Table of Contents
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM
10-Q

FORM 10-Q

X☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

MARCH 31, 2022

or

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________
to ___________

Commission file number File Number:
001-38078

ADOMANI,

ENVIROTECH VEHICLES, INC.

(Exact name of registrant as specified in its charter)

Delaware46-0774222

Delaware
46-0774222
(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4740 Green River

1425 Ohlendorf Road Suite 106

Corona, CA 92880

Osceola, AR 72370
(Address of principal executive offices, including zip code)

(951)
407-9860

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.00001 per share
EVTV
OTC Markets Group Inc.

Indicate by check mark whether the Registrantregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ☐

Indicate by check mark whether the Registrant (1)registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer☐Accelerated filer☐
    
Non-accelerated
filer		ý (Do not check if a smaller reporting company)☒Smaller reporting company☐☒
   Emerging growth companyý☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ý

☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ý

☒

The number of shares outstanding of the Registrant’s only class ofregistrant’s common stock as of November 10, 2017May 13, 2022 was 68,070,930.

299,929,841.
 
 

ADOMANI,

Table of Contents
ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM
10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

Note About Forward-Looking Statements

Part I. FINANCIAL INFORMATION

MARCH 31, 2022
PAGE
Item 1. Financial Statements:
   
PAGE
 
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
2
Unaudited Consolidated Balance Sheets as of September 30, 2017March 31, 2022 and December 31, 20162021
1
   2 
Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017March 31, 2022 and 20162021
2
   3 
Unaudited Consolidated Statement of Stockholders’ Equity (Deficit) for the NineThree Months Ended September 30, 2017March 31, 2022 and 2021
3
   4 
Unaudited Consolidated Statements of Cash Flows for the NineThree Months Ended September 30, 2017March 31, 2022 and 20162021
4
   5 
Notes to Unaudited Consolidated Financial Statements
5
   6 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
12
   20 
Item 3. Quantitative and Qualitative Disclosure about Market Risk
21
   25 
Item 4. Controls and Procedures
21
   25 
Part II. OTHER INFORMATION
  
Item 1. Legal Proceedings
22
   26 
Item 1A. Risk Factors
22
   28 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
23
   28 
Item 3. Defaults Upon Senior Securities
23
   28 
Item 4. Mine Safety Disclosures
23
   28 
Item 5. Other Information
23
   28 
Item 6. Exhibits
23
   29 
Signatures
2430

 

i
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form
10-Q or
(“Quarterly Report,Report”) contains “forward-looking statements” that involve substantial risks and uncertainties. Forward-looking statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.

terminology intended to identify statements about the future.

You should not place undue reliance on forward-looking statements. The cautionary statements 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:

·Our ability to generate demand for our zero-emission or hybrid drivetrains and conversion kits in order to generate revenue;

·Our dependence upon external sources for the financing of our operations, particularly given that our independent registered accounting firm’s report on our consolidated financial statements for the year ended December 31, 2016 contains a statement concerning our ability to continue as a going concern;

·Our ability to effectively execute our business plan;

·Our ability to scale our assembling and converting processes effectively and quickly from low volume production to high volume production;

·Our ability to manage our expansion, growth and operating expenses and reduce and adequately control the costs and expenses associated with operating our business;

·Our ability to obtain, retain and grow our customers;

·Our ability to enter into, sustain and renew strategic relationships on favorable terms;

·Our ability to achieve and sustain profitability;

·Our ability to evaluate and measure our current business and future prospects;

·Our ability to compete and succeed in a highly competitive and evolving industry;

·Our ability to respond and adapt to changes in electric or hybrid drivetrain technology; and

·Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand.

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;
ability to effectively execute our business 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;
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;
ability to enter into, sustain and renew strategic relationships on favorable terms;
ability to achieve and sustain profitability;
ability to evaluate and measure our current business and future prospects;
ability to compete and succeed in a highly competitive and evolving industry;
ability to respond and adapt to changes in electric vehicle 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. We discuss many of these risks and uncertainties in greater detail in this Quarterly Report, particularly in Part II. Item 1A. “Risk Factors.” 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 on Form 10-Q to “ADOMANI,“Envirotech,” the “Company,” “we,” “our,” and “us” refer to ADOMANI,Envirotech Vehicles, Inc. and our consolidated subsidiaries, unless the context indicates otherwise.

 
1

PART I. FINANCIAL INFORMATION

Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADOMANI,

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

  September 30,
2017		 December 31,
2016
ASSETS    
Current assets:        
Cash and cash equivalents $4,475  $938 
Notes receivable, net  1,000   454 
Inventory  704   314 
Other current assets  195   1,039 
Total current assets  6,374   2,745 
Property, plant and equipment, net  501   417 
Other investments  -   120 
Other non-current assets  130   124 
Total assets $7,005  $3,406 
         
         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)        
Current liabilities:        
Accounts payable $182  $107 
Accrued liabilities  382   236 
Notes payable, net  3,195   5,177 
Convertible debt, net  -   593 
Total current liabilities  3,759   6,113 
Total liabilities  3,759   6,113 
         
Commitments and contingencies        
         
Stockholders' equity (deficit):        
Preferred stock, 100,000,000 authorized $0.00001 par value none issued and outstanding, respectively  -   - 
Common stock, 2,000,000,000 authorized $0.00001 par value,  68,070,930 and 58,542,350 issued and outstanding, respectively  1   1 
Additional paid-in capital  45,930   18,366 
Accumulated deficit  (42,685)  (21,074)
Total stockholders' equity (deficit)  3,246   (2,707)
Total liabilities and stockholders' equity $7,005  $3,406 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

   
March 31,

2022
  
December 31,

2021
 
ASSETS
         
Current assets:
         
Cash and cash equivalents
  $4,040,542  $4,846,490 
Restricted cash
   60,063   60,035 
Marketable securities
   4,998,500   8,002,700 
Accounts receivable
   2,535,982   1,428,030 
Inventory, net
   6,736,161   3,850,541 
Inventory deposits
   3,411,975   4,503,079 
Prepaid expenses
   207,395   332,514 
   
 
 
  
 
 
 
Total current assets
   21,990,618   23,023,389 
Property and equipment, net
   265,955   272,113 
Goodwill
   51,775,667   51,775,667 
Other
non-current
assets
   75,869   236,639 
   
 
 
  
 
 
 
Total assets
  $74,108,109  $75,307,808 
   
 
 
  
 
 
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
         
Current liabilities:
         
Accounts payable
  $170,524  $238,464 
Accrued liabilities
   753,756   1,280,020 
Notes payable, net
   31,788   31,788 
   
 
 
  
 
 
 
Total current liabilities
   956,068   1,550,272 
   
Long-term liabilities
         
Other
non-current
liabilities
   0     2,427 
Notes payable, net
   5,298   13,245 
   
 
 
  
 
 
 
Total liabilities
  
961,366  
1,565,944 
   
 
 
  
 
 
 
Stockholders’ equity (deficit):
         
Preferred stock, 5,000,000 authorized, $0.00001 par value per share, NaNissued and outstanding as of March 31, 2022, and December 31, 2021
  
0—    
0—   
Common stock, 350,000,000 authorized, $0.00001 par value per share, 299,929,841 and 298,160,160 issued and outstanding as of March 31, 2022, and December 31, 2021, respectively
   2,999   2,981 
Additional
paid-in
capital
   83,795,501   81,863,243 
Accumulated deficit
   (10,651,757)   (8,124,360) 
   
 
 
  
 
 
 
Total stockholders’ equity
   73,146,743   73,741,864 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $74,108,109  $73,307,808 
   
 
 
  
 
 
 
See Accompanying Notes to Unaudited Consolidated Financial Statements
.
2
Table of Contents
ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
   
Three Months Ended March 31,
 
   
2022
  
2021
 
Sales
  $1,108,500  $470,793 
Cost of sales
   691,562   313,434 
   
 
 
  
 
 
 
Gross profit
   416,938   157,359 
Operating expenses:
         
General and administrative
   2,876,848   585,903 
Consulting
   70,800   10,250 
   
 
 
  
 
 
 
Total operating expenses, net
   2,947,648   596,153 
   
 
 
  
 
 
 
Loss from operations
   (2,530,710)   (483,794) 
Other income (expense):
         
Interest income (expense), net
   12,272   (922) 
Other income (expense)
   (8,959)   (494) 
   
 
 
  
 
 
 
Total other income (expense)
   3,313   (1,416) 
   
 
 
  
 
 
 
Loss before income taxes
   (2,527,397)   (440,210) 
Income tax expense
   0     (218,300) 
   
 
 
  
 
 
 
Net loss
  $(2,527,397)  $(658,510) 
   
 
 
  
 
 
 
Net loss per share to common stockholders:
         
Basic and diluted
  $(0.01)  $(0.01) 
   
 
 
  
 
 
 
Weighted shares used in the computation of net loss per share:
         
Basic and diluted
   298,537,193   45,374,856 
   
 
 
  
 
 
 
See Accompanying Notes to Unaudited Consolidated Financial Statements.
3
Table of Contents
ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF
STOCKHOLDERS
’ EQUITY
(unaudited)
   
Common Stock
   
Additional

Paid-In

Capital
   
Accumulated

Deficit
  
Stockholders’

Equity (Deficit)
 
   
Shares
   
    Amount    
 
Balance, December 31, 2021
   298,160,160   $2,981   $81,863,243   $(8,124,360)  $73,741,864 
Common stock issued for cash
   1,000,000    10    119,990    —     120,000 
Common stock issued for lawsuit settlement
   769,681    8    197,423    —     197,431 
Stock based compensation
   —      —      1,614,845    —     1,614,845 
Net loss
   —      —      —      (2,527,397)   (2,527,397) 
   
 
 
   
 
 
   
 
 
   
 
 
  
 
 
 
Balance, March 31, 2022
   299,929,841   $2,999   $83,795,501   $(10,651,757)  $73,146,743 
1

ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
Net sales $-  $-  $-  $68 
Cost of sales  -   -   -   50 
Gross profit  -   -   -   18 
Operating expenses:                
General and administrative  11,716   5,872   18,363   8,107 
Consulting  49   -   2,213   95 
Research and development  38   112   557   128 
Total operating expenses, net  11,803   5,984   21,133   8,330 
Loss from operations  (11,803)  (5,984)  (21,133)  (8,312)
                 
Other income (expense):                
Interest expense, net  (47)  (274)  (362)  (833)
Other income (expense)  (116)  (11)  (113)  (9)
Total other income (expense)  (163)  (285)  (475)  (842)
                 
Loss before income taxes  (11,966)  (6,269)  (21,608)  (9,154)
Income tax expense  (1)  -   (3)  - 
Net loss $(11,967) $(6,269) $(21,611) $(9,154)
                 
Net loss per share to common shareholders:                
Basic and diluted $(0.18) $(0.11) $(0.33) $(0.13)
                 
Weighted shares used in the computation of net loss per share:                
Basic and diluted  68,070,930   57,163,882   66,020,773   69,286,226 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2

ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

(in thousands, except per share data)

(unaudited)

  Common Stock Additional
Paid-In		 Accumulated Stockholders'
  Shares Amount Capital Deficit Equity (Deficit)
Balance, December 31, 2016  58,542,350  $1  $18,366  $(21,074) $(2,707)
                     
Common stock issued due to debt conversion  6,868,578   -   726   -   726 
Common stock issued for cash  2,510,002   -   12,550   -   12,550 
Offering costs netted against proceeds from common stock issued for cash  -   -   (4,437)  -   (4,437)
Common stock issued for prepaid services cancelled  (100,000)  -   (100)  -   (100)
Common stock issued as offering costs  250,000   -   1,250       1,250 
Warrants issued for services  -   -   1,241       1,241 
Warrants issued as offering costs  -   -   681       681 
Stock based compensation  -   -   15,653   -   15,653 
Net loss  -   -   -   (21,611)  (21,611)
Balance, September 30, 2017  68,070,930  $1  $45,930  $(42,685) $3,246 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

3

ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

  Nine Months Ended September 30,
  2017 2016
Cash flows from operating activities:        
Net loss  (21,611)  (9,154)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  11   9 
Accretion of discount on note receivable  (46)  - 
Amortization of debt discount  130   454 
Stock based compensation expense  15,653   6,920 
Warrant issued for services  1,241   - 
Gain on disposal of property and equipment  (1)  - 
Write-off of investment  120   - 
Changes in assets and liabilities:        
Inventory  (390)  - 
Other current assets  (59)  (28)
Other non-current assets  (5)  (90)
Accounts payable  75   165 
Accrued liabilities  226   (315)
Deferred revenue  -   (68)
Net cash used in operating activities  (4,656)  (2,107)
         
Cash flows from investing activities:        
Purchases of property, plant and equipment, net  (94)  (359)
Investment in note receivable, net  (500)  - 
Other Investments  -   (10)
Net cash used in investing activities  (594)  (369)
         
Cash flows from financing activities:        
Proceeds from issuance of common stock  12,550   188 
Payments for stock rescission  -   (54)
Proceeds from issuance of debt, net of issuance costs  500   42 
Principal repayments of debt  (2,560)  (8)
Payments for deferred offering costs  (1,703)  (492)
Net cash provided (used) by financing activities  8,787   (324)
         
Net change in cash and cash equivalents  3,537   (2,800)
Cash and cash equivalents at the beginning of the year  938   4,537 
         
Cash and cash equivalents at the end of the year $4,475  $1,737 
         
Non-cash transactions:        
Debt discount due to BCF $-  $42 
Stock issued for third-party services rendered $-  $98 
Stock issued for prepaid services $-  $100 
Common stock issued for conversion of notes payable $-  $885 
Common stock issued due to debt conversion $726  $- 
Deferred offering costs reclassified to equity $838  $- 
Common stock issued for prepaid services rescinded $100  $- 
Common stock issued as offering costs $1,250  $- 
Warrants issued as offering costs $681   - 
         
Supplemental cash flow disclosures:        
Cash paid for interest expense $288  $361 
Cash paid for income taxes $-  $- 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

4

ADOMANI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.Organization and Operations

ADOMANI, Inc., or “we”, “us”, “our” or the “Company”, was incorporated in Florida in August 2012 and reincorporated in Delaware in November 2016. The Company is a provider of advanced zero-emission electric and hybrid vehicles and replacement drivetrains that is focused on reducing the total cost of vehicle ownership. The Company’s drivetrain systems are designed to help fleet operators unlock the benefits of green technology and address the challenges of traditional fuel price cost instability and local, state and federal environmental regulatory compliance. The Company’s principal executive offices are located in Corona, California. Our telephone number is (951) 407-9860 and our corporate website address is www.adomanielectric.com.

