Impairment of Long-Lived Assets—Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates these assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets. If the estimated undiscounted cash flows are less than the carrying value of the assets, the assets are written down to their fair value. There was no impairment of long-lived assets, or property and equipment, as of March 31, 2022 2023and December 31, 2021, 2022, respectively.

Goodwill—Goodwill represents the excess acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead.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, 20212023, that $51,775,667$14,682,620 in goodwill related to the ADOMANI, Inc. and EVTDS Merger did not experience impairment. The Company recorded a non-cash goodwill impairment charge of $37,093,047 for the year ended December 31, 2022 resulting in a goodwill balance of $14,682,620 on that date.

Research and Development—Costs incurred in connection with the development of new products and manufacturing methods are charged to operating expenses as incurred. Research and development costs were $58,139 for the year ended December 31, 2021. No costs were incurred$70,888 during the three-months months ended March 31, 2022.2023. There were no research and development costs for 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-cashNon-cash stock-based compensation expense of $1,614,845$87,144 was recorded for the three months ended March 31, 2022.2023.

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 shorter of its useful life ofor the lease term. Property and equipment qualify for capitalization if the purchase price exceeds $2,000. Major repairs and replacements, which extend the useful lives of equipment, are capitalized and depreciated over the estimated useful lives of the property. All other maintenance and repairs are expensed as incurred.

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

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

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 to zero 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:

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, 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.

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.

Components of property and equipment, net, consist of the following as of March 31, 2022 2023and December 31, 2021:2022:

Depreciation expense was $18,659$28,984 and $7,996, respectively,$18,659 for the three months ended March 31, 2022,2023 and March 31, 2021.2022, respectively.

On June 15, 2021, the Company entered into an equipment financing agreement with Navitas Credit Corp. in connection with the purchase of certain inventory management software. The $63,576 loan is payable over twenty-four months, beginning in July 2021, with monthly payments of $2,648.99. AsThe balance of this note is $5,298 and is classified as Notes Payable - Current on the Company's Consolidated Balance Sheets on March 31, 2023.

On July 15, 2022, $31,788the Company entered into an equipment financing agreement with Wells Fargo in connection with the purchase of facility grounds equipment. The $18,755 loan is reflected on the consolidatedpayable over 36 months, beginning in August 2022, with monthly payments of $521. The balance sheet as current notes payable while $5,298of this note is $21,360 of which $6,252 is classified as long-term notes payable.Notes Payable - current and $15,108 is classified as Notes Payable - Long Term on the Company's Consolidated Balance Sheets on March 31, 2023.

Effective May 2, 2018,June 15, 2022, ADOMANI, Inc.the Company entered into a premium financing agreement with First Insurance Funding to finance certain insurance coverage. The $225,000 loan is payable over nine months, beginning in July 2022, and bears interest at 5.8% with monthly payments of $25,608. The balance of this note is zero on March 31, 2023.

Effective August 20, 2022, the Company entered into a second premium financing agreement with First Insurance Funding to finance other insurance coverages. The $214,088 loan is payable over nine months, beginning in September 2022, and bears interest at 6.3% with monthly payments of $24,416. The balance of this note is $48,451 and is classified as Notes Payable - Current on the Company's Consolidated Balance Sheets on March 31, 2023.

Effective August 4, 2022, EVT secured a line of credit from Morgan Stanley.Centennial Bank. Borrowings under the line of credit bear interest at 30-day LIBOR plus 2.0%.2.75% annually. There is no maturity date for the line, but Morgan StanleyCentennial Bank may at any time, in its sole discretion and without cause, demand the Company immediately repay any and all outstanding obligations under the line of credit in whole or in part. The line is secured by the cash and cash equivalents maintained by the Company in its Morgan StanleyCentennial Bank 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; therebalances up to $1,000,000. 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. March 31, 2023The line of credit is still available to the Company, but and there is no current plan to borrow from it.

As a result of the Merger closing (see Note 3),The Company’s outstanding warrants as of March 15, 2021, 31, 2023the Company had outstanding warrants to purchase an aggregate of 10,681,327 shares of common stock, 2,056,326 of which is summarized as follows, and all were exercisable. The warrants were previously issued by ADOMANI, Inc. and assumed in the Merger. exercisable at that date.

