Envirotech Vehicles (EVTV) 10-Q 2022 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

or

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

For the transition period fromto

Commission File Number:

001-38078

ENVIROTECH VEHICLES, INC.

(Exact name of registrant as specified in its charter)

Delaware	46-0774222
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1425 Ohlendorf Road

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	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    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	☒	Smaller reporting company	☒
		Emerging growth company	☒

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.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act).    Yes  ☐    No  ☒

The number of shares outstanding of the registrant’s common stock as of August 15, 2022 was

 15,000,673.

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM

10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

	PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:		2
Unaudited Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021		2
Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021		3
Unaudited Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2022 and 2021		4
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021		5
Notes to Unaudited Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosure about Market Risk		23
Item 4. Controls and Procedures		23
Part II. OTHER INFORMATION
Item 1. Legal Proceedings		24
Item 1A. Risk Factors		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3. Defaults Upon Senior Securities		26
Item 4. Mine Safety Disclosures		26
Item 5. Other Information		26
Item 6. Exhibits		27
Signatures		28

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form

10-Q

(“Quarterly 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 intended to identify statements about the future.

You should not place undue reliance on forward-looking statements. The special note set forth in this Quarterly Report, including in “Risk Factors” and elsewhere, identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:

• ability to generate demand for our zero-emission commercial fleet vehicles in order to generate revenue;

• dependence upon external sources for the financing of our operations;

• 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. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.

Unless expressly indicated or the context requires otherwise, references in this Quarterly Report to “Envirotech,” the “Company,” “we,” “our,” and “us” refer to Envirotech Vehicles, Inc. and our consolidated subsidiaries, unless the context indicates otherwise.

1

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30,			December 31,
	2022			2021
ASSETS
Current assets:
Cash and cash equivalents	$	4,270,421		$	4,846,490
Restricted cash		60,091			60,035
Marketable securities		2,002,472			8,002,700
Accounts receivable		4,542,295			1,428,030
Inventory, net		5,607,135			3,850,541
Inventory deposits		4,518,975			4,503,079
Prepaid expenses		47,268			332,514
Total current assets		21,048,657			23,023,389
Property and equipment, net		286,976			272,113
Goodwill		51,775,667			51,775,667
Other non-current assets		78,369			236,639
Total assets	$	73,189,669		$	75,307,808
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	266,486		$	238,464
Accrued liabilities		757,565			1,280,020
Notes payable, net		29,139			31,788
Total current liabilities		1,053,190			1,550,272
Long-term liabilities
Other non-current liabilities		—			2,427
Notes payable, net		—			13,245
Total liabilities		1,053,190			1,565,944
Stockholders’ equity (deficit):
Preferred stock, 5,000,000 authorized, $0.00001 par value per share, 0ne issued and outstanding as of June 30, 2022, and December 31, 2021		0—			0—
Common stock, 350,000,000 authorized, $0.00001 par value per share, 15,000,673 and 14,912,178 issued and outstanding as of June 30, 2022, and December 31, 2021, respectively		150			149
Additional paid-in capital		83,798,350			81,866,075
Accumulated deficit		(11,662,021	)		(8,124,360	)
Total stockholders’ equity		72,136,479			73,741,864
Total liabilities and stockholders’ equity	$	73,189,669		$	73,307,808

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2022			2021			2022			2021
Sales	$	2,087,700		$	188,266		$	3,196,200		$	659,059
Cost of sales		1,260,480			147,932			1,952,042			461,366
Gross profit		827,220			40,334			1,244,158			197,693
Operating expenses
General and administrative		1,646,136			836,246			4,522,984			1,422,149
Consulting		99,518			95,108			170,318			105,358
Research and development		87,412			—			87,412			—
Total operating expenses, net		1,833,066			931,354			4,780,714			1,527,507
Loss from operations		(1,005,846	)		(891,020	)		(3,536,556	)		(1,329,814	)
Other income (expense):
Interest income, net		(4,516	)		(4,837	)		7,756			(5,759	)
Other income, net		98			2,778			(8,861	)		2,284
Total other income (expense)		(4,418	)		(2,059	)		(1,105	)		(3,475	)
Loss before income taxes		(1,010,264	)		(893,079	)		(3,537,661	)		(1,333,289	)
Income tax expense		—			—			—			(218,300	)
Net loss	$	(1,010,264	)	$	(893,079	)	$	(3,537,661	)	$	(1,551,589	)
Net loss per share to common stockholders:
Basic and diluted	$	(0.07	)	$	(0.06	)	$	(0.24	)	$	(0.19	)
Weighted shares used in the computation of net loss per share:
Basic and diluted		14,996,631			13,921,580			14,961,938			8,137,852