2.Summary of Significant Accounting Policies

Basis of Presentation—The consolidated financial statements and related disclosures as of September 30, 2017 and for the nine months ended September 30, 2017 and 2016, are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission, or SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with our audited financial statements for the years ended December 31, 2016 and 2015 included in our 253(g)(2) offering circular filed with the SEC on May 16, 2017. The results of operations for the nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for the full year.

The Company has incurred losses for the past several years while developing infrastructure and planning a public offering of equity securities. The Company incurred net losses of $21.6 million and $9.2 million during the nine months ended September 30, 2017 and 2016, respectively. The Company completed an offering of Common Stock under Regulation A on June 9, 2017, as discussed in Note 5 below.

The Company’s independent registered public accounting firm expressed in its report on the Company’s financial statements for the year ended December 31, 2016 substantial doubt about the Company’s ability to continue as a going concern. Based on management’s plans and the significant capital raised during the nine months ended September 30, 2017, that substantial doubt has been alleviated.

Principles of Consolidation—The accompanying financial statements reflect the consolidation of the individual financial statements of ADOMANI, Inc., ADOMANI California, Inc., Adomani (Nantong) Automotive Technology Co. Ltd., School Bus Sales of California, Inc, and Zero Emission Truck and Bus Sales of Arizona, Inc. All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition—The Company recognizes revenue from the sales of advanced zero-emission electric drivetrain systems for fleet vehicles. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title has passed, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.

Stock-Based Compensation—The Company accounts for employee stock-based compensation in accordance with the guidance of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or 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.

The Company follows ASC Topic 505-50, formerly EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees.  In accordance with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital over the period during which services are rendered.

5

Recent Accounting Pronouncements—In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): “Scope of Modification Accounting.” The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including any interim period, for reporting periods for which financial statements have not been issued. The Company will adopt this change effective with the financial statements issued for annual periods beginning after December 15, 2017.

Reclassification

Certain amounts in the 2016 financial statements have been reclassified to conform to the 2017 financial presentation. These reclassifications have no impact on net loss.

3.Notes Receivable

On June 29, 2017, the Company loaned $500,000 to an unaffiliated third party with engineering expertise in the electric bus technology industry, with whom the Company may seek an alliance at some future date, in order to provide it with working capital. The stated interest rate is 9% per annum, with interest payments due monthly beginning July 31, 2017. The note is secured by the assets of the borrower

   
Common Stock
   
Additional

Paid-In

Capital
  
Accumulated

Deficit
  
Stockholders’

Equity (Deficit)
 
   
Shares
   
    Amount    
 
Balance, December 31, 2020
   1   $100   $0    $(472,260)  $(472,160) 
Common stock issued for cash
   142,558,000    1,425    6,413,785   —     6,415,210 
Common stock retained in merger
   112,675,558    1,027    53,508,495   —     53,509,522 
Offering costs netted against proceeds common stock
   —      —      (156,443)   —     (156,443) 
Net loss
   —      —      —     (658,510)   (658,510) 
   
 
 
   
 
 
   
 
 
  
 
 
  
 
 
 
Balance, March 31, 2021
   255,233,559   $2,552   $59,765,837  $(1,130,770)  $58,637,619 
See Accompanying Notes to Unaudited Consolidated Financial Statements.
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ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
   
Three Months Ended March 31,
 
   
        2022        
  
        2021        
 
Cash flows from operating activities:
         
Net loss
  $(2,527,397)  $(658,510) 
Adjustments to reconcile net loss to net cash used in operating activities:
         
Depreciation and amortization
   18,659   7,996 
Unrealized loss on marketable securities
   4,137   0   
Stock based compensation expense
   1,614,845   0   
Changes in assets and liabilities:
         
Accounts receivable
   (1,107,952)   (151,824) 
Inventory
   (2,885,620)   (331,361) 
Inventory deposits
   1,091,104   0   
Prepaid expenses
   125,119   38,705 
Other
non-current
assets
   160,770   244,487 
Accounts payable
   (67,940)   (416,461) 
Accrued liabilities
   (331,259)   (1,530,046) 
Other
non-current
liabilities
   0     (98,866) 
   
 
 
  
 
 
 
Net cash (used in) operating activities  
(3,905,534)  
(2,895,880) 
   
 
 
  
 
 
 
Cash flows from investing activities:
         
Purchase of property and equipment, net
  
(12,502)  
0   
Investment in marketable securities
   (999,937)   —   
Sale of marketable securities
   4,000,000   —   
Cash acquired in merger
   0     3,373,332 
   
 
 
  
 
 
 
Net cash provided by investing activities  
2,987,561  
3,373,332 
   
 
 
  
 
 
 
Cash flows from financing activities:
         
Proceeds from issuance of common stock
  
120,000  
6,415,110 
Payments for deferred offering costs
   0     (156,443) 
Principal advances from (repayments on) debt
   (7,947)   (152,835) 
   
 
 
  
 
 
 
Net cash provided by financing activities
   112,053   6,105,832 
   
 
 
  
 
 
 
Net change in cash, and restricted cash
   (805,920)   6,583,284 
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
  $4,100,605  $8,513,416 
   
 
 
  
 
 
 
Supplemental cash flow disclosures:
         
   
 
 
  
 
 
 
Cash paid for interest expense
  $0    $—   
   
 
 
  
 
 
 
Cash paid for income taxes
  $0    $—   
Non-cash common stock lawsuit settlement  $197,431  $— 
See Accompanying Notes to Unaudited Consolidated Financial Statements.
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ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1.
Organization and matures on December 31, 2017. The Company loaned an additional $500,000 to another third party in December 2016 in connection with its issuance of a promissory note with a principal amount of $500,000 to an unaffiliated third party (see Note 4).

Operations

4.Debt

During 2016, 2015 and 2014, the Company issued convertible notes for total proceeds of $42,160, $20,275 and $207,465, respectively, to Acaccia Family Trust, or Acaccia, formerly a related party. As of December 31, 2016, the outstanding balance of such convertible notes was $359,000. During 2014, the Company issued convertible notes for total proceeds of $286,000 to various third parties. As of December 31, 2016, the aggregate face value of the convertible notes issued to third and related parties was $645,000. All notes had a three-year maturity and bore interest at rates of 3% or 5% per annum. The terms of such loans permitted conversion of all outstanding principal and accrued interest into shares of common stock, with loans totaling $45,000 convertible at a rate of $0.50 per share and loans totaling $600,000, including the convertible notes issued to Acaccia, convertible at $0.10 per share. During 2016, the Company’s CFO purchased $25,000 of the $645,000 convertible notes outstanding from Acaccia. Effective January 30, 2017, all holders of such convertible debt converted their debt, which totaled $725,584, consisting of the outstanding principal amount and accrued and unpaid interest as of the date of conversion, into 6,868,578 shares of common stock, or Common Stock, in anticipation of our public offering of Common Stock. As of September 30, 2017, all such convertible notes have been converted and no balance remains outstanding thereunder. No gain or loss resulted from the conversion of this debt to equity.

As these notes had an effective conversion price that was less than the fair market value of the Common Stock, these notes gave rise to a beneficial conversion feature totaling $42,160 and $20,275 during 2016 and 2015, respectively, which was recognized as an increase to paid-in capital and a corresponding debt discount. The debt discount was being amortized to interest expense on an effective interest basis over the maturity of the notes. For the nine months ended September 30, 2017 and 2016, debt discount amortization associated with these notes was $51,935 and $50,532, respectively, which was recognized as interest expense in the accompanying consolidated statement of operations. The unamortized discount of these convertible notes was $0 and $51,935 at September 30, 2017 and December 31, 2016, respectively.

6

During 2015, the Company issued two-year secured promissory notes with an aggregate face value of $5,147,525 to third-party lenders for cash. The notes are secured by all the assets of the Company, mature between January and November 2017 and bear interest at 9%. Prior to the maturity dates of the notes, the Company exercised its option to extend the maturity dates six months pursuant to the provisions of such notes. In connection with these notes, the Company incurred debt issuance costs of $514,753, which are being recognized as a debt discount and amortized over the life of the notes. During the nine months ended September 30, 2017 and 2016, the debt discount amortization associated with these notes was $29,006 and $160,688, respectively, which was recognized as interest expense in the accompanying unaudited consolidated statements of operations. As of September 30, 2017, the debt issuance costs associated with these notes have been fully amortized. As of September 30, 2017, the Company has repaid in cash $1,060,000 in principal relative to these notes. In September 2016, the Company authorized the exchange of $884,700 principal amount of these notes for 884,700 shares of Common Stock. There was no gain or loss that resulted from the conversion of the notes to equity.

On November 18, 2016, the Company issued a promissory note with a principal amount of $500,000 to a stockholder in order to insure adequate working capital through the close of its offering under Regulation A. The loan evidenced by the note is for a period of one year, at an interest rate of 5% per annum, with the principal and any unpaid interest due and payable in cash at maturity. On March 17, 2017, due to unforeseen delays in the closing of the offering under Regulation A, the Company issued a second promissory note with a principal amount of $500,000 to the same stockholder in order to address additional liquidity concerns. The second note also bears interest at a rate of 5% per annum, with the principal and any unpaid interest due and payable in cash at maturity. The loans mature on November 15, 2017, unless previously repaid in accordance with the terms thereof. On May 12, 2017, the Company repaid both notes, plus accrued and unpaid interest of $15,685, from the proceeds of the initial closing of the offering under Regulation A.

In December 2016, the Company borrowed $500,000 from an unaffiliated third party. The loan matured on June 15, 2017. It contains no stipulated interest rate, but the Company was obligated to pay loan fees of $50,000 to the lender. The proceeds of the loan were immediately used to loan $500,000 to a company in the zero-emissions technology industry that specializes in drivetrain solutions for zero emission and hybrid vehicles. The loan, carried as a note receivable on the balance sheet, contains the same provisions, including the loan fees payable to the Company, as the note payable discussed above in this paragraph, and also matured on June 15, 2017. The Company repaid the loan to the unaffiliated third party on May 12, 2017 from the proceeds of the initial closing of the offering under Regulation A. The maturity date for the note receivable has been extended to December 31, 2017. During the nine months ended September 30, 2017, the related amortization expense recognized on this loan amounted to $45,833.

In January 2015, in connection with the 2015 9% secured notes payable financing discussed above, the Company agreed to issue a warrant exercisable for 1,250,000 shares of Common Stock of the Company at an exercise price of $4.00 per share. The warrant, issued in September 2016, was valued using the Black-Scholes valuation model and the resulting fair market value of $349,042 was recorded in 2015 as debt discount and is being amortized over the term of the notes. Interest expense relating to the amortization of this discount was $3,347 and $131,010 for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the fair market value of the warrant was fully amortized.

7

Details of notes payable at September 30, 2017 and December 31, 2016 are as follows:

  As of September 30,
2017		 As of December 31,
2016
Convertible Debt        
Principal amount outstanding $-  $645,000 
Cumulative discount for notes with beneficial conversion feature  -   (349,560)
Cumulative amortization of debt discount  -   297,625 
Subtotal of convertible notes @ $0.10 or $.50/share  -   593,065 
         
Notes Payable        
Principal amount outstanding  3,195,325   5,255,325 
Cumulative discount for finance charges incurred  (514,753)  (514,753)
Cumulative discount for warrant  (349,042)  (349,042)
Cumulative discount for 9% notes  (50,000)  (50,000)
Cumulative amortization of finance charges  514,753   485,747 
Cumulative amortization of warrant expense  349,042   345,695 
Cumulative amortization of 9% notes  50,000   4,167 
Subtotal of notes payable  3,195,325   5,177,139 
Total of debt $3,195,325  $5,770,204 

5.Common Stock

Effective January 30, 2017, all holders

Envirotech Vehicles, Inc. (“we”, “us”, “our” or the “Company”) is 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. The Company serves 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. The Company’s vehicles address the challenges of traditional fuel price cost instability and local, state, and federal regulatory compliance.
On March 15, 2021, the Company completed its acquisition of Envirotech Drive Systems, Inc., a Delaware corporation (“EVTDS”), a supplier of
zero-emission
trucks, cargo vans, chassis, and other commercial vehicles. The transaction was completed in accordance with an Agreement and Plan of Merger, dated February 16, 2021 (the “Merger Agreement”), by and among the Company, EVTDS, and EVT Acquisition Company, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”). See Note 3.
The Company was formerly known as ADOMANI, Inc. On May 26, 2021, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation the Company with the Secretary of State of the State of Delaware to change its name from ADOMANI, Inc. to Envirotech Vehicles, Inc., effective as of May 26, 2021.
On February 22, 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 negotiations with the City of Osceola and the Arkansas Economic Development Commission. 
2.
Summary of the $645,000 original principal amount of convertible debt converted their debt, which totaled $725,584, consisting of the outstanding principal amount and accrued and unpaid interest as of the date of conversion, into 6,868,578 shares of Common Stock (see Note 4).