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 19,166,667958,334 shares of its common stock, all of which were exercisable as of March 31, 2022. 2023The Company’s outstanding warrants as of March 31, 2022 is summarized as follows, and all were exercisable at that date.

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

Approximately 12,833 stock warrants have expired in the three months ended March 31, 2023.

As of March 31, 2022, 2023, the outstanding warrants have no intrinsic value.

Stock Options

As a result of the Merger closing (see Notes 2 and 3) there were 12,992,857649,643 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 2023consisted of the following:

On January 7, 2022, the Company’s Compensation Committee granted Phillip W. Oldridge, the Company’s CEO,Chief Executive Officer, options to purchase 3,000,000150,000 shares of common stock at an exercise price of $0.10$2.00 per share and options to purchase 1,000,00050,000 shares of common stock at an exercise price of $0.12$2.40 per share. The options vested immediately and expire on the tenth anniversary of grant.

On January 7, 2022, the Company’s Compensation Committee granted Susan M. Emry, the Company’s Executive Vice President, options to purchase 2,000,000100,000 shares of common stock at an exercise price of $0.10$2.00 per share and options to purchase 817,85540,893 shares of common stock at an exercise price of $0.12$2.40 per share. The options vested immediately and expire on the tenth anniversary of grant.

On January 31, 2022, the Company’s Compensation Committee granted Christian S. Rodich, the Company’s Chief Financial Officer, options to purchase 55,2492,763 shares of common stock at an exercise price of $0.181$3.62 per share and options to purchase 22,2221,111 shares of common stock at an exercise price of $0.45$9.00 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 1,000,00050,000 shares of common stock were exercised by the former President and CEO of the Company at a price of $0.12$2.40 per share, resulting in a payment to the Company of $120,000. Also on March 15, 2022, options to purchase an aggregate of 500,00025,000 shares of common stock with an exercise price of $0.45$9.00 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, 2023, outstanding options had intrinsic value of $1,491,870.$355,670.

Restricted Shares

During the first quarter of 2023, the Company awarded 85,000 restricted shares to a vendor that will vest over a six-month period in exchange for marketing services to be provided over the same period. As a result, the Company recorded stock compensation expense of $87,144 during the three months ended March 31, 2023. These restricted shares were issued in the third quarter of 2023.

The Company has entered into an engagement agreement (the “SRI Services Agreement”)lease agreements with SRI Professional Services, Incorporated (“SRI”), pursuant to which the Company engaged SRI to provide certain servicesleases equipment used in connection with the day-to-day operationsoperation 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 SRIits business (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.Leases”). Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, serves as an executive officer and a member of the board of directors of SRI.

The 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 obligationsobligation of the Company under the SRI Equipment Leases is $7,771. As a result of these agreements, the Company recorded rent expense of $23,312 for the three months ended March 31, 2023.

EVTDSThe Company has entered into a cancelable month-to-month lease with SRI (the “SRI Office Lease”), pursuant to which EVTDSthe Company 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.$2,730. The Company recorded rent expense of $5,460 for the three months ended March 31, 2023 in connection with this agreement.

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.$5,000. Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, is a director of ABCI.

In connection with the closing The Company recorded rent expense of the Merger in March, 2021, the Company purchased two electric trucks from Mr. Oldridge$20,600 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.March 31, 2023 in connection with this agreement.

Prior toDuring the closingfirst quarter of 2023, the Company reimbursed Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Merger, Mr. Oldridge had permitted the two vehicles to be used by the Company as customer demonstration vehiclesBoard, and a member of its board of directors, $81,269 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. Oneuse 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.CEO's personal airplane for certain business-related activities.

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.

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.

The following table summarizes the Company’s There are no future minimum payments under the terms of both agreements as each party has a right to terminate the agreement without any contractual commitments, excluding debt, as of March 31, 2022:payments other than what has been stated in their respective contracts.

Future minimum payments under operating leases are not material.

Except as set forth below, we know of no material, existing or pending, legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

GreenPower Litigation

On December 17, 2019, GreenPower Motor Company Inc., a public company incorporated under the laws of British Columbia (“GreenPower”), of which Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, 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 thatThe Company has denied all claims, believes the lawsuit is without merit, and intendintends 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 counterclaimcounterclaim.