See Accompanying Notes to Unaudited Consolidated Financial Statements.

3

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		14,912,178	$	149	$	81,866,075	$	(8,124,360	)	$	73,741,864
Common stock issued for cash		50,000		1		119,999		—			120,000
Common stock issued for lawsuit settlement		38,495		0		197,431		—			197,431
Stock based compensation		—		—		1,614,845		—			1,614,845
Net loss		—		—		—		(2,527,397	)		(2,527,397	)
Balance, March 31, 2022		15,000,673	$	150	$	83,798,350	$	(10,651,757	)	$	73,146,743
Net loss		—		—		—		(1,010,264	)		(1,010,264	)
Balance, June 30, 2022		15,000,673	$	150	$	83,798,350	$	(11,662,021	)	$	72,136,479

	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Stockholders’ Equity (Deficit)
	Shares		Amount
Balance, December 31, 2020		1	$	—	$	100		$	(472,260	)	$	(472,160	)
Common stock issued for cash		7,129,887		72		6,415,139			—			6,415,210
Common stock retained in merger		5,635,348		56		53,509,466			—			53,509,522
Offering costs netted against proceeds common stock		—		—		(156,443	)		—			(156,443	)
Net loss		—		—		—			(658,510	)		(658,510	)
Balance, March 31, 2021		12,765,236	$	128	$	59,768,262		$	(1,130,770	)	$	58,637,619
Common stock issued for cash		1,936,813		19		16,322,030			—			16,322,049
Offering costs netted against proceeds		—		—		(31,572	)		—			(31,572	)
Net loss		—		—		—			(893,079	)		(893,079	)
Balance, June 30, 2021		14,702,049	$	147	$	76,058,720		$	(2,023,849	)	$	74,035,017

See Accompanying Notes to Unaudited Consolidated Financial Statements.

4

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(3,537,661	)	$	(1,551,589	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		37,608			35,376
Unrealized loss on marketable securities		4,137			(10,190	)
Stock based compensation expense		1,614,845			—
Changes in assets and liabilities:
Accounts receivable		(3,114,265	)		(146,804	)
Inventory		(1,756,594	)		(1,208,657	)
Inventory deposits		(15,896	)		(292,879	)
Prepaid expenses		285,245			(1,950,600	)
Other non-current assets		158,270			265,523
Accounts payable		28,023			(239,413	)
Accrued liabilities		(330,100	)		(1,800,582	)
Other non-current liabilities		—			82,348
Net cash used in operating activities	$	(6,626,389	)	$	(6,817,467	)
Cash flows from investing activities:
Purchase of property and equipment, net	$	(52,471	)	$	(183,076	)
Investment in marketable securities		(2,003,909	)		(12,000,000	)
Sale of marketable securities		8,000,000			—
Cash acquired in merger		—			3,373,332
Net cash provided by (used in) investing activities	$	5,943,620			(8,809,744	)
Cash flows from financing activities:
Proceeds from issuance of common stock	$	120,000		$	22,737,159
Payments for deferred offering costs		—			(188,015	)
Principal advances from (repayments on) debt		(13,245	)		(309,865	)
Net cash provided by financing activities		106,755			22,239,279
Net change in cash, and restricted cash		(576,013	)		6,612,067
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	$	4,330,512		$	8,542,199
Supplemental cash flow disclosures:
Cash paid for interest expense	$	1,227		$	2,283
Cash paid for income taxes	$	—		$	—
Non-cash common stock lawsuit settlement, reverse stock split rounding	$	199,162		$	—

See Accompanying Notes to Unaudited Consolidated Financial Statements.