In March 2017, Dennis Di Ricco, who formerly served as the trustee of Acaccia, along with his family members and trusts, relinquished voting and investment power over all securities of the Company they owned, which constituted approximately 22% of the outstanding Common Stock of the Company. Mr. Di Ricco also surrendered his options to purchase up to 7,000,000 shares of common stock for forfeiture and cancellation, and sold (in a private transaction to which the Company was not a party) all 2,500,000 shares of Common Stock held as of record by his IRA. In connection with the foregoing, the Company and Mr. Di Ricco also terminated their consulting relationship (see Note 7).

In March 2016, the Company entered into a consulting agreement with Redwood Group International Limited, or Redwood. In exchange for its services, Redwood received $5,000 per month in retainer payments and was eligible to receive other fees and warrants, as set forth in the consulting agreement. The initial term of the consulting agreement was 12 months, ending on February 28, 2017, although the term would automatically extend for an additional 12 months unless terminated by either party. On September 29, 2016, the Company executed a letter agreement with Redwood, pursuant to which it issued to Redwood an additional 100,000 shares of Common Stock, subject to Redwood satisfying certain performance thresholds. If Redwood failed to meet such performance thresholds, the agreement provided the Company with an exclusive option to reacquire all or a portion of the shares of Common Stock at $0.00001 per share. On November 15, 2016, the Company and Redwood agreed to terminate the original consulting agreement and entered into a new consulting agreement that was set to expire upon thirty days’ written notice by either party following the successful completion of the Company’s offering under Regulation A. The new consulting agreement was substantially similar to the prior agreement with respect to fees and warrants due to Redwood, and provided that the Company would pay Redwood a sum of $800,000 and issue Redwood a warrant to acquire 350,000 shares of Common Stock. In May 2017, the Company and Redwood mutually agreed to terminate this agreement. On June 8, 2017, the Company paid a fee of $800,000 to Redwood and issued Redwood a warrant to purchase 350,000 shares of Common Stock, in connection with which the Company cancelled the 100,000 shares of Common Stock it had previously issued pursuant to the September 2016 letter agreement. The warrant to purchase 350,000 shares of Common Stock was valued using the Black-Scholes method resulting in a fair market value of $1.24 million. The assumptions used in the valuation included the term of 5 years, the exercise price of $5.00 per share, volatility of 92% and a risk-free interest rate of 1.75%. The fair value of the warrant was recorded as consulting expense during the nine months ended September 30, 2017.

8
Significant Accounting Policies

On June 9, 2017, the Company consummated the final closing of the offering under Regulation A, as discussed in Note 2 above. The Company sold an aggregate of 2,852,275 shares of Common Stock, of which 342,273 shares were sold on behalf of certain stockholders of the Company who elected to participate in the offering, for aggregate gross proceeds of $14,261,375. Net proceeds received after deducting commissions, expenses and fees of approximately $2.5 million and the $1,711,365, amounted to approximately $10.0 million. The Company remitted the $1,711,365 in aggregate gross proceeds resulting from the sale of shares on behalf of the selling stockholders to such stockholders. As such, the Company issued and sold an aggregate of 2,510,002 shares of Common Stock in connection with the offering under Regulation A, excluding the shares sold by the selling stockholders. In connection with the final closing of the offering under Regulation A on June 9, 2017, the Company issued an additional 250,000 shares of Common Stock, valued at $1,250,000 under the terms of a consulting agreement. Under the terms of the underwriting agreement executed in connection with the offering under Regulation A, the Company issued to Boustead Securities, LLC a warrant to purchase 199,659 shares of Common Stock. The warrant to purchase 199,659 shares of Common Stock was valued using the Black-Scholes method resulting in a fair market value of $680,543. The assumptions used in the valuation included the term of 5 years, the exercise price of $6.00 per share, volatility of 92% and a risk-free interest rate of 1.75%. The fair value of the warrant was recorded as offering costs and netted against additional paid in capital during the nine months ended September 30, 2017.

6.Stock Warrants

As of September 30, 2017, the Company has issued warrants to purchase 1,799,659 shares of Common Stock, consisting of a warrant to purchase 199,659 shares of Common Stock with a measurement price of $5.00 and an exercise price of $6.00, a warrant to purchase 350,000 shares of Common Stock with a measurement price of $5.00 and an exercise price of $5.00, and a warrant to purchase 1,250,000 shares of Common Stock with a measurement price of $1.00 and an exercise price of $4.00.

The Company’s stock warrant activity for the nine months ended September 30, 2017 is summarized as follows:

  Number of
Shares		 Weighted
Average
Exercise
Price		 Weighted
Average
Remaining
Contractual Life (years)
Outstanding at December 31, 2016  1,250,000  $4.00     
Granted  549,659   5.36     
Forfeited  -         
Outstanding at September 30, 2017  1,799,659  $4.42   4.12 
   ��         
Exercisable at September 30, 2017  1,250,000  $4.00   3.92 
Basis of Presentation
—The consolidated financial statements and related disclosures of EVTDS (see Note 3) as of March 31, 2022, which include the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries, and for the fiscal period ended March 31, 2022, which include the consolidated results of operations of EVTDS and Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries for the entire three-month period. The consolidated financial statements and related disclosures as of December 31, 2021 include the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries, including EVTDS. The consolidated results of operations for the three months ended March 31, 2021 include the results of operations of EVTDS for the entire period and include the consolidated results of operations of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries for the post-merger period March 16, 2021 through March 31, 2021. These consolidated financial statements are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and EVTDS audited financial statements for the years ended December 31, 2021 and 2020 included in the Company’s Annual Report on Form
10-K
filed with the SEC on April 26 , 2022. The results of operations for the fiscal period ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
—The accompanying financial statements reflect the consolidation of the financial statements of EVTDS, its wholly-0wned subsidiary Envirotech Drive Systems Incorporated, Envirotech Vehicles, Inc., ADOMANI California, Inc., Adomani (Nantong) Automotive Technology Co. Ltd., ADOMANI ZEV Sales, Inc., Zero Emission Truck and Bus Sales of Arizona, Inc., and ZEV Resources, Inc. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates
—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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Fair Value of Financial Instruments
—The carrying values of the Company’s financial instruments, including cash, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 820, “Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
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: Unobservable inputs that are supported by little or no market data and that require the reporting entity to develop its own assumptions.
The Company does 0t have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.
Revenue Recognition
— The Company recognizes revenue from the sales of
zero-emission
electric vehicles and vehicle maintenance and inspection services. The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. At March 31, 2022, the Company did have a concentration of customers; five customers’ balances account for approximately 83 percent of the outstanding accounts receivable; for the three months ended March 31, 2022, two customers accounted for 100% of the reported revenue, with one of the two customers accounting for approximately 81 percent of the quarterly revenue recorded.
In applying ASC Topic 606, the Company is required to:
(1) identify any contracts with customers;
(2) determine if multiple performance obligations exist;
(3) determine the transaction price;
(4) allocate the transaction price to the respective obligation; and
(5) recognize the revenue as the obligation is satisfied.
Product revenue also includes the sale of electric trucks and cargo vans. These sales represent a single performance obligation with revenue recognition occurring at the time title transfers. Transfer of title occurs when the customer has accepted the vehicle and signed the appropriate documentation acknowledging receipt.
The Company provides the option of financing (flooring) to Factory Authorized Representatives (“FARs”) for demo vehicles that are used in their selling process. Flooring agreements are made either expressly or implicitly and last no longer than one year with respect to specific vehicles, as payment for the vehicles is due in full before the first anniversary of the agreement, or upon sale by the FAR of the demo vehicle. The interest rate associated with the flooring agreement is agreed upon at the time of executing the FAR agreement. The Company has elected the practical expedient allowed by ASC Topic 606 where consideration does not need to be adjusted for financing components of the agreement.
Cash and Cash Equivalents
—The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less to be cash equivalents. The recorded value of our restricted cash and cash equivalents approximates their fair value. The Company had $60,063 and $60,035 restricted cash at March 31, 2022 and at December 31, 2021, respectively. The amounts at both dates relate to balances required by our bank to support certain minor activities. See Concentration of Credit Risk below in this Note.
Marketable Securities
—The Company invests in short-term, highly liquid, marketable securities, such as U.S. Treasury notes,
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U.S. Treasury bonds, and other government-backed securities. The Company classifies these marketable securities as
held-to-maturity,
as the intent is not to liquidate them prior to the respective stated maturity date. At March 31, 2022, the aggregate amount of the Company’s investments in marketable securities was $4,998,500. These securities had original maturity dates ranging from 122 days to 364 days, and at March 31, 2022, the remaining maturity dates on these securities ranged from 14 days to 77 days. Investments in marketable securities at December 31, 2021 were $8,002,700.
Accounts Receivable and Allowance for Doubtful Accounts—
The Company establishes an allowance for bad debts through a review of several factors, including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. The Company does not generally require collateral for its accounts receivable. The Company had trade accounts receivable of $2,535,982 and $1,428,030 as of March 31, 2022 and December 31, 2021, respectively. A significant portion of the Company’s sales are made to customers who qualify for state-sponsored grant programs which can cover a significant portion, up to most of, a vehicle’s purchase price. Grant monies are paid directly to vehicle dealers like the Company after the customer and the dealer meet state requirements related to the transaction; reimbursements to the dealer may take two to six months from the date of request before being received. The Company does not provide an allowance for doubtful accounts related to sales made utilizing state grant funds, as those funds are guaranteed by the state(s) once awarded. Because the trade accounts receivable balance at March 31, 2022 is from credit-worthy customers, many of whom are our Company’s Factory Authorized Representatives (“FARs”), and because the December 31, 2021 balance was in the collection process for guaranteed state grant funding subsequent to that date, no allowance has been recorded relative to the trade accounts receivable balance as of March 31, 2022 or December 31, 2021. As discussed above, at March 31, 2022, the Company did have a concentration of customers; five customers’ balances account for approximately 83 percent of the outstanding accounts receivable; for the three months ended March 31, 2022, two customers accounted for 100
 percent
 of the reported revenue, with one of the two customers accounting for approximately 81 percent of the quarterly revenue recorded.
Inventory and Inventory Valuation Allowance
—
The Company records inventory at the lower of cost or market, and uses a First In, First Out (“FIFO”) accounting valuation methodology, and establishes an inventory valuation allowance for vehicles that it does not intend to sell in the future. The Company had finished goods inventory on hand of $6,748,590 as of March 31, 2022 and recorded an inventory valuation allowance of $12,429 related to three vehicles that the Company does not intend to sell in the future as of March 31, 2022, resulting in a net inventory balance of $6,736,161 as of March 31, 2022. The Company had finished goods inventory on hand and a related inventory valuation of $3,862,970 and $12,429 allowance as of December 31, 2021.
Inventory Deposits—
Certain of our vendors require the Company to pay upfront deposits before they will commence manufacturing our vehicles, and then require progress deposits through the production cycle and before the finished vehicles are shipped. These deposits are classified as inventory deposits in the Balance Sheet. Upon completion of production acceptance by the Company, and passage of title to the Company, deposits are reclassified to inventory. The Company had inventory deposits of $3,411,975 and $4,503,079 as of March 31, 2022 and December 31, 2021, respectively. Deposits paid to two vendors accounted for 95 percent of the deposits outstanding at March 31, 2022; one different vendor with an affiliation to the two vendors just mentioned accounted for approximately 98 percent of the cost of sales for the three months ended March 31, 2022.
Income Taxes
—The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.
Accounting for Uncertainty in Income Taxes—
The Company evaluates its uncertain tax positions and will recognize a loss contingency when it is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. At March 31, 2022 and December 31, 2021, respectively, management did not identify any uncertain tax positions.
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Net Loss Per Share
—Basic net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period.
Diluted net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares of common stock outstanding is the basic weighted number of shares of common stock adjusted for any potentially dilutive debt or equity securities. As of March 31, 2022, 12,165,326 shares of the Company’s common stock were subject to issuance upon the exercise of stock options then outstanding and 28,597,994 shares of the Company’s common stock were subject to issuance upon the exercise of warrants then outstanding.
Concentration of Credit Risk
—The
Company has credit risks related to cash and cash equivalents on deposit with a federally insured bank, as at times it exceeds the $250,000 maximum amount insured by the Federal Deposit Insurance Corporation (“FDIC”). Additionally, the Company maintains cash and short-term securities invested at Morgan Stanley Private Bank, National Association (“Morgan Stanley”). Between FDIC and the Securities Investor Protection Corporation (“SPIC”) coverage, funds up to $750,000, which may include cash up to $500,000, are insured. In addition, Morgan Stanley provides excess insurance acquired by them from SPIC for an additional $1.9 million in cash and unlimited per customer securities up to a $1 billion cap.
During the three months ended March 31, 2022, the Company’s bank required compensating balances for a subsidiary’s potential lease exposure and for the Company’s credit card limit, resulting in restricted cash of $60,063.
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 0impairment of long-lived assets, or property and equipment, as of March 31, 2022 and December 31, 2021, 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 March 31, 2022 and at December 31, 2021 that $51,773,667 in goodwill related to the ADOMANI, Inc. and EVTDS Merger did not experience impairment.
Research and Development
—Costs incurred in connection with the development of new products and manufacturing methods are charged to operating expenses as incurred. Research and development costs were $58,139 for the year ended December 31, 2021. NaNcosts were incurred during the three-months ended March 31, 2022
.
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. With respect to the options to purchase 6,817,855 shares of common stock issued on January 7, 2022 and the options to purchase
77, 471
shares of common stock issued on January 31, 2022 (see Note 7),
non-cash
stock-based compensation expense of $1,614,845 was recorded for the three months ended March 31, 2022.
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.