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. PhilipPhillip 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 PhilipPhillip 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- Competitiveanti-Competitive behavior, restitution for harm, an award of treble damages, and associate fees and costs. The complaint’s allegations are centered around the same assertions in the pending Canadian litigation.

The Company has been served and its response to the Complaint is due  On May 10, 2022.2022, We believethe Company, together with other defendants, filed a Motion to Dismiss and/or Stay the lawsuit pending the outcome of the Canadian litigation. The Court issued stay of this case pending resolution of parallel litigation in Canada between similar parties. GreenPower and defendants have agreed that the U.S. GreenPower case will not proceed while Canadian litigation is pending. The Company believes that the lawsuit is without merit and intendintends to vigorously defend the action.

Mollik Litigation - Resolved

On August 23, 2018, a purported class action lawsuit captioned M.D. Ariful Mollik v. ADOMANI, Inc. et al., Case No. RIC 1817493, was filed in the Superior Court of the State of California for the County of Riverside against us,the Company, certain of ourits executive officers, Edward R. Monfort, the former Chief Technology Officer and a former director of ADOMANI, Inc., and the two underwriters of ourthe Company’s offering of common stock under Regulation A in June 2017. This complaint alleges that documents related to our offering of common stock under Regulation A in June 2017 contained materially false and misleading statements and that all defendants violated Section 12(a)(2) of the Securities Act, and that wethe Company and the individual defendants violated Section 15 of the Securities Act, in connection therewith. The plaintiff seeks on behalf of himself and all class members: (i) certification of a class under California substantive law and procedure; (ii) compensatory damages and interest in an amount to be proven at trial; (iii) reasonable costs and expenses incurred in this action, including counsel fees and expert fees; (iv) awarding of rescission or recessionary damages; and (v) equitable relief at the discretion of the court. Plaintiff’s

On June 19, 2023, 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 andfor 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 againstcounsel for the Company seeking indemnification under the terms of the underwriting agreementparticipated in a mediation at which Electric Drivetrains and the Company and the Underwriters entered for the Company’s initial public offering (the “Underwriting Agreement”).executed a binding term sheet to completely resolve this matter. 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 FebruaryJuly 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, 2021,2023, Electric Drivetrains and ADOMANI filedall Defendants executed a stipulation extending the deadlineSettlement Agreement 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 meritscomplete resolution of the motion for class certification. Electric Drivetrains settled its claimscase and dismissal against Mr. Monfort. The Underwriters have reached settlementsall Defendants with Electric Drivetrains on the primary claims inprejudice. No Company proceeds will be used to resolve 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,September 30, 2023, the Court vacateddismissed this action with prejudice and 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 conferencematter is scheduled for June 16, 2022. We believe that the lawsuit is without merit and intend to vigorously defend the action.completely resolved.

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 twentyfive thousand dollars) in stock and mutual releases between parties. There are no longer any cross claims pending in the Mollik action.Litigation

On June 19, 2019, Alan K. Brooks, an ADOMANI investor, filed a complaint, captioned Alan K. Brooks v. ADOMANI, Inc., et al., Case No. 1-CV-349153 in the Superior Court of California for the County of Santa Clara, against the Company, certain of the Company’s executive officers and directors, two of the underwriters of the Company’s offering of common stock under Regulation A in June 2017, and certain of the underwriters’ personnel, among others (the “Brooks Case”). The complaint alleges that the Company and other defendants breached the terms of an agreement between Mr. Brooks and the Company by refusing to release 1,320,359 shares of ADOMANI, Inc. stock to Mr. Brooks. Mr. Brooks seeks damages of $13,500,000.00 plus interest and attorney’s fees. On September 20, 2019, Mr. Brooks filed his first amended complaint (“FAC”) reasserting his breach of contract claim and alleging five additional claims for (i) violations of Cal. Corp. Code Section 25401, (ii) fraud, negligent misrepresentation, (iv) elder abuse, and (v) unfair competition. 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 providedduring which they resolved 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.matter. 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 becase has now been completely 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.

As of March 31, 2022, the Company is a party to nineeight operating leases. FourFive of these leases are office or warehouse leases; the remaining fivethree are equipment leases (see Note 9). As disclosed in Note 2, theleases. 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 as of March 31, 2023 should be classified as short-term operating leases.