5

ENVIROTECH VEHICLES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Operations

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

.

On June 28, 2022, we effected a 20-for-1

stock split of our common stock with no change to authorized shares of common stock. All share, restricted stock unit (“RSU”), and per share or per RSU information through this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the stock split. the shares of common stock retain a par value of

$0.00001 per share. Accordingly an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from “Common Stock” to “Additional paid-capital.”

2. Summary of Significant Accounting Policies

Basis of Presentation

—The consolidated financial statements and related disclosures of EVTDS (see Note 3) as of June 30, 2022, whichinclude the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries, and for the fiscal period ended June 30, 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 June 30, 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 June 30, 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 June 30, 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 assumptionsthat 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.

6

Fair Value of Financial Instruments

—The carrying values of the Company’s financial instruments, including cash, accounts receivable andaccounts 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 andinspection 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 June 30, 2022, the Company did have a concentration of customers; five customers’ balances account for approximately 62 percent of the outstanding accounts receivable; for the six months ended June 30, 2022, 11 customers accounted for 100% of the reported revenue, with five of the 11 customers accounting for approximately 69 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 threemonths or less to be cash equivalents. The recorded value of our restricted cash and cash equivalents approximates their fair value. The Company had $60,091 and $60,035 restricted cash at June 30, 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.

7

Marketable Securities

—The Company invests in short-term, highly liquid, marketable securities, such as U.S. Treasury notes, 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 June 30, 2022, the aggregate amount of the Company’s investments in marketable securities was $2,002,472. These securities had original maturity dates ranging from 61 days to 214 days, and at June 30, 2022, the remaining maturity dates on these securities ranged from 31 days to 184 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 $4,542,295 and $1,428,030

as of June 30, 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 all 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 Company 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 June 30, 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 June 30, 2022 or December 31, 2021. Account receivable balances guaranteed by state grant funding as a percentage of total were 70% and 70% on June 30, 2022 and December 31, 2021, respectively. As discussed above, at June 30, 2022, the Company did have a concentration of customers; five customers’ balances account for

approximately 62 percent of the outstanding accounts receivable; for the six months ended June 30, 2022, eleven customers accounted for 100 percent of the reported revenue, with three of the eleven customers accounting for approximately 50 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 $5,619,564 as of June 30, 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 June 30, 2022, resulting in a net inventory balance of $5,607,135 as of June 30, 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 $4,518,975 and $4,503,079 as of June 30, 2022 and December 31, 2021, respectively. Deposits paid to three vendors accounted for 84 percent of the deposits outstanding at June 30, 2022; one different vendor with an affiliation to the two vendors just mentioned accounted for approximately 97 percent of the cost of sales for the three months ended June 30, 2022.

Income Taxes

—The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future taxconsequences 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 itis 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 June 30, 2022 and December 31, 2021, respectively, management did not identify any uncertain tax positions.

8

Net Loss Per Share

—Basic net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by theweighted 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 June 30, 2022, 604,711 shares of the Company’s common stock were subject to issuance upon the exercise of stock options then outstanding and 1,402,417 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 attimes 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 Arvest Bank, National Association (“Arvest”). Between FDIC and the Securities Investor Protection Corporation (“SIPC”) coverage, funds up to $750,000, which may include cash up to $500,000, are insured. In addition, Arvest provides excess insurance acquired by them from SIPC for unlimited per customer securities up to a $1 billion cap.

During the six months ended June 30, 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 $60,091.

Impairment of Long-Lived Assets

—Long-lived assets, including property and equipment, are reviewed for impairment whenever events orchanges 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 0 impairment of long-lived assets, or property and equipment, as of June 30, 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 notamortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead. to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it can conclude the assessment. If the Company concludes otherwise, the Company is required to perform a quantitative analysis to determine the amount of impairment, if any. The Company has determined that it has one reporting unit, and based on both qualitative and quantitative analysis, it is management’s assessments at June 30, 2022 and at December 31, 2021 that $51,775,667 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 tooperating expenses as incurred. Research and development costs were $58,139 for the year ended December 31, 2021. Research and development costs were $

87,412

during the

six-months

ended June 30, 2022.