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Table of Contents
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.

As of September 30, 2017, the outstanding warrants have an intrinsic value of approximately $4.58 million.

3.
Merger
7.Stock-Based Compensation

In March 2017, Dennis Di Ricco surrendered his options to purchase up to 7,000,000 shares of Common

On March 15, 2021, the Company completed its acquisition of EVTDS, a supplier of
zero-emission
trucks, cargo vans, chassis, and other commercial vehicles. The transaction was completed in accordance with the Merger Agreement, by and among the Company, EVTDS and Merger Sub. As a result of such transaction, Merger Sub was merged with and into EVTDS, with EVTDS surviving as a wholly owned subsidiary of the Company (the “Merger”). In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of the common stock of EVTDS was automatically converted into the right to receive one share of the common stock of the Company. As a result of the Merger, the Company issued an aggregate of 142,558,001 shares of its common stock to the former EVTDS stockholders, which shares represented approximately 56% of the total issued and outstanding shares of common stock of the Company as of immediately following the effective time of the Merger. This exchange of shares and the resulting controlling ownership of EVTDS constitutes a reverse acquisition resulting in a recapitalization of EVTDS and purchase accounting being applied to ADOMANI, Inc. under ASC 805 due to EVTDS being the accounting acquirer and ADOMANI, Inc. being deemed an acquired business. This requires financial reporting from the Merger close date forward to reflect only the historic consolidated results of EVTDS and to include the consolidated results for Envirotech Vehicles, Inc. and subsidiaries from March 16, 2021 forward.
The primary reasons EVTDS consummated the merger with ADOMANI, Inc. were the opportunity to immediately become a public company without the process of doing its own initial public offering, affording it the opportunity to more quickly raise capital and provide liquidity options to its stockholders, at the same time acquiring the infrastructure required of a public company run by people experienced in investor relations and the public company regulatory compliance issues and filings required. In addition, since ADOMANI, Inc. had been the sole customer of EVTDS, the two management teams had experience working with each other and anticipated a smooth transition in addition to obtaining synergies, chief of which was a layer of profit required when 2 separate entities were involved in making and selling a vehicle that was immediately eliminated upon the Merger close, enabling the purchase price of vehicles to customers to be reduced. The combined entity also was able to exert more pressure on suppliers to reduce vehicle costs, which also supported the price reductions to customers.
At December 31, 2020, EVTDS had subscription restricted cash of $1,793,910 on its balance sheet as a result of offering a restricted subscription agreement to the stockholders of Envirotech Electric Vehicles, Inc., a Canadian entity (“EVT Canada”), to have the right to purchase two shares of EVTDS for every one common share of EVT Canada they owned. The purpose of this subscription agreement was to raise the necessary capital to close the Merger and to provide working capital for EVTDS so that it could pay off certain liabilities and pay for ongoing expenses through the closing of the Merger. A corresponding liability account was also recorded as of December 31, 2020. The total amount raised just prior to the Merger closing was $6,415,110. At the closing of the Merger, EVTDS satisfied its obligation to deliver $5 million in cash to ADOMANI, Inc. and repaid the majority of the items discussed above. This number has decreased to0 in both categories as of December 31, 2021.
EVTDS entered into an exclusive
50-year
distribution agreement as of October 4, 2017 to become the sole USA distributor of EVT Canada. This agreement grants EVTDS the exclusive right in the United States to promote sales, including the right to use trademarks, trade names, service marks and logos and to obtain orders based on sales targets for orders. The agreement also provides that EVT Canada. may not independently appoint additional distributors. The Company obtained this agreement in the Merger.
The following table presents the estimated allocation of the purchase price of the assets acquired and liabilities assumed for the acquisition by EVTDS of ADOMANI, Inc. via the reverse acquisition:
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Table of Contents
Purchase Price Allocation of ADOMANI, Inc.
Accounts receivable and other current assets
  $1,680,926 
Property and equipment
   86,873 
Right of use asset
   369,987 
Other assets
   59,510 
Goodwill
   51,775,667 
Accounts payable and accrued expenses
   (820,389) 
Lease liability
   (369,987) 
Notes payable
   (417,540) 
   
 
 
 
Purchase price, net of $3,373,332 cash acquired
  $52,365,047 
   
 
 
 
This allocation is based on management’s estimated fair value of the ADOMANI Inc. assets and liabilities at March 15, 2021. ADOMANI, Inc. assets were derived from a total value of $53,509,622, based on 112,675,558 shares of common stock outstanding on March 15, 2021 and the closing price that day of $0.4749 per share. The fair value of certain of the stock options assumed by EVTDS in the Merger of $2,228,757 (see Note 7) was added to reach an adjusted value of $55,738,379. From that amount, total assets acquired of $5,570,628 (including a reduction in the carrying value of finished goods inventory of $26,400 to reflect fair value) were deducted, and total acquired liabilities of $1,607,916 were added in order to arrive at the $51,775,667 of Goodwill recorded, none of which will be deductible for future income tax purposes. The Company incurred approximately $415,472 in transaction costs related to the Merger, which were expensed.
The unaudited consolidated statement of operations for the three months ended March 31, 2021 included $151,793 of revenue and a loss from operations of $(144,015) contributed by ADOMANI, Inc. and its subsidiaries, excluding EVTDS. Since the closing of the Merger on March 15, 2021, primarily due to the fact that EVTDS brought no employees or sales people to the merged entity, and that sales and operating activities have been conducted on a company-wide basis, not on the basis of either EVTDS alone or the ADOMANI entities alone, other than nominal expense items related to EVTDS leases assumed in the Merger (see Notes 9 and 11), all accounting subsequent to the closing of the Merger has been and will continue to be done on a consolidated basis. Therefore, the Company cannot segregate the operating results of operations between the formerly separate entities in the current periods.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the Merger discussed above as if it had occurred on January 1, 2021. The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations for the three months ended March 31, 2021 that would have been realized if the Merger had occurred on January 1, 2021, nor does it purport to project the results of the merged entity in future periods. The pro forma financial information does not give effect to any anticipated integration costs related to the merged entities.
Pro forma combined results of operations
  
For the three months
ended

March 31, 2021
 
Sales
  $168,204 
Net loss
  $(3,302,434) 
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For purposes of the pro forma disclosures above, the adjustments for the three
months
ended March 31, 2021, reduced sales by $319,000 and increased the net loss by $91,800. The sales adjustments resulted from sale of vehicles by EVTDS to ADOMANI, Inc. However, the actual loss for ADOMANI, Inc. for the period January 1, 2021 through March 15, 2021 that is included in this pro forma information included an adjustment to fully amortize the unamortized stock-based compensation expense related to outstanding stock options that fully vested at the closing of the Merger. This adjustment increased pro forma expenses, and therefore the pro forma net loss, for the three months ended March 31, 2021 by approximately $1,826,623 more than would otherwise have been recorded absent the consummation of the Merger.​​​​​​​
4.
Property and Equipment, Net
Components of property and equipment, net, consist of the following as of March 31, 2022 and December 31, 2021:
   
March 31,

2022
   
December 31,

2021
 
Furniture and fixtures
  $54,300   $41,799 
Leasehold improvements
   28,112    28,112 
Machinery & equipment
   86,266    86,266 
Vehicles
   252,724    252,724 
Test/Demo vehicles
   15,784    15,784 
   
 
 
   
 
 
 
Total property and equipment
   437,186    424,685 
Less accumulated depreciation
   (171231)    (152,572) 
   
 
 
   
 
 
 
Net property and equipment
  $265,955   $272,113 
   
 
 
   
 
 
 
Depreciation expense was $18,659 and $7,996, respectively, for the three months ended March 31, 2022, and March 31, 2021.
5.
Debt
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 $2,648.99. As of March 31, 2022, $31,788 is reflected on the consolidated balance sheet as current notes payable while $5,298 is classified as long-term notes payable.
Effective May 2, 2018, ADOMANI, Inc. secured a line of credit from Morgan Stanley. Borrowings under the line of credit bear interest at
30-day
LIBOR plus 2.0%. There is no maturity date for the line, but Morgan Stanley 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 Morgan Stanley accounts. Borrowings under the line may not exceed 95% of such cash, cash equivalents, and marketable securities balances. The maximum amount the Company could borrow at March 31, 2022, was approximately $8.1 million; there was no principal amount outstanding at that date. The line of credit and related interest expense was repaid in full on February 3, 2020. The line of credit is still available to the Company, but there is no current plan to borrow from it.
6.
Stock for forfeiture or cancellation (see Note 5).

In March 2017, the board of directors of the Company, or Board, consented to the grant of options to purchase an aggregate of 3,600,000 shares of Common Warrants

As a result of the Merger closing (see Note 3), as of March 15, 2021, the Company had outstanding warrants to purchase an aggregate of 10,681,327 shares of common stock, 2,056,326 of which were exercisable. The warrants were previously issued by ADOMANI, Inc. and assumed in the Merger. In connection with the second closing of the Financing discussed in the Company’s Annual Report on Form
10-K
filed with the SEC on April 26, 2022, the Company issued additional warrants to purchase up to 19,166,667 shares of its common stock, all of which were exercisable as of March 31, 2022. The Company’s outstanding warrants as of March 31, 2022 is summarized as follows, and all were exercisable at that date
.

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Table of Contents
   
Number of
Shares
   
Exercise
Price
   
Remaining
Contractual Life (years)
 
Outstanding warrants expiring June 9, 2022
   199,659   $6.00    0.21 
Outstanding warrants expiring June 9, 2022
   350,000   $5.00    0.21 
Outstanding warrants expiring January 9, 2023
   256,667   $3.75    0.78 
Outstanding warrants expiring January 28, 2025
   8,625,001   $0.50    3.75 
Outstanding warrants expiring May 7, 2026
   19,166,667   $1.00    3.46 
Outstanding warrants on December 31, 2021
   28,597,994   $0.96    4.10 
   
 
 
   
 
 
   
 
 
 
Outstanding warrants on March 31, 2022
   28,597,994   $0.96    3.89 
   
 
 
   
 
 
   
 
 
 
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.
As of March 31, 2022, the outstanding warrants have no intrinsic value.
7.
Stock to 13 people (employees and current and prospective Board members). The options will vest over a three-year period and the exercise price is $10.49, which was determined on the basis of the average of the trading price of the Company’s Common Stock on the Nasdaq Capital Market for the first ten days following the close of its offering under Regulation A. The options were valued using the Black-Scholes method, resulting in a fair market value of $37.6 million. The assumptions used in the valuation included an expected term of 4.75 years; volatility of 86% and a risk-free interest rate of 2.02%.

Options
9
As a result of the Merger closing (see Notes 2 and 3) there were 12,992,857 fully vested stock options outstanding at March 15, 2021 that were previously issued by ADOMANI, Inc. and assumed in the Merger. The outstanding options at March 31, 2022 consisted of the following:
   
Number of
Shares
   
Exercise
Price
   
Weighted
Average
Remaining
Contractual Life
(years)
 
Outstanding at December 31, 2021
   6,770,000   $0.29    6.98 
Options granted during 3 months ended March 31, 2022:
               
Options Granted at $0.10 Exercise Price
   5,000,000   $0.10      
Options Granted at $0.12 Exercise Price
   1,817,855   $0.12      
Options Granted at $0.181 Exercise Price
   55,249   $0.181      
Options Granted at $0.45 Exercise Price
   22,222   $0.45      
Exercised
   (1,000,000)   $0.12      
Cancelled / Forfeited at $0.45 Exercise Price
   (500,000)   $0.45      
   
 
 
           
Subtotal, as follows:
   12,165,326           
Outstanding Options at $0.10 Exercise Price
   5,000,000   $0.10    9.80 
Outstanding Options at $0.12 Exercise Price
   1,817,855   $0.12    9.80 
Outstanding Options at $0.181 Exercise Price
   55,249   $0.181    4.84 
Outstanding Options at $0.45 Exercise Price
   5,157,222   $0.45    8.71 
Outstanding Options at $1.31 Exercise Price
   135,000   $1.31    6.05 
   
 
 
   
 
 
   
 
 
 
Outstanding at March 31, 2022
   12,165,326   $0.27    9.27 
 
 
 
 
 
 
 
 
 
 
 
 
 
On January 7, 2022, the Company’s Compensation Committee granted Phillip W. Oldridge, the Company’s CEO, options to purchase 3,000,000 shares of common stock at an exercise price of $0.10 per share and options to purchase
1,000,000
shares of common stock at an exercise price of $0.12 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 2,000,000 shares of common stock at an exercise price of $0.10 per share and options to purchase 817,855 shares of common stock at an exercise price of $0.12 per share. The options vested immediately and expire on the tenth anniversary of grant.
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Table of Contents
On January 31, 2022, the Company’s Compensation Committee granted Christian S. Rodich, the Company’s Chief Financial Officer, options to purchase 55,249 shares of common stock at an exercise price of $0.181 per share and options to purchase 22,222 shares of common stock at an exercise price of $0.45 per share. The options vest ratably at 1/60th per month over five years and expire on the tenth anniversary of grant.
On March 15, 2022, options to purchase 1,000,000 shares of common stock were exercised by the former President and CEO of the Company at a price of $0.12 per share, resulting in a payment to the Company of $120,000. Also on March 15, 2022, options to purchase an aggregate of 500,000 shares of common stock with an exercise price of $0.45 per share were forfeited by the former executive, as they were not exercised prior to their expiration on March 15, 2022.
As of March 31, 2022, outstanding options had intrinsic value of $1,491,870.
8.