DuringThe Company has entered into the yearSRI Equipment Leases. Rent expense under the SRI Equipment Leases was $23,312 and $23,312 for the three months ended March 31, 2023 and three months ended March 31, 2022, respectively.

The Company has entered into the SRI Office Lease. Rent expense under the SRI Office Lease was $5,460 and $2,730 for the three months ended March 31, 2023 and three months ended March 31, 2022, respectively.

The Company has entered into the ABCI Office Lease. Rent expense under the ABCI Office Lease was $20,600 and $8,400 for the three months ended March 31, 2023 and three months ended March 31, 2022, respectively.

The Company has entered into the Toledo Jet Center Lease for office space in the Ft. Lauderdale, Florida area effective February 15, 2022. The lease has a one-year term with the option to renew after one year. Rent expense for the Toledo Jet Center Lease for the three months ended March 31, 2023 and three months ended March 31, 2022, was $4,500 and $2,408, respectively.

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

In December 31, 2020,2019, the Company entered into an operatingsigned 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, (see Noteand made such facility the new corporate office location in addition to its prior use. The lease is for a period of 1036 months, commencing on January 1, 2020, and terminating on December 31, 2022. The base rent for the term of the lease was $495,720, with $265 due per month for fire sprinkler alarm monitoring and landscape maintenance. The base rent amount due monthly was $13,108 at commencement and would have escalated to $13,906 by its conclusion. However, the Company vacated the premises effective March 31, 2022, and the lease was taken over on April 1, 2022 by its sublease tenant, as discussed below.

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

As required by ASC 842, in conjunction with thisthe Corona, California lease, the Company recognized an operating liability with a corresponding Right-Of-Use (“ROU”) asset of the same amounts based on the present value of the minimum rental payments of such lease. As of March 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:

The Company evaluates subsequent events through September 22, 2023, which is the date the financial statements were issued or available to be issued.

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.

On August 5, 2022 the Santa Clara Superior Court approved the settlement reached on April 8, 2022 between the Company and Boustead Securities, LLC. rending it finally effective, with consideration to be paid by the Company of fifty thousand dollars ($50,000) in cash and 20,415 shares of common stock and mutual releases between parties being forthcoming (see note 10).

Effective August 4, 2022, EVT secured a line of credit from Centennial Bank. Borrowings under the line of credit bears interest of 2.75% annually. There is no maturity date for the line, but Centennial Bank may at any time, in its sole discretion and without cause, demand the Company immediately repay any and all outstanding obligations under the line of credit in whole or in part. The line is secured by the cash and cash equivalents maintained by the Company in its Centennial Bank accounts. Borrowings under the line may not exceed $1,000,000 of such cash, cash equivalents, and marketable securities balances.

In March 2023, the Company ("Sublessee") entered into an agreement with Berthaphil, Inc. ("Sublessor") to sublease approximately 3,600 squaresquarer yards of a warehouse building based in the Clark Freeport Zone in the Philippines. The term of the lease is two years and two months with a turnover date of July 1, 2023 ("turnover date") and a rental commencement date of September 1, 2023. ThereTher is a grace period of two months for rental payments starting from the turnover date. The monthly rent for the first year is $15,000, escalating to $15,750 for the second year and $16,530 for the remaining term. The sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions. The Company intends to use the leased space as a production facility as it seeks to expand its business presence both in the region and the United States of America.States.

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

During   The Company evaluates subsequent events that have occurred after the preparationbalance sheet date but before the consolidated financial statements are issued. There are two types of its Form subsequent events: (101-K for the year ended December 31, 2022, the Company identified misstatements) recognized, or those that provide additional evidence with respect to recognition of sales revenue and related cost of sales during eachconditions that existed at the date of the three month periods ended March 31, 2022, June 30, 2022 balance sheet, including the estimates inherent in the process of preparing financial statements, and (September 30, 2022. 2Management identified vehicle sales transactions where sales revenue and related cost of sales were incorrectly recognized upon approval of customer purchase incentives by certain government-sponsored electric vehicle incentive programs. Management determined) non-recognized, or those that such approvalprovide evidence with respect to conditions that did not coincide with a transfer of control under ASC Topic 606,Revenue from Contracts with Customers, and that revenue should have been recognized upon deliveryexist at the date of the vehiclesbalance sheet but arose subsequent to that date. There were no material transactions that occurred subsequently to March 31, 2023 that would require the customer.Company to disclose in this filing.

