ZIP program.state policy changes beyond our control.

Sales for the sixnine months ended JuneSeptember 30, 2023 and 2022 were $2,656,079$2,756,103 and $1,595,810,$2,625,090, respectively. Sales for the six months ended June 30, 2023 consisted of 25 logistics cargo vans and one cab and chassis truck while sales for the six months ended June 30, 2022 consisted of 14 logistics cargo vans and one cab and chassis truck. The slight increase in sales was primarily due to an increase in the number of units sold as a result of favorable market conditions. A significant number of these sales were primarily to customers in New Jersey who utilized a voucher from the NJ ZIP program.

Cost of Sales

Cost of sales for the three months ended JuneSeptember 30, 2023 and 2022 were $1,253,886$80,283 and $845,008,$677,855, respectively. Cost of sales for the sixnine months ended JuneSeptember 30, 2023 and 2022 were $1,658,722$1,739,005 and $921,435,$1,599,290, respectively.  These costs consisted of the costs related to the sale of the vehicles sold as described above.

General and Administrative ("G&A") Expenses

G&A expenses were $2,041,146$2,578,727 and $1,646,136$1,584,973 for the three months ended JuneSeptember 30, 2023 and 2022, respectively. G&A expenses increased by $395,010$993,754 primarily due to an increase of $1,105,074 in stock-compensation expense due to equity awarded during the third quarter of 2023 that vested immediately, an increase of $59,760 in payroll costs in anticipation of business growth, an increase of $92,384 in accounting and compliance costs as a public company and an increase of $6,821 in overall G&A expenses for costs incurred with running the business, partially offset by a decrease of $143,813 in advertising and marketing costs as we focus on certain marketing priorities, a decrease in travel expenses of $41,145 as we reduced expenses as a cost saving initiative during the third quarter of 2023, a decrease in legal fees of $47,569 due to lower litigation costs, and a decrease of $37,758 in investor relations expenses as a result of $133,795 related to compliance with regulatory authorities, an increase in stock-based compensation of $105,164 fromour cost cutting measures noted above.

G&A expenses were $6,785,405 and $6,113,957 for the issuance of awards in the second quarter, annine months ended September 30, 2023 and 2022, respectively. G&A expenses increased by $674,448 primarily due toan increase in contract labor costs of $96,176$240,833 to assist in our operations, an increase in payroll costs of $158,330 in anticipation of business growth, an increase in travel expenses of $105,795$200,151 as we seek additional growth opportunities,explore business markets globally, an increase of $117,962 in payroll of $45,479 in anticipation of future growthinvestor relations expenses as we explore incentives by the federal and instate governments across the United States, an increase of $84,4211$126,470 in otheraccounting and compliance costs as a public company, and an overall increase of $371,564 in G&A expenses for costs incurred with running the operations, partially offset by a decrease of $174,459 in legal fees of $175,820 as a result of lower litigation expenses.

G&A expenses were $4,206,678 and $4,528,984 for the six months ended June 30, 2023 and 2022, respectively. G&A expenses decreased by $322,306 primarily due to a decrease in stock compensation expense of $1,422,535, a decrease in legal fees of $126,890costs due to lower litigation costs, partially offset by an increasea decrease in payrolladvertising and marketing expenses of $98,570 in anticipation of future growth, an increase in marketing costs of $47,667 and increase in travel costs of $241,296$48,942 as we seek additional growth opportunities, an increase in contract laborfocus on certain marketing priorities and a decrease of $317,461 related to stock-based compensation costs of $209,893 to assist in our operations, an increase in dues and subscription of $106,619 as we seek potential new markets, an increase in investor relations fees of $153,720 due to higher compliance costs and an overall increase in other costslower fair valuations of $369,354 in anticipation of future growth in our business.equity awards.

Consulting Expenses

Consulting expenses were $46,433($13,312) and $99,518$94,187 for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The decrease in consulting expenses was due to a reduction in public affairs activities (which also included a credit for certain expenses) in 2023 versus 2022. Consulting expenses were $221,242$207,930 and $170,318$264,505 for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increasedecrease in consulting expenses was primarily due to increased search costs for key employees, partially offset by a decrease in costs related to public affairs consulting.consulting, partially offset by increased search costs for key employees.

Research and Development ("R&D") Expenses

Research and developmentR&D expenses were $57,924$46,734 and $87,412$25,000 for the three months ended JuneSeptember 30, 2023 and 2022, respectively. The decreaseincrease was primarily due to a reductionan increase in R&D activities related to the development of new product lines during the three months ended JuneSeptember 30, 2023 compared to the same period in 2022. Research and developmentR&D expenses were $128,812$175,546 and $87,412$112,412 for the sixnine months ended JuneSeptember 30, 2023 and 2022, respectively. The increase in R&D expenses was primarily due to activities pertaining to the development of new product lines.

Goodwill Impairment Charge

Due to our declining stock price, we conducted an impairment test related to our goodwill. As a result of this test, we recorded an impairment charge of $3,392,129 related to our goodwill for the three and nine months ended September 30, 2023. No impairment charges were recorded for the three and nine months ended September 30, 2022.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the sixnine months ended JuneSeptember 30, 2023 and 2022:

Operating Activities

Net cash used in operating activities for the sixnine months ended JuneSeptember 30, 2023 was $3,073,334,$4,039,576, primarily due to a net loss of $3,521,937,$9,510,360, partially offset by changes in operating assets and liabilities, net of $233,300$677,631 and non-cash operating charges of $260,519.$4,793,153, of which $3,392,192 was related to a non-cash goodwill impairment charge and $1,297,384 was related to non-cash stock-based compensation expense. The changes in operating assets and liabilities, net was due to a decrease in accounts receivable of $449,322 as cash collections outpaced sales, a decrease of $1,696,180 in inventory deposits, of $1,771,454, a decrease in prepaid expenses of $356,742 and$3,190, an increase in accounts payable of $317,469,$90,272, partially offset by an increase in inventory of $1,266,924,$1,210,921, an increase in accounts receivableother assets of $660,028$112,382 and a decrease in accrued liabilities of $264,486.$238,030.