As of September 30, 2017, the Company has issued stock options to purchase 30,375,000 shares of Common Stock, consisting of options to purchase 16,260,002 shares of Common Stock with a measurement price of $0.10 and an exercise price of $0.10, options to purchase 10,514,998 shares of Common Stock with a measurement price of $1.00 and an exercise price of $0.10, and options to purchase 3,600,000 shares of Common Stock with a measurement price of $14.50 and an exercise price of $10.49.

For the three months ended September 30, 2017, the Company recorded a $10.6 million stock-based compensation expense. This expense includes an adjustment due to the remeasurement of the fair market value of non-employee stock options, in accordance with ASC 505. ASC 505 requires a remeasurement of the fair market value of non-employee stock options at each interim vesting period, based on the Company’s stock price on the interim vesting date, and the related stock-based compensation expense is adjusted accordingly at each balance sheet date.

Stock option activity for the nine months ended September 30, 2017 is as follows:

  Number of
Shares		 Weighted
Average
Exercise
Price		 Weighted
Average
Remaining
Contractual Life (years)
Outstanding at December 31, 2016  33,775,000  $0.10     
Granted            
Forfeited  (7,000,000)        
Outstanding at March 31, 2017  26,775,000  $0.10     
Granted  3,600,000   10.49     
Forfeited            
Outstanding at September 30, 2017  30,375,000  $1.33   4.2 
             
Exercisable at September 30, 2017  23,237,692  $0.40   3.7 
Related Party Transactions

Stock-based compensation expense was $15.7 million and $6.9 million for the nine months ended September 30, 2017 and 2016, respectively, and is included in general and administrative expense in the accompanying unaudited consolidated statements of operations. As of September 30, 2017, the Company expects to recognize $41.4 million of stock-based compensation for the non-vested outstanding options over a weighted-average period of 2.31 years.

As of September 30, 2017, the outstanding options have an intrinsic value of approximately $183.7 million.

8.Commitments

Employment Agreements—Effective September 1, 2014, the Company executed an employment agreement with James Reynolds, its Chief Executive Officer. The term of the employment agreement is 5 years, and the agreement provides for an annual base salary of $240,000 and entitles Mr. Reynolds to receive a bonus of five percent of the Company’s net profits on an annual basis.

Effective September 1, 2014, the Company executed an employment agreement with Edward Monfort, its Chief Technology Officer. The term of the employment agreement was 5 years, and the agreement provided for an annual base salary of $240,000 and entitled Mr. Monfort to receive a bonus of five percent of the Company’s net profits. In June 2016, Mr. Monfort entered into a new employment agreement with a two-year term, which superseded the 2014 employment agreement, pursuant to which his salary was reduced to $120,000 per annum. Additionally, the Company pays up to $7,000 per month to ELO, LLC, an entity owned by Mr. Monfort, for invoiced expenses relating to research and development pursuant to a consulting relationship, as well as up to $3,000 per month for services to another consultant selected by Mr. Monfort. For the nine months ended September 30, 2017, the Company paid $63,000 to ELO, LLC.

Effective January 1, 2017, the Company entered into an employment agreement with Michael Menerey, its Chief Financial Officer. The term of the employment agreement is five years and the agreement provides for an annual base salary of $200,000.

10
The Company has entered into an engagement agreement (the “SRI Services Agreement”) with SRI Professional Services, Incorporated (“SRI”), pursuant to which the Company engaged SRI to provide certain services in connection with the
day-to-day
operations of the Company, including the issuing of invoices to customers and making payments on behalf of the Company with respect to
month-to-month
leases of facilities, vehicles and trailers under separate agreements between the Company and SRI, including the SRI Equipment Leases and the SRI Office Leases further described in the following paragraphs in this Note 8, as well as Notes 9 and 11. The term of the SRI Services Agreement will continue for a period of three months unless earlier terminated by the parties in accordance therewith, and it is contemplated that an aggregate of $26,042 will be paid by the Company to SRI in consideration of the services rendered under the SRI Services Agreement. 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 Company has entered into lease agreements with SRI (the “SRI Equipment Leases”), pursuant to which the Company leases equipment used in connection with the operation of its business. 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 obligations of the Company under the SRI Equipment Leases is $7,771.
EVTDS 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 $910.
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 $2,800. See Notes 9 and 11. 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.
In connection with the closing of the Merger in March, 2021, the Company purchased
two
electric trucks from Mr. Oldridge for an aggregate purchase price of $128,000. The purchase price for such vehicles was paid in full to Mr. Oldridge during the three months ended June 30, 2021.
Prior to the closing of the Merger, Mr. Oldridge had permitted the two vehicles to be used by the Company as customer demonstration vehicles for no cost. The purchase price of $64,000 per vehicle was less than the purchase price of $83,000 per vehicle that ADOMANI, Inc. had paid to EVTDS for similar vehicles in prior transactions. One of the vehicles purchased by the Company was subsequently sold to a customer of the Company in March 2021 and the second truck remains in the Company’s inventory at March 31, 2022.
9.

Commitments
Operating Leases
The Company has entered into the SRI Equipment Leases (see Note 8). Rent expense under the SRI Equipment Leases for the three months ended March 31, 2022 was $23,312, and was $19,432 for the three months ended March 31, 2021.
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The Company has entered into the SRI Office Lease (see Note 8). Rent expense under the SRI Office Lease for the three months ended March 31, 2022 was $2,730, and was $5,810 for the three months ended March 31, 2021.
The Company has entered into the ABCI Office Lease (see Note 8). Rent expense under the ABCI Office Lease for both the three months ended March 31, 2022 and March 31, 2021, respectively was $8,400.
The Company has entered into the Toledo Jet Center Lease for office space in the Ft. Lauderdale Florida area commencing 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 months ended March 31, 2022 was $2,405.
In February 2017, ADOMANI, Inc. 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, ADOMANI, Inc. 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 was 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 escalate 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, ADOMANI, Inc. 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. See Note 12.
The Company’s total net rent expense for the three months ended March 31, 2022 and 2021 was $73,049 and $57,846 respectively. See Notes 11 and 12.
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.

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The following table summarizes the Company’s future minimum payments under contractual commitments, excluding debt, as of March 31, 2022:

   Payments due by period 
   Total   Less than
one year		   1 - 3 years   4 - 5
years		   More
than 5
years		 
Operating lease obligations
  $19,292   $16,853   $2,439   $0     $0   
Employment contracts
   2,375,000    500,000    1,500,000    375,000    0   
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,394,292   $516,853   $1,502,439   $375,000   $0   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.
Contingencies
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.
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, and a member of its 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.
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. On February 2, 2020, the Company and the other companies affiliated therewith named in the notice of civil claim filed a response to the civil claim in which they denied certain of the allegations and asserted that certain other facts were outside of their knowledge. Fact discovery, through document disclosure and examinations for discoveries, in this matter remain ongoing. We believe that the lawsuit is without merit and intend 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. 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 Philip 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 employment 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 prevent 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 pending Canadian litigation.
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The Company has been served and its response to the Complaint is due May 10, 2022. We believe that the lawsuit is without merit and intend to vigorously defend the 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 recessionary 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. Alan K. Brooks was subsequently dropped as a putative class representative. On October 27, 2020, we 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. Monfort filed a cross-complaint against the Company seeking indemnification under the terms of the Company’s Amended and Restated Bylaws and Section 145 of the Delaware General Corporation Law. On February 18, 2020, we filed an answer to Mr. Monfort’s cross-complaint, generally denying the allegations and asserting affirmative defenses.
On March 2, 2021, Electric Drivetrains filed its motion for class certification. On March 17, 2021, the court held a case management conference. At the case management conference, the court set a tentative schedule for class discovery and briefing on the motion for class certification. On June 2, 2021, Electric Drivetrains and ADOMANI filed a stipulation extending the deadline for class certification discovery proposing the following deadlines: close of class discovery on September 28, 2021; defendants’ opposition to the motion for class certification due on October 28, 2021; plaintiff’s reply in support of its motion due on November 29, 2021; a case management conference on December 13, 2021 to set a date for hearing on the merits of the motion for class certification. Electric Drivetrains settled its claims against Mr. Monfort. The Underwriters have reached settlements with Electric Drivetrains on the primary claims in this matter. All defendants are maintaining their cross claims against each other. On July 13, 2021, Electric Drivetrains’ counsel moved to be relieved as counsel and on August 23, 2021, the court granted this motion. Also on 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. On December 10, 2021, the Court vacated the order to show cause. On January 20, 2022, Mr. Monfort dismissed his cross-complaint for indemnification against the Company. On March 28, 2022, Electric Drivetains forwarded its proposed Fifth Amended Complaint, in which it: i) drops certain class allegations; ii) adds certain state law claims (various violations of California Corporations Code), aider and abettor liability, and negligent misrepresentation, but leaves the remaining claims against defendants intact. The Company has agreed to stipulate to the filing of the amended complaint. A status conference is scheduled for June 16, 2022. We believe that the 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 in the Mollik action. On April 8, 2022, the Company and Boustead Securities, LLC (“Boustead”) settled their respective cross-claims against each other in both the Mollik action and Brooks action (see below) in exchange for the Company paying fifty thousand dollars ($50,000) in cash and $125,000 (one hundred twenty five thousand dollars) in stock and mutual releases between parties. There are no longer any cross claims pending in the Mollik action.
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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 other
s (the “Brooks Case”)
. 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, (iii) negligent misrepresentation, (iv) elder abuse, and (v) unfair competition. We answered the FAC on November 12, 2019, generally denying the allegations in the FAC and asserting affirmative defenses. Fact discovery in this matter remains ongoing. On August 10, 2021, we filed a motion for summary judgement and dismissal of plaintiff’s FAC. The parties participated in two days of mediation with Mark LeHocky. Mr. LeHocky provided the parties with a mediator’s proposal. Both parties accepted the proposal and reduced the proposal to a written settlement agreement. Pursuant to the settlement agreement, the Company has agreed to pay plaintiffs $197,500 in cash and $197,500 in shares of common stock. In addition, the Company’s insurance carrier has agreed to pay plaintiffs $170,000. On January 14, 2022, the parties filed a joint motion for an order approving the fairness of the terms of the settlement agreement. On March 7, 2022, the Court issued an Order approving the settlement and the parties are in the process of effectuating its terms. On April 5, 2022, the Company and Boustead resolved Boustead’s cross claim for indemnification in the Brooks action. This settlement is still subject to court approval. There are no further claims pending in the Brooks action and, if and when the Court approves the settlement, it should be dismissed.
On February 3, 2020, the Company acquired substantially all the assets of Ebus in a foreclosure sale through a credit bid in the amount of $582,000, representing the amount then owed by Ebus to the Company evidenced by a secured promissory note. Following the Company’s successful credit bid at the foreclosure sale, Ebus’s obligations under the note were extinguished and the Company was entitled to take possession of substantially all of the assets of Ebus. While the Company was able to take possession of some of the assets, Ebus prevented the Company from taking possession of all of the assets purchased at the foreclosure sale. As a result, on April 13, 2020, the Company filed a complaint captioned ADOMANI, Inc. v. Ebus, Inc., et al., in the Superior Court of California for the County of Los Angeles, Case No. 20ST CV 14275, against Ebus and certain of its insiders and affiliates seeking to recover the remainder of the assets and related damages. On January 14, 2021, a cross- complaint was filed against the Company by Ebus, Inc. and Anders B. Eklov for Unjust Enrichment and Conversion of Domain Name, seeking monetary damages and injunctive relief. A settlement agreement was entered into on March 15, 2022.
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11.
Leases—In 2015, the Company signed an office and warehouse lease agreement for a facility in Orange, California, to serve as its primary facility for research and development activity. The initial term of the lease expired on February 29, 2016, at which time the Company extended the lease for two additional years, until February 28, 2018. The total amount due annually under the lease was $44,856. Effective August 15, 2017, the Company terminated this lease.

The Company signed a one-year office lease for office space in Newport Beach, California, to serve as office space for its headquarters. The initial term of the lease expired on December 31, 2016, at which time the Company extended the lease on a month-to-month basis. The total amount due monthly was approximately $3,400. Effective September 30, 2017, in connection with the execution of the lease for office space in Corona, California, the Company terminated this lease.

In 2016, the Company signed a lease for office space in Los Altos, California, to serve as office space for its Northern California operations. The lease expired February 28, 2017 and the Company executed a new one-year lease in February 2017. The total amount due under the lease is $5,676 and the lease period is from March 1, 2017 through February 28, 2018.

In April 2017, the Company signed a lease for storage space in Phoenix, Arizona 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 $500.

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 October 2017, the Company signed a non-cancellable lease for its corporate office space in Corona, California, to serve as its corporate headquarters. The lease is for a period of 65 months, terminating February 28, 2023. The base rent for the term of the lease is $568,912. The total amount due monthly is $7,600 at commencement and will escalate to $10,560 by its conclusion. Additionally, the lease includes five months in which no rent payment is due.

Other Agreements—In 2015, the Company entered into a contract with THINKP3 to provide services with the goal of securing federal grant assistance for development of the Company’s zero-emission and hybrid transportation solutions for school bus, commercial, government and utility fleets. The initial term of this contract was December 1, 2015 through November 30, 2016. On November 21, 2016, the parties renewed the agreement through November 30, 2017. Fees for these services are $8,000 per month. The contract can be terminated by either party with 30-days advance notice.

In March 2015, the Company signed a licensing option agreement with Silicon Turbines Systems, Inc. for use of its patent in manufacturing. The option calls for a payment of $10,000 per month, beginning March 1, 2015, up to a full investment amount of $3,000,000. The agreement provided that the original option would terminate on August 31, 2015, but the parties agreed verbally to both extend the date of termination of the option and delay the Company’s obligation to make any monthly payments under the option agreement while both companies evaluate the relationship. As such, no payments have been made in 2017. For the year ended December 31, 2016, the Company made one $10,000 payment. In September 2017, the Company determined that it no longer desired to continue this relationship and, effective September 30, 2017, the $120,000 investment was written off.