The Company has restated its Consolidated Balance Sheet as of March 31, 2022, and the related Consolidated Statement of Operations, Consolidated Statement of Stockholders’ Equity and Consolidated Statement of Cash Flows for the three months ended March 31, 2022 to correct the misstatements described above.

The following table summarizes the effects of the restatement as of and for the three months ended March 31, 2022. Corresponding changes were made in the Consolidated Statement of Stockholders’ Equity and Consolidated Statement of Cash Flows. The restatement had no net effect on the cash flows of the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Overview

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

As discussed in Item 1, Notes 2 and 3 toFor the unaudited consolidated financial statements contained in 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 those of EVTDS 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 periodthree months ended March 31, 2023 and 2022, which include the consolidated resultswe generated sales revenue of operations of EVTDS$523,199 and Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.)$89,900, respectively, and subsidiaries for the entire three month period. The consolidated financial statements and related disclosures as of March 31, 2021 include the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries, including EVTDS. The consolidated results of operationsour net loss for the three months ended March 31, 2021 include the results of operations of EVTDS2023 was $2,267,908. Our net loss 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. 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 $89,900 and $470,793, respectively, and our net losses were $2,936,862 and $658,510, respectively. The 2022 loss includes approximately $1.6 million of non-cash expenses.was $2,936,862.

Factors Affecting Our Performance

We believe that the growth and future success of our business depend on various opportunities, challenges and other factors, including the following:

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

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

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

Dependence on external sources of financing of our operations. We have historically depended on external sources 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.

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

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

Market growth. We believe the market for all-electric solutions for alternative fuel technology, specifically all-electric vehicles, will continue to grow as more purchases of new zero-emission vehicles and as more conversions of existing fleet vehicles to zero-emission vehicles are made. However, unless the costs to produce such vehicles decrease dramatically, 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, the amounts of such assistance to our customers, or our ability to access such funds.

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

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

Components of Results of Operations

Sales

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

Cost of Sales

Cost of sales includes those costs related to the development, manufacture, and distribution of our products. Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; labor and other costs related to the development and manufacture of our products; and other associated costs. Cost of sales also includes costs related to the valuation of inventory due to impairment, obsolescence, or shrinkage.

General and Administrative Expenses

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

Consulting and Research and Development Costs

These expenses are related to our consulting and research and development activity.

Other Income/Expenses, Net

Other income/expenses include non-operating income and expenses, including interest income and expense.

Provision for Income Taxes

We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) ASC 740 “Income Taxes,” which requires the recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations. Because we have incurred only losses to this point, no provision for income taxes has been made in 2022.2023.

Results of Operations

The following discussion compares operating data for the three months ended March 31, 20222023 to the corresponding periodsperiod ended March 31, 2021:2022:

Sales

Sales were $89,900$523,199 and $470,793$89,900 for the three months ended March 31, 2023 and 2022, and 2021, respectively. Sales for the three months ended March 31, 2023 consisted of six logistic cargo vans sold primarily to customers in New Jersey who utilized a voucher from the NJ ZIP program. Sales for the three months ended March 31, 2022 consisted of one cargo vancab and chassis truck sold primarily to a customer who utilized a voucher fromNew Jersey customers utilizing the NJ ZipZIP program. Sales forThe increase in sales was primarily due to an increase in the three months ended March 31, 2021 consistednumber of four cargo vansvehicles sold and one Class 4 truck.an increase in average selling price as a result of a more favorable product mix.

Cost of Sales

Cost of sales were $76,427$404,836 and $313,434$76,427 for the three months ended March 31, 20222023 and 2021,2022, respectively. Cost of sales for the three months ended March 31, 2022 and 20212023 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.above. 