Net cash used in operating activities for the sixnine months ended JuneSeptember 30, 2022 was $6,626,388,$8,271,750, primarily due to a net loss of $3,426,701$5,437,212 and changes in operating assets and liabilities, net of $4,169,534,$4,500,050, partially offset by non-cash operating charges of $1,656,590.$1,665,512, of which $1,614,845 was related to stock-based compensation expense. The changes in operating assets and liabilities, net was due to an increase in inventory of $2,728,452,$2,103,834, an increase in accounts receivable of $1,507,435,$1,956,906, a decrease in accrued liabilities of $331,464$194,907 and in increase in inventory deposits of $68,646,$351,970, a decrease in accounts payable of $76,919 and an increase in prepaid expenses of $377,107, partially offset by a decrease in other assets of $158,270,$158,265, a decrease in prepaid expenses of $60,246 and an increase in accounts payableother liabilities of $28,023.$403,328.

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 and government incentives 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 expenses we incur to satisfy future warranty claims.

Investing Activities

Net cash provided by investing activities during the sixnine months ended JuneSeptember 30, 2023 was $1,248,052,$2,306,312, primarily due to the sale of our marketable securities of $1,329,599,$2,342,643, partially offset by $36,331 of capital expenditures. Net cash provided by investing activities during the sixnine months ended JuneSeptember 30, 2022 was $5,943,620,$5,942,221, primarily due to the net sale of our marketable securities of $5,996,091,$6,032,425, partially offset by $52,471$90,204 of capital expenditures. 

Financing Activities

Net cash used in financing activities during the sixnine months ended JuneSeptember 30, 2023 was $212,119$213,161 as a result of repayment of certain notes payable. Net cash provided by financing activities during the sixnine months ended JuneSeptember 30, 2022 was $106,755,$106,234, primarily from the issuance of common stock of $120,000, partially offset by payments on notes payable of $13,245.$13,766.

Liquidity and Capital Resources

As of JuneSeptember 30, 2023, we had cash and cash equivalents of $833,282 and marketable securities of $1,013,044, a combined total of $1,846,326$879,042 and working capital of approximately $13.5$12.0 million. We believe that our existing cash and cash equivalents and marketable securities will be sufficient to fund our operations during the next twelve months and beyond. However, we may not successfully execute our business plan, and if we do not, we may need additional capital to continue our operations and support the increased working capital requirements associated with the fulfillment of purchase orders.

On February 2022, we announced Osceola, Arkansas as the site of itsour state-of-the-art manufacturing facility and new corporate offices. We moved into an approximately 580,000 square foot facility and are 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 us to obtain local tax incentives of up to $27 million, provided that the qualifying expenditures are made. We are not currently contractually obligated to make the expenditures.

Line of Credit

Effective August 4, 2022, we 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 us 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 us in our Centennial Bank accounts. Borrowings under the line may not exceed cash, cash equivalents, and marketable securities balances up to $1,000,000. ThereThis line was closed during the third quarter of 2023 and there was no principal amount outstanding on June 30, 2023 and there is no current plan to borrow from itat the time of closing.

Capital Expenditures

We do not have any contractual obligations for ongoing capital expenditures at this time. We do, however, purchase equipment necessary to conduct our operations on an as needed basis and will begin increasing those expenditures as the Company transferswe transfer assembly and corporate functions to the Osceola Arkansas facility.

Contractual Obligations

Other than as disclosed in the unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q for the period ended JuneSeptember 30, 2023, we have no contractual obligations.

Critical Accounting Policies and Significant Judgments and Estimates

Our consolidated financial statements are prepared in accordance 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 historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles.

Smaller Reporting Company Status

We are 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 most 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 quarter. We may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure about our executive compensation arrangements.

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 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of JuneSeptember 30, 2023. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures (a) were not effective to ensure that information that we are required to disclose in reports that we file or submitssubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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 date of this filing, 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 period ended JuneSeptember 30, 2023. 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There were no material developments during the quarter ended JuneSeptember 30, 2023 in the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2022.2022, except as follows:

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 the Company, certain of its executive officers, Edward R. Monfort, the former Chief Technology Officer and a former director of ADOMANI, Inc., and the two underwriters of the Company’s 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 the Company 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 recessionary damages; and (v) equitable relief at the discretion of the court. Plaintiff Mollik was replaced by putative class representatives Alan K. Brooks and Electric Drivetrains, LLC. Alan K. Brooks was subsequently dropped as a putative class representative.

On June 19, 2023, counsel for Electric Drivetrains and counsel for the Company participated in a mediation at which Electric Drivetrains and the Company executed a binding term sheet to completely resolve this matter. On July 18, 2023, Electric Drivetrains and all defendants executed a Settlement Agreement for complete resolution of the case and dismissal against all defendants with prejudice. No Company proceeds were paid in the settlement. On September 30, 2023, the Court dismissed this action with prejudice and the matter is completely resolved.

ITEM 1A. RISK FACTORS

There were no material changes during the quarter ended JuneSeptember 30, 2023 from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

A list of exhibits is set forth at the end of this Quarterly Report on Form 10-Q for the information required by this item.

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.