In 2016, the Company signed an advisor agreement with Dennis Di Ricco, formerly a related party and stockholder, pursuant to which Mr. Di Ricco would provide consulting services to the Company. In March 2017, the Company terminated this agreement (see Note 5).

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As of March 31, 2022, the Company is a party to nine operating leases. NaN of these leases are office or warehouse leases; the remaining 5 are equipment leases (see Note 9). As disclosed in Note 2, 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. As of March 31, 2022, this exception applies to the six EVTDS leases and to the ADOMANI Inc. Stockton, California lease, which are all
month-to-month.
In applying the guidance in ASC 842, the Company has determined that all current leases should be classified as operating leases.
During the year ended December 31, 2020, the Company entered into an operating lease for warehouse space in Corona, California (see Note 10). As required by ASC 842, in conjunction with this 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 15, 2021, the ROU asset had a balance of $238,365. 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. See Notes 9 and 12.
Quantitative information regarding the Company’s leases is as follows:
   Three Months Ended March 31, 
           2022                  2021         
Lease expenses
         
Operating lease expenses
  $44,641  $11,415 
Short-term lease expenses
  $28,408  $57,846 
   
 
 
  
 
 
 
Total lease cost
  $73,049  $69,261 
 
 
 
 
 
 
 
 
 
Other information
         
Cash paid for the amounts included in the measurement of lease liabilities for operating leases:
         
Operating cash flows
  $45,430  $28,673 
Weighted-average remaining lease term (in years):
         
Operating leases
   1.02   2.04 
Weighted-average discount rate:
         
Operating leases
   14%   14% 
12.

The following table summarizes our future minimum payments under contractual commitments, excluding debt, as of September 30, 2017:

  Payments due by period
  Total Less than
one year		 1 - 3 years 3 - 5 years More than 5
years
Operating lease obligations  599,087   78,815   224,400   243,072   52,800 
Employment contracts  1,470,000   600,000   620,000   250,000   - 
Total  2,069,087   678,815   844,400   493,072   52,800 
Subsequent Event

Beginning April 1, 2022 the lease discussed above in Note 9 and Note 11 for the Corona, CA office and warehouse facility was assigned to Masters through the end of the lease obligation at December 31, 2022. Masters’ sublease agreement with the Company was also terminated on April 1, 2022.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion of our financial condition and the results of operations should be read in conjunction with the “Unaudited Consolidated Financial Statements”unaudited consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form
10-Q or
(“Quarterly Report.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 “Cautionary Statement Regarding Forward-Looking Statements” above, and elsewhere in this Quarterly Report, particularly in Part II.II, Item 1A.1A “Risk Factors,” below.

Overview of ADOMANI

We are a provider of advanced purpose-built
zero-emission
electric and hybrid vehicles and replacement drivetrains that is focused on reducing the total cost of vehicle ownership. Our drivetrain systems are designed to helpownership and helping fleet operators unlock the benefits of green technologytechnology. 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 cost instability and local, state and federal environmental regulatory compliance.

We design advanced zero-emission electric

As discussed in Item 1, Notes 2 and hybrid drivetrain systems for integration3 to the unaudited consolidated financial statements contained in new school buses and medium to heavy-duty commercial fleet vehicles. We also design patented conversion kits to replace conventional drivetrain systems for combustion powered vehicles with zero-emission electric or hybrid drivetrain systems. The hybrid drivetrain systems this Quarterly Report on Form
10-Q,
as a result of the closing of the Merger on March 15, 2021, the historical results discussed in this section of the Quarterly Report on Form
10-Q
are available in both an assistive hybrid format and a full-traction format for use in private and commercial fleet vehiclesthose of all sizes. We seek to expand our product offerings toEVTDS as of March 31, 2022, which include the saleconsolidated balance sheet accounts of zero-emission systems in vehicles manufactured by outside original equipment manufacturer, or OEM, partners, but to be marketed, sold, warrantiedEnvirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and serviced through our developing distributionsubsidiaries, and service network.

Our drivetrain systems can be built with options for remote monitoring, electric power-export and various levels of grid-connectivity. Our zero-emission systems may also grow to include automated charging infrastructure and “intelligent” stationary energy storage that enables fast vehicle charging, emergency back-up facility power, and access to the developing, grid-connected opportunities for the aggregate power available from groupsfiscal period ended March 31, 2022, which include the consolidated results of large battery packs.

We generated virtually no revenue from inception through September 30, 2017. Foroperations of EVTDS and Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries for the years ended Decemberentire three month period. The consolidated financial statements and related disclosures as of March 31, 20162021 include the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and 2015, our net losses were $10.7 million and $6.0 million, respectively. For the nine months ended September 30, 2017 and 2016, our net losses were $21.6 million and $9.2 million, respectively; andsubsidiaries, including EVTDS. The consolidated results of operations for the three months ended September 30, 2017March 31, 2021 include the results of operations of EVTDS for the entire period and 2016,include the consolidated results of operations of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries for the post-merger period March 16, 2021 through March 31, 2021. On May 26, 2021, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware to change its name from ADOMANI, Inc. to Envirotech Vehicles, Inc., effective as of May 26, 2021.

For the three months ended March 31, 2022 and 2021, respectively, we generated sales revenue of $1,108,500 and $470,793, respectively, and our net losses were $12.0$2,527,397 and $658,510, respectively. The 2022 loss includes approximately $1.6 million and $6.3 million, respectively.

of
12
non-cash
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
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.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 for 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.
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Investment in Growth.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 drivetrainscommercial 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 and hybrid drivetrainvehicle 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 and hybrid drivetrainfleet 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 vehiclestechnology are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in
zero-emission
electric and hybrid 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.growth.
We believe the market for
all-electric and hybrid
solutions for alternative fuel technology, specifically
all-electric and hybrid
vehicles, will continue to grow as more purchases of new zero emission
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, purchases of our products will continue to depend in large part on financing subsidies from government agencies. We cannot be assured of the continued availability, or the amounts of such assistance to our customers.

Revenue Growthcustomers, or our ability to access such funds.

Sales revenue growth from Additional Productsadditional products
.
We seek to add to our product offerings additional
zero-emission
vehicles of all sizes manufactured by outside OEM partners, 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.

Revenue Growth from Additional Geographic Markets.

Third-party contractors, suppliers and manufacturers.
We believe that growth opportunities for our products exist internationallyrely upon third parties to supply us with raw materials, parts, components and services in additionadequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to domestically, and through our wholly-owned subsidiary Adomani (Nantong) Automotive Technology Co. Ltd., or ADOMANI China, we will be pursuing international growth as well. Our future performance will depend in part upon the growth of these additional markets. Accordingly, our business and operating results will be significantly affected by our ability to timely enter and effectively address these emerging markets and the speed with which and extent to which demand for our products in these markets grows.

us.

Components of Our Results of Operations

Revenue

Revenue is

Sales
Sales are recognized from the sales of advanced new, purpose-built
zero-emission
electric and hybrid drivetrain systems for fleet vehicles and from the sale of new, purpose-built zero-emission electric or hybrid vehicles. Revenue isproviding vehicle maintenance and safety inspection services. Sales are recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title has passed, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.

13
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.

Selling, 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 costsexpenses include all corporate and administrative functions that support our company. These costs also includecompany, including personnel-related expense and stock-based compensation expense;costs; costs related to investor relations activities; warranty costs, including product recall and customer satisfaction program costs; consulting costs; marketing-related expenses; and other costsexpenses that cannot be included in cost of sales.

Consulting and Research and Development Costs

These costsexpenses are substantially 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.

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Provision for Income Taxes

We account for income taxes in accordance with FASBFinancial 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.

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made in 2022.

Results of Operations

The following tablediscussion compares operating data for the three and nine months ended September 30, 2017March 31, 2022 to the corresponding periods ended March 31, 2021:
Sales
Sales were $1,108,500 and 2016:

ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in thousands, except per share data)

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
         
         
Net sales $-  $-  $-  $68 
Cost of sales  -   -   -   50 
Gross profit  -   -   -   18 
Operating expenses:                
General and administrative [1]  11,716   5,872   18,363   8,107 
Consulting  49   -   2,213   95 
Research and development  38   112   557   128 
Total operating expenses, net  11,803   5,984   21,133   8,330 
Loss from operations  (11,803)  (5,984)  (21,133)  (8,312)
                 
Other income (expense):                
Interest expense, net  (47)  (274)  (362)  (833)
Other income (expense)  (116)  (11)  (113)  (9)
Total other income (expense)  (163)  (285)  (475)  (842)
                 
Loss before income taxes  (11,966)  (6,269)  (21,608)  (9,154)
Income tax expense  (1)  -   (3)  - 
Net loss $(11,967) $(6,269) $(21,611) $(9,154)
                 
Net loss per share to common shareholders:                
Basic and diluted $(0.18) $(0.11) $(0.33) $(0.13)
                 
Weighted shares used in the computation of net loss per share:                
Basic and diluted  68,070,930   57,163,882   66,020,773   69,286,226 

[1]   Includes stock-based compensation expense as follows:

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
General and administrative expenses  10,609   5,645   15,653   6,920 
Total stock-based compensation expense  10,609   5,645   15,653   6,920 

Revenue

Revenue for each of the three and nine months ended September 30, 2017 was $0, as compared to revenue of $0 and $68,000$470,793 for the three and nine months ended September 30, 2016,March 31, 2022 and 2021, respectively. We expectSales for the three months ended March 31, 2022 consisted of 10 cargo vans sold to begin generating revenuesfactory authorized representatives and two vans sold to the Newark Public Library in New Jersey who utilized a voucher from the fourth quarterNJ Zip program.

Cost of 2017.

15
Sales
Cost of sales were $1,281,468 and $313,434 for the three months ended March 31, 2022 and 2021, respectively. Cost of sales for the three months ended March 31, 2022 consisted of the costs related to the sale of the vehicles sold as described above and, for the three months ended March 31, 2021 only, the costs of providing maintenance and inspection services.

General and Administrative Expenses

General and administrative expenses consist primarily of the following:

•        personnel-related expenses, including stock-based compensation costs;

•        costs related to investor relations activities;

•        saleswere $2,876,848 and marketing-related expenses; and

•        other expenses relating to the operations of the Company.

General and administrative expenses increased by $5.8 million and $10.3 million$585,903 for the three and nine months ended September 30, 2017,March 31, 2022 and 2021, respectively, asan increase of $2,290,945. The increase was primarily related to $1,614,845

non-cash
stock-based compensation expense recorded with respect to the stock options granted during the 2022 quarter compared to no similar expense recorded during the prior-year periods. The2021 period. Other increases arewere due to payroll-related expenses of $342,769; to contract labor costs of $95,856 primarily duerelated to engineering and technical assistance; to advertising and marketing expenses of $93,150; to insurance costs of $82,835; and to travel and related expenses of $79,213 related primarily to finalizing logistics and moving into the Osceola, Arkansas manufacturing location; and to increases in stock-based compensation expense of $5.0 million and $8.7 million for the three and nine months ended September 30, 2017, respectively, as compared to the prior-year periods, due to the additional options granted in March 2017 (see “Options to Purchase Common Stock” below and Note 7 to the unaudited consolidated financial statements included in this report) and also to the requirement to remeasure non-employee stock options, as required by ASC 718 and ASC 505. We anticipate stock-based compensation expense to continue to increase as we expand our infrastructure in order to begin generating revenue.

Other increases in the current-year periods over the prior-year periods include payroll, rent, sales and marketing, travel, investor relations expenses, and other general and administrative expenses which increased by $920,305 and $1.6 million, offsetof $147,119 . These increases were reduced by a decreasereduction in legal and professional fees of $183,124 and $122,906 for the three and nine months ended September 30, 2017, respectively, as$164,842 compared to the prior-year periods, due2021 period. The first quarter 2022 general and administrative expenses include $1,633,504 in

non-cash
charges, with depreciation expense of $18,659 being added to the Company’s need to expand its salesstock-based compensation expense discussed above. The general and marketing infrastructure, as well as the incurrence of certain costs associated with its status as a public company.

Consulting Expenses

Consultingadministrative expenses increased by $49,153 and $2.1 million for the three and nine months ended September 30, 2017, respectively, as compared to the prior-year periods.

The increase for the three months ended September 30, 2017 as compared to the prior period is due to required payments to various consultants for this period.

The increase for the nine months ended September 30, 2017 as compared to the prior period is primarily due to the issuanceMarch 31. 2021 included

non-cash
depreciation expense of a warrant to purchase 350,000 shares of Common Stock as part of a settlement agreement, which was valued at $1.2 million,$7,996.
Consulting Expenses
Consulting expenses were $70,800 and a payment of $800,000 required under the same agreement. Additionally, $75,000 previously paid to the party involved in the settlement agreement, and originally classified as deferred offering costs, was reclassified as consulting expense. See Note 5 of the unaudited consolidated financial statements contained in this report.

Research and Development Expenses

Research and development expenses decreased by $74,213 and increased by $428,516 for the three and nine months ended September 30, 2017, respectively, as compared to the prior-year periods.

The decrease$10,250 for the three months ended September 30, 2017 as comparedMarch 31, 2022 and 2021, respectively. The increase in the current year period was due primarily to payments to an Arkansas state relationship and incentive consulting firm that assisted the Company in securing the manufacturing facility in Osceola, Arkansas and to the prior period is due to lower expenditures for research and development activity.