General and Administrative Expenses

General and administrative expenses were $2,882,848$2,165,532 and $585,903$2,882,848 for the three months ended March 31, 2023 and 2022, and 2021, respectively, an increaserespectively. The decrease of $2,296,945. The increase$717,316  was primarily related to $1,614,845a $1,527,699 decrease of 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 2021 period. Other increases were due topartially offset by increase in payroll-related expenses of $342,769;$377,616 as we seek to expand our employees in anticipation of future growth, increase in professional fees of $319,773 (primarily legal fees), increase in contract labor costs of $101,856$113,717 primarily related to engineering and technical assistance; toassistance, increase in advertising and marketing expenses of $93,150;$72,877 as we continue to insurance costs of $82,835; and toseek new revenue opportunities;  increase in travel and related expenses of $79,213$135,500 related primarily to finalizing logisticstradeshows and moving into the Osceola, Arkansas manufacturing location;other marketing activities, and to increasesincrease in other general and administrative expenses of $147,119. These increases were reduced by a reduction in legal fees of $164,842 compared$209,100 due to the 2021 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 stock-based compensation expense discussed above. The general and administrative expenses for the three months ended March 31. 2021 included non-cash depreciation expense of $7,996.anticipated business growth.

Consulting Expenses

Consulting expenses were $70,800$174,809 and $10,250$70,800 for the three months ended March 31, 20222023 and 2021,2022, respectively. The increase in the current year period was due primarily to paymentsfees paid to an Arkansas state relationshipoutside human resources firm in conjunction with the search for two key positions.

Research and incentive consulting firm that assistedDevelopment Expenses

Research and development expenses were $70,888 for the Companythree months ended March 31, 2023 and no expense was incurred for the three months ended March 31, 2022. The increase in securing the manufacturing facility in Osceola, Arkansas andcurrent year period was due to the costdevelopment of the ASC 805 valuation report related to the Merger.new product lines.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 20222023 and 2021:2022:

Operating Activities

Cash (used in)Net cash used in operating activities isfor the three months ended March 31, 2023 was $2,248,663, primarily the resultdue to a net loss of our operating losses, reduced by the impact of non-cash expenses, including non-cash stock-based compensation,$2,267,908 and changes in the assetoperating assets and liability accounts.liabilities, net of $104,078, partially reduced by non-cash operating charges of $123,323. The changes in operating assets and liabilities, net was due to inventory deposits of $339,939, accrued liabilities of $294,676, inventory of $62,095 and other current assets of $33,337, partially offset by changes in accounts receivable of $184,177, prepaid expenses of $161,495 and accounts payable of $280,297.

Net cash used in operating activities for the three months ended March 31, 2022 was $3,905,534, versusprimarily due to a net cash usedloss of $2,936,862 and changes in operating activitiesassets and liabilities, net of $2,895,880 for the three months ended March 31, 2021, an increase$2,606,313, partially reduced by non-cash operating charges of $1,009,654.$1,637,641. The increase in net cash usedchanges in operating activitiesassets and liabilities, net was due to an increase in net lossinventory of $2,278,352 and an increase in inventory additions$3,435,765, accrued liabilities of $3,104,404. These uses$331,259, accounts payable of cash were$67,940, partially offset by an increase in non-cash expenses of $1,629,645 (primarily stock-based compensation expense of $1,614,845); a reduction in decreased accrued liabilities of $1,198,787, a reductionchanges in inventory deposits of $1,032,114; a decrease in the use$1,032,114, other non-current assets of cash to reduce accounts payable$160,770 and prepaid expenses of $348,521, and to a $164,035 net decrease in the use of cash in the remaining balance sheet accounts.$125,119.

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 expenses we incur to satisfy future warranty claims.

Investing Activities

Net cash provided by investing activities during the three months ended March 31, 2022 decreased2023 was $1,310,118, primarily due to the sale of our marketable securities of $1,329,599, partially offset by $385,771 to $2,987,561, as compared to cash provided by investing activities$19,481 of $3,373,332 during the three months ended March 31,2021. The decrease in netcapital expenditures. Net cash provided by investing activities during the three months ended March 31, 2022 iswas $2,987,561, primarily due to the absence in 2022net sale of the $3,373,332 cash acquired in merger in 2021 and to capital expenditures in 2022our marketable securities of $12,502 versus none in 2021,$3,000,063, partially offset by net provision$12,502 of cash of $3,000,063 from the purchase and sale of marketable securities.capital expenditures. 

Financing Activities