The increase forcost of the nine months ended September 30, 2017 as comparedASC 805 valuation report related to the prior period is primarily due to $420,000 incurred in the second quarter of 2017 to build and install our drivetrain system on a chassis of a Type D school bus, on a promotional basis, for a potential customer. The project also enabled us to evaluate a third party firm that performed the work.

Liquidity and Capital Resources

From our incorporation in 2012 until the completion of our offering of Common Stock under Regulation A in June 2017, we financed our operations and capital expenditures through issuing equity capital, convertible notes and notes payable. A significant portion of this funding has been provided by affiliated stockholders, although significant equity capital was also raised in late 2015, and the majority of the convertible notes outstanding was also raised in 2015 from non-affiliated third parties, as discussed below and in Note 4 to the unaudited consolidated financial statements.

16
Merger.

As of September 30, 2017, we had cash and cash equivalents of $4.5 million. We believe that our existing cash and cash equivalents will be sufficient to fund our operations at least through the end of calendar year 2018. However, there can be no assurance that we will successfully execute our business plan, and if we do not, we may need additional capital to continue our operations. While we have not generated any material revenues to date and do not expect to be able to satisfy our cash requirements solely through product sales in the near future, we have received several purchase orders for zero-emission electric school buses in the second half of 2017 and we expect to begin generating revenue in the fourth quarter of 2017. The sale of additional equity securities in the future could result in additional dilution to our stockholders and those securities may have rights senior to those of our Common Stock. The incurrence of additional indebtedness in the future would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. Such capital, if required, may not be available on terms that are favorable to us or at all. We are currently incurring operating deficits that are expected to continue for the foreseeable future, and as we begin to execute our marketing plan, we expect our operating deficit will continue to grow until we begin to generate a sufficient level of revenue from our sales and marketing efforts.

Debt

As of December 31, 2016, the Company had borrowed $645,000 from Acaccia Family Trust, formerly a related party, and other parties by issuing notes convertible into Common Stock at prices ranging from $0.10 per share to $0.50 per share. On January 30, 2017, the notes plus accrued interest, a total of $725,584, converted into 6,868,578 shares of Common Stock. As of December 31, 2016, we also had outstanding a total of $4,255,325 of secured promissory notes, net of $884,700 principal amount of these secured notes that were exchanged for 884,700 shares of Common Stock on September 1, 2016. In November 2016, we borrowed $500,000 from an unaffiliated stockholder for working capital needs and, in March 2017, borrowed an additional $500,000 from the same stockholder for additional working capital required due to delays in completing our offering under Regulation A. In December 2016, we borrowed $500,000 from a third party pursuant to a secured promissory note, and immediately made a $500,000 loan to another third party who operates in the zero-emissions drivetrain technology industry. All notes referenced in this paragraph were scheduled to mature in 2017. In connection with the initial closing of our offering under Regulation A, on May 12, 2017, we repaid the $1,500,000 outstanding under the three unsecured notes payable. See Note 4 to the unaudited consolidated financial statements contained in this report.

Equity Financings

In a series of closings during the fiscal years ended 2012, 2013, 2014, 2015 and 2016, the Company sold an aggregate of 58,542,350 shares of Common Stock to certain of its officers, directors and other related parties for an aggregate purchase price of $5,270,860.

Regulation A Offering

On June 9, 2017, we completed an offering of Common Stock under Regulation A. We sold 2,852,275 shares of Common Stock for gross proceeds of $14,261,375, of which $1,711,365 was paid to the selling stockholders for 342,273 shares they sold in the offering.

Options to Purchase Common Stock

As of September 30, 2017, we had granted options to purchase 30,375,000 shares of Common Stock. 22,567,619 shares of Common Stock are issuable upon the exercise of options vested as of September 30, 2017, at an exercise price of $0.10 per share, and 670,073 shares of Common Stock are issuable upon the exercise of options vested as of September 30, 2017, at an exercise price of $10.49 per share. If all vested options to purchase Common Stock were exercised, we would receive proceeds of $9,285,828 and we would be required to issue 23,237,692 shares of Common Stock. There can be no assurance, however, that any such options will be exercised.

17

In March 2017, a co-founder of the Company (including family members and trusts) relinquished voting and investment power over all securities of the Company they owned. The co-founder surrendered his options to purchase 7,000,000 shares of Common Stock for forfeiture and cancellation, and sold the shares owned by his IRA.

2015 Note Financing and Warrants to Purchase Common Stock

During 2015, the Company issued two-year secured promissory notes to third party lenders in an aggregate principal amount of $5,147,525, or the Note Financing. As of September 30, 2017, the Company had repaid $1,060,000 of principal outstanding under such notes. The secured promissory notes are due on various dates between January 31 and November 30, 2017. Prior to the maturity dates of the notes, the Company exercised its option to extend the maturity dates six months pursuant to the provisions of such notes. Any subsequent extension requires the consent of the noteholders. The notes bear interest at an annual rate of 9%, payable monthly in arrears. The note obligations are secured by a lien on all assets of the Company. On September 1, 2016, holders of $884,700 of principal amount of the notes exchanged their notes for 884,700 shares of Common Stock, thereby reducing the principal amount outstanding under the notes to $3,195,325.

In connection with the Note Financing, in 2015, the Company agreed to issue a warrant to a third party to purchase 1,250,000 shares of Common Stock at $4.00 per share, exercisable through September 1, 2021. On September 1, 2016, the Company issued the warrant.

Credit Facilities

We do not have any credit facilities or other access to bank credit. If, however, we elect to repay the secured promissory notes at maturity, or believe that making an acquisition is appropriate, or see that sales of product are more rapidly using working capital than anticipated, we may seek to obtain a credit facility to address these issues.

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.

Going Concern

As of September 30, 2017, we had working capital of $2.6 million and stockholders’ equity of approximately $3.2 million. During the nine months ended September 30, 2017, we incurred a net loss attributable to holders of our Common Stock of approximately $21.6 million. Of the $21.6 million loss incurred for the nine months ended September 30, 2017, approximately $15.7 million is attributable to non-cash stock-based compensation expense, and another $1.2 million is related to non-cash consulting expense discussed above. The foregoing non-cash expenses had no impact on our cash flows during the nine months ended September 30, 2017. Stock-based compensation expense represents the amortization of the fair market value of stock options granted over their respective vesting period. The fair market value for both items is determined using the Black-Scholes model. Because some of these stock options were granted to non-employees, ASC 505 also require that we remeasure the fair market value of each of these options for each interim vesting period based on the market value of our stock on the interim vesting date. Therefore, the expense associated with these options is sensitive to changes in our stock price.

We have not generated any material revenues and have incurred net losses since inception. Our recurring operating losses and our need for additional sources of capital to fund our ongoing operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our audited consolidated financial statements as of December 31, 2016 and 2015 and for the years then ended with respect to this uncertainty. However, on June 9, 2017, we completed our offering under Regulation A. We sold 2,852,275 shares of Common Stock for gross proceeds of $14,261,375, of which $1,711,365 was paid to the selling stockholders for 342,273 shares they sold in the offering. Based on our management’s plans and the significant capital raised, that substantial doubt has been alleviated.

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Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the ninethree months ended September 30, 2017March 31, 2022 and 2016.

  Nine Months Ended September 30,
  2017 2016
Consolidated Statements of Cash Flow Data:        
Cash flows used in operating activities $(4,656) $(2,107)
Cash flows used in investing activities  (474)  (369)
Cash flows provided by (used in) financing activities  8,787   (324)
Increase (decrease) in cash and cash equivalents $3,657  $(2,800)

2021:

   
Three months ended March 31,
 
   
2022
   
2021
 
Cash flows (used in), provided by operating activities
  $(3,905,534)   $(2,895,880) 
Cash flows provided by investing activities
   2,987,561    3,373,332 
Cash flows provided by financing activities
   112,053    6,105,832 
  
 
 
   
 
 
 
Net change in cash, restricted cash and cash equivalents
  $(805,920)   $6,583,284 
  
 
 
   
 
 
 
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Operating Activities

Cash used in(used in) operating activities is primarily the result of our operating losses, reduced by the impact of the
non-cash
expenses, including
non-cash
stock-based compensation, and warrant amounts. These numbers are further impacted by adjustments for non-cash interest expense.

changes in the asset and liability accounts.

Net cash used in operating activities duringfor the ninethree months ended September 30, 2017March 31, 2022 was $4.7 million, as a result of a$3,905,534 versus net loss of $21.6 million, stock-based compensation of $15.7 million, other non-cash charges of $1.4 million, and changes in operating assets and liabilities that used $152,241 in cash. Inventory increased by $390,000, accrued liabilities increased by $226,225, accounts payable increased by $75,716, other current assets increased by $59,202, and other non-current assets increased by $4,980.

Net cash used in operating activities duringof $2,895,880 for the ninethree months ended September 30, 2016March 31, 2021, an increase of $1,009,654. The increase in net cash used in operating activities was $2.1 million, as a result of adue to an increase in net loss of $9.2 million,$1,868,887, an increase in inventory additions of $2,554,259, and an increase in accounts receivable related to sales of $956,128. These uses of cash were partially offset by an increase in

non-cash
expenses of $1,629,645 (primarily stock-based compensation expense of $6.9 million, other non-cash charges$1,614,845); a reduction in decreased accrued liabilities of $463,248,$1,198,787, a reduction in inventory deposits of $1,091,104; a decrease in the use of cash to reduce accounts payable of $348,521, and changesto a $101,563 decrease in operating assets and liabilities that used $336,797the use of cash in cash.

the remaining balance sheet accounts

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 used inprovided by investing activities during the ninethree months ended September 30, 2017 was $593,573. This was dueMarch 31, 2022 decreased by $385,771 to $2,987,561, as compared to cash provided by investing activities of $3,373,332 during the acquisition of property and equipment relating to the lease of our new office facility, and issuing a note to a third party. See Notes 4 and 8 to the unaudited consolidated financial statements containedthree months ended March 31,2021. The decrease in this report.

Netnet cash used inprovided by investing activities during the ninethree months ended September 30, 2016 was $368,939. This wasMarch 31, 2022 is primarily due to the acquisitionabsence in 2022 of $358,939the $3,373,332 cash acquired in merger in 2021 and to capital expenditures in 2022 of property$12,502 versus none in 2021, partially offset by net provision of cash of $3,000,063 from the purchase and equipment and a $10,000 investment in Silicon Turbine Solutions.

sale of marketable securities.

Financing Activities

Net cash provided by financing activities during the ninethree months ended September 30, 2017 was $8.8 million. This is due to netMarch 31, 2022 decreased by $5,993,779 from cash provided by financing activities in 2021 of $6.105,832. The decrease consisted primarily of the
pre-merger
$6,415,110 proceeds of $12.6 million received from the closingissuance of common stock raised by EVTDS in the 2021 quarter in anticipation of the Merger versus $120,000 raised in the 2022 quarter from the issuance of stock for stock options that were exercised. The 2021 cash provided was reduced by offering costs of $156,443; there were no offering costs incurred in the 2022 quarter. The proceeds from the issuance of common stock were further reduced in 2022 by the Company making installment payments on its debt, and in 2021 by EVTDS repaying their SBA EIDL loan in the amounts $152,835.
Liquidity and Capital Resources
As of March 31, 2022, we had cash and cash equivalents of $4,040,542 and marketable securities of $4,998,500, a combined total of $9,039,042 and working capital of approximately $21.0 million. We believe that our offeringexisting cash, 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, 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 snd 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.
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Line of Credit
Effective May 2, 2018, the Company secured a line of credit from Morgan Stanley Private Bank, National Association (“Morgan Stanley”). Borrowings under Regulation A, a $2.6the line of credit bear interest at
30-day
LIBOR plus 2.0%. There is no maturity date for the line, but Morgan Stanley 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 Morgan Stanley accounts, which was approximately $5.7 million repaymentas of notes payableMarch 31, 2021. Borrowings under the line may not exceed 95% of such cash, cash equivalents, and marketable securities balances. The maximum amount the Company could borrow at March 31, 2022, was approximately $8.1million; there was no principal amount outstanding at that date. The line of credit and related accruedinterest expense was repaid in full on February 3, 2020. While the line of credit is still available to the Company with Morgan Stanley, there is no current plan to use it.
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 unpaid interest,will begin increasing those expenditures as the Company transfers assembly and net notes payable proceeds of $500,000. This is reduced by payments for costs relatedcorporate functions to our offering under Regulation A of $1.7 million. See Note 5 tothe newly announced Osceola Arkansas facility.
Contractual Obligations
Other than as disclosed in the unaudited consolidated financial statements contained in Item 1 of this report.

Net cash used by financing activities during the nine months ended September 30, 2016 was $324,219. This is due to net proceeds of $187,827 from sales of capital stock, $54,000 paidQuarterly Report on Form 10-Q for a stock rescission, notes payable proceeds of $42,160, and to a $7,500 repayment of notes payable principal, reduced by payments for costs related to our offering under Regulation A of $492,706.

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Contractual Obligations

Except as set forth below, during the nine months ended September 30, 2017, there were no material changes in our contractual obligations and commitments.

During the three months ended September 30, 2017, we entered into a lease for our corporate office space in Corona, California, to serve as our corporate headquarters. The lease is for a periodMarch 31, 2022, the Company has no contractual obligations.

24
Table of 65 months, terminating February 28, 2023. The base rent for the term of the lease is $568,912. The total amount due monthly is $7,600 at commencement and will escalate to $10,560 by its conclusion. Additionally, the lease includes five months in which no rent payment is due.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Jumpstart Our Business Startups Act of 2012 (JOBS Act)

We are an “emerging growth company,” or an EGC, as defined in the JOBS Act. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for EGCs. We have irrevocably elected not 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 chosen to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an EGC 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 Discussion and Analysis of Financial Condition and Results of Operations” disclosure, (ii) not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting, (iii) not being required to comply with any requirement that 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) 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 will retain our EGC status until the first to occur of: (i) the end of the fiscal year in which the fifth anniversary of the completion of our initial public offering occurs, (ii) the end of the fiscal year in which our annual revenues exceed $1 billion, (iii) the date on which we issue more than $1 billion in non-convertible debt during any three-year period or (iv) the date on which we qualify as a “large accelerated filer.”

Critical Accounting Policies Judgments and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with the preparation of the financial statement information presented in this Quarterly Report are not significant because we have not generated any appreciable revenue. Therefore, we have not had to make assumptions or estimates related to a reserve for bad debt expense, or for future warranty costs to be incurred, two items that will have the greatest potential impact on our consolidated financial statements in the future. We also have no significant current litigation on which we have to provide reserves or estimate accruals and our investment to date in property, plant and equipment has not been significant. We therefore have not had to rely on estimates related to impairment. We have not generated any taxable income to date, so have not had to make any decisions about future profitability that would impact recording income tax expense. Assuming we are able to generate future profits by executing our business plan, these areas, among others, will most likely be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see Note 2 to our unaudited consolidated financial statements.

There have been no material changes to the critical accounting policies disclosed in the Company’s Form 1-A, which was declared qualified by the Securities and Exchange Commission, or SEC, on April 25, 2017.

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Recent Accounting Pronouncements

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): “Scope of Modification Accounting.” The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including any interim period, for reporting periods for which financial statements have not been issued. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures.

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.

As we continue our commercialization efforts internationally, we may generate revenue and incur expenses denominated in currencies other than the U.S. dollar, a majority of which we expect to be denominated in Chinese Yuan. As a result, as operations of ADOMANI China expand in the future, our revenue may be significantly impacted by fluctuations in foreign currency exchange rates.

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 the same foreign currency,United States dollars, which may mitigate ourcreate 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 the end of the period covered by this Quarterly Report. 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 submits 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 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 months ended March 31, 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, cancannot provide only reasonableabsolute 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.

Our management, with the participation of our chief executive officer and chief financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of September 30, 2017 due to the material weaknesses in internal control over financial reporting which existed since December 31, 2016. Specifically, these material weaknesses are as follows: (1) limited segregation of duties; (2) lack of system in place to keep appropriate records for expenses incurred, specifically for operations in China; and (3) need for training and expertise to account for complex equity transactions, which may result in a greater than normal risk that material errors may occur in the financial statements and not be detected timely. The Company has not conducted Similarly, an evaluation of the effectivenesscontrols cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of internal control over financial reporting. We will be required to assess internal control over financial reporting for the year ending December 31, 2018, and reportfraud, if any, material weaknesses in such internal control, but we intend to address this issue prior to such date.

Effective June 9, 2017, we added three independent directors to our Board to replace three employee directors. We created concurrently three committeeshave been detected.

25
Table of the Board, including an audit committee, on which the three independent directors serve. There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2017.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We

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.

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, and a member of its 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.
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. On February 2, 2020, the Company and the other companies affiliated therewith named in the notice of civil claim filed a response to the civil claim in which they denied certain of the allegations and asserted that certain other facts were outside of their knowledge. Fact discovery, through document disclosure and examinations for discoveries, in this matter remain ongoing. We believe that the lawsuit is without merit and intend 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. 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 Philip 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 employment 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 prevent 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 pending Canadian litigation.
The Company has been served and its response to the Complaint is due May 10, 2022. We believe that the lawsuit is without merit and intend to vigorously defend the 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 recessionary 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. Alan K. Brooks was subsequently dropped as a putative class representative. On October 27, 2020, we 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
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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. Monfort filed a cross-complaint against the Company seeking indemnification under the terms of the Company’s Amended and Restated Bylaws and Section 145 of the Delaware General Corporation Law. On February 18, 2020, we filed an answer to Mr. Monfort’s cross-complaint, generally denying the allegations and asserting affirmative defenses.
On March 2, 2021, Electric Drivetrains filed its motion for class certification. On March 17, 2021, the court held a case management conference. At the case management conference, the court set a tentative schedule for class discovery and briefing on the motion for class certification. On June 2, 2021, Electric Drivetrains and ADOMANI filed a stipulation extending the deadline for class certification discovery proposing the following deadlines: close of class discovery on September 28, 2021; defendants’ opposition to the motion for class certification due on October 28, 2021; plaintiff’s reply in support of its motion due on November 29, 2021; a case management conference on December 13, 2021 to set a date for hearing on the merits of the motion for class certification. Electric Drivetrains settled its claims against Mr. Monfort. The Underwriters have reached settlements with Electric Drivetrains on the primary claims in this matter. All defendants are maintaining their cross claims against each other. On July 13, 2021, Electric Drivetrains’ counsel moved to be relieved as counsel and on August 23, 2021, the court granted this motion. Also on 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. On December 10, 2021, the Court vacated the order to show cause. On January 20, 2022, Mr. Monfort dismissed his cross-complaint for indemnification against the Company. On March 28, 2022, Electric Drivetrains forwarded its proposed Fifth Amended Complaint, in which it: i) drops certain class allegations; ii) adds certain state law claims (various violations of California Corporations Code), aider and abettor liability, and negligent misrepresentation, but leaves the remaining claims against defendants intact. The Company has agreed to stipulate to the filing of the amended complaint. A status conference is scheduled for June 16, 2022. We believe that the 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 in the Mollik action. On April 8, 2022, the Company and Boustead Securities, LLC (“Boustead”) settled their respective cross-claims against each other in both the Mollik action and Brooks action (see below) in exchange for the Company paying fifty thousand dollars ($50,000) in cash and $125,000 (one hundred twenty five thousand dollars) in stock and mutual releases between parties. There are no longer any cross claims pending in the Mollik action.
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 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, (iii) negligent misrepresentation, (iv) elder abuse, and (v) unfair competition. We answered the FAC on November 12, 2019, generally denying the allegations in the FAC and asserting affirmative defenses. Fact discovery in this matter remains ongoing. On August 10, 2021, we filed a motion for summary judgement and dismissal of plaintiff’s FAC. The parties participated in two days of mediation with Mark LeHocky. Mr. LeHocky provided the parties with a mediator’s proposal. Both parties accepted the proposal and reduced the proposal to a written settlement agreement. Pursuant to the settlement agreement, the Company has agreed to pay plaintiffs $197,500 in cash and $197,500 in shares of common stock. In addition, the Company’s insurance carrier has agreed to pay plaintiffs $170,000. On January 14, 2022, the parties filed a joint motion for an order approving the fairness of the terms of the settlement agreement. On March 7, 2022, the Court issued an Order approving the settlement and the parties are in the process of effectuating its terms. On April 5, 2022, the Company and Boustead resolved Boustead’s cross claim for indemnification in the Brooks action. This settlement is still subject to court approval. There are no further claims pending in the Brooks action and, if and when the Court approves the settlement, it should be dismissed.
On February 3, 2020, the Company acquired substantially all the assets of Ebus in a foreclosure sale through a credit bid in the amount of $582,000, representing the amount then owed by Ebus to the Company evidenced by a secured promissory note. Following the Company’s successful credit bid at the foreclosure sale, Ebus’s obligations under the note were extinguished and the Company was entitled to take possession of substantially all of the assets of Ebus. While the Company was able to take possession of some of the assets, Ebus prevented the Company from taking possession of all of the assets purchased at the foreclosure sale. As a result, on April 13, 2020, the Company filed a complaint captioned ADOMANI, Inc. v. Ebus, Inc., et al., in the Superior Court of California for the County of Los Angeles, Case No. 20ST CV 14275, against
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Ebus and certain of its insiders and affiliates seeking to recover the remainder of the assets and related damages. On January 14, 2021, a cross- complaint was filed against the Company by Ebus, Inc. and Anders B. Eklov for Unjust Enrichment and Conversion of Domain Name, seeking monetary damages and injunctive relief. A settlement agreement was entered into on March 15, 2022.

ITEM 1A. RISK FACTORS

Except as set forth below, there

There were no material changes from the risk factors previously disclosed in our Quarterlythe audited financial statements of Envirotech Vehicles, Inc. for the year ended December 31, 2021 as described in Part II, Item 7 of the Company’s Annual Report on Form 10-Q
10-K
for the quarterly periodyear ended MarchDecember 31, 2017,2021, as filed with the SEC on June 19, 2017.

We may face risks associated with our international business.

We plan to develop our business internationally, including the pursuit of certain opportunities in China through our wholly-owned subsidiary, ADOMANI China. The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, would subject us to extensive United States, European Economic Area and other foreign governmental trade, import and export and customs regulations and laws. Compliance with these regulations and laws would be costly and may expose us to penalties for non-compliance. If we are successful in developing our international activities, we expect that such operations would be subject to a variety of risks, including:

·difficulties in staffing and managing foreign and geographically dispersed operations;

·having to comply with various United States and international laws, including export control laws and the U.S. Foreign Corrupt Practices Act of 1977 and anti-money laundering laws;

·differing regulatory requirements for obtaining clearances or approvals to market our products;

·changes in, or uncertainties relating to, foreign rules and regulations that may impact our ability to sell our products, perform services or repatriate profits to the United States;

·tariffs and trade barriers, export regulations and other regulatory and contractual limitations on our ability to sell our products in certain foreign markets;

·fluctuations in foreign currency exchange rates;

·imposition of limitations on or increase of withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;

·imposition of differing labor laws and standards;

·economic, political or social instability in foreign countries and regions;

·an inability, or reduced ability, to protect our intellectual property, including our patented zero-emission drivetrain design, including any effect of compulsory licensing imposed by government action; and

·availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us.

While we plan to expand into other markets in the future, our expansion plans may not be realized, or if realized, may not be successful. We expect each market to have particular regulatory and funding hurdles to overcome and future developments in these markets, including the uncertainty relating to governmental policies and regulations, could harm our business. If we expend significant time and resources on expansion plans that fail or are delayed, our reputation, business and financial condition may be harmed.

22
April 26, 2022.

If we are unable to implement and maintain effective internal control over financial reporting and effective disclosure controls and procedures, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock may be negatively affected.

As a public company, we will not be required to comply with the requirements to assess and report on internal control over financial reporting until the filing of our annual report for the year ending December 31, 2018. Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires that we evaluate and determine the effectiveness of our internal control over financial reporting and, beginning with our annual report for the fiscal year ending December 31, 2018, provide a management report on the internal control over financial reporting. Once we are no longer either an “emerging growth company” or a smaller reporting company, such report must be attested to by our independent registered public accounting firm. While we have not conducted an evaluation of our the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, in connection with its audit of our financial statements for the fiscal year ended December 31, 2016, our independent registered public accounting firm identified material weaknesses in our internal controls that are standard for companies of our size, including limited segregation of duties and lack of systems in place to keep appropriate records for expenses incurred, specifically regarding operations in China. The Sarbanes-Oxley Act also requires that our principal executive officer and principal financial officer conclude as to the effectiveness of our disclosure controls and procedures on a quarterly basis. As of September 30, 2017, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective due to the presence of such material weaknesses in our internal controls. Due to our size, we rely heavily on key management for day-to-day operations and internal controls, and our size and correspondingly limited resources give rise to additional internal control weaknesses, including our disclosure controls.

If we fail to remediate our material weaknesses or find additional material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We are in the process of designing and implementing the internal control over financial reporting required to comply with this obligation, which process may be time consuming, costly, and complicated. While we have taken steps to remediate our material weaknesses, if we fail to remediate our material weaknesses or find additional material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal control over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

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

None.

In connection with the settlement of the Brooks Case, the Company issued 769,681 shares to Mr. Brooks for a total value of $197,500 on March 10, 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 onat the Exhibit Index immediately following the signature pageend of this Quarterly Report on Form
10-Q and is incorporated herein
for the information required by reference.

this item.
      
Incorporated by Reference
   
Exhibit
Number
  
Exhibit Description
  
Form
  
File No.
  
Exhibit
  
Filing
Date
  
Filed
Herewith
  10.1  Offer Letter with Christian S. Rodich dated February 3, 2022  8-K  001-38078  10.1  2/8/2022  
  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).          
#23
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 reportQuarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

ADOMANI, INC.

Envirotech Vehicles, Inc.
Date: May 16, 2022By:
/s/ Phillip W. Oldridge Phillip
     W. Oldridge Chief
    Executive Officer
    (Principal Executive Officer)
Date: November 13, 2017May 16, 2022By:
/s/ James L. ReynoldsChristian S. Rodich
 

James L. Reynolds

President and Chief Executive Officer

(Principal Executive Officer)

      Christian S. Rodich Chief
Date: November 13, 2017By:/s/ Michael K. Menerey
     

Michael K. Menerey

Chief Financial Officer

(Principal

    (Principal Financial and Accounting Officer)

24

Exhibit Index

    Incorporated by Reference  
Exhibit
Number		 Exhibit Description Form File No. Exhibit Filing
Date		 Filed
Herewith
             
10.1 Office Lease, dated July 11, 2017, by and between HGN Corona Partners, LLC and the Company S-1 333-220983 10.14 10/16/2017  
             
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 XBRL Instance Document*         X
             
101.SCH XBRL Taxonomy Extension Schema Document*         X
             
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document*         X
             
101.LAB XBRL Taxonomy Extension Label Linkbase Document*         X
             
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*         X
             
101.DEF XBRL Taxonomy Extension Definitions Linkbase Document*         X

#       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 of 1933, as amended (the “Securities Act”), or the Exchange Act (including this 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.

25

 

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