Stock-Based Compensation

—The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASCTopic 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 340,893 shares of common stock issued on January 7, 2022 and the options to purchase 3,874 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 six months ended June 30, 2022.

Property and Equipment

— Property and equipment are stated at cost, less accumulated depreciation and amortization. The Company provides fordepreciation using the straight-line method over the estimated useful lives of the assets, which range from

three

to

five years

, except leasehold improvements, which are being amortized over the life of the lease term. Property and equipment qualify for capitalization if the purchase price exceeds $

2,000

. Major repairs and replacements, which extend the useful lives of equipment, are capitalized and depreciated over the estimated useful lives of the property. All other maintenance and repairs are expensed as incurred.

Leases

—

The Company accounts for leases as required by ASC Topic 842. The guidance requires companies to recognize leased assets andliabilities 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 notbelieve that they will have a significant impact on the Company’s financial statements.

9

3. Merger

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 7,129,887 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 two 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

0

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.

10

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:

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 $53,509,522, based on 5,635,347 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 six months ended June 30, 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						For the six months ended
	June 30						June 30
	2022			2021			2022			2021
Sales	$	2,087,700		$	188,266		$	3,196,200		$	659,059
Net loss	$	(1,010,264	)	$	(893,079	)	$	(3,537,661	)	$	(1,551,589	)

For purposes of the pro forma disclosures above, there were no adjustments required for the

six

months ended June 30, 2022 because there were no transactions between EVTDS and ADOMANI, Inc. during that period. For the three months ended June 30, 2021, there were also no adjustments required, as the quarter reflects the results of operations of the merged entity. For purposes of the pro forma disclosures above, the adjustments for the six months ended June 30, 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.

11

4. Property and Equipment, Net

Components of property and equipment, net, consist of the following as of June 30, 2022 and December 31, 2021:

	June 30,			December 31,
	2022			2021
Furniture and fixtures	$	60,082		$	41,799
Leasehold improvements		40,112			28,112
Machinery & equipment		108,453			86,266
Vehicles		252,725			252,724
Test/Demo vehicles		15,784			15,784
Total property and equipment		477,156			424,685
Less accumulated depreciation		(190,180	)		(152,572	)
Net property and equipment	$	286,976		$	272,113

Depreciation expense was $18,948 and $27,380 and was $37,607 and $35,376 for the three and six months ended June 30, 2022 and 2021, respectively.

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 June 30, 2022

, $29,139 is reflected on the consolidated balance sheet as current notes payable.

6. Stock 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 534,067 shares of common stock, 102,817 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 958,333 shares of its common stock, all of which were exercisable as of June 30, 2022.

Approximately 27,483 stock warrants have expired in the six months ending June 30, 2022.

 

The Company’s outstanding warrants as of June 30, 2022 is summarized as follows, and all were exercisable at that date.

	Number of		Exercise		Remaining
	Shares		Price		Contractual Life (years)
Outstanding warrants expiring January 9, 2023		12,833	$	75.00		0.58
Outstanding warrants expiring January 28, 2025		431,250	$	10.00		2.58
Outstanding warrants expiring May 7, 2026		958,334	$	20.00		3.85
Outstanding warrants on June 30, 2022		1,402,417	$	17.43		3.43

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 June 30, 2022, the outstanding warrants have no intrinsic value.

12

7. Stock Options

As a result of the Merger closing (see Notes 2 and 3) there were 649,643 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 June 30, 2022 consisted of the following:

						Weighted
						Average
	Number of			Exercise		Remaining
						Contractual Life
	Shares			Price		(years)
Outstanding at December 31, 2021		338,500		$	5.80		6.98
Options granted during 6 months ended June 30, 2022:
Options Granted at $2.00 Exercise Price		250,000		$	2.00
Options Granted at $2.40 Exercise Price		90,893		$	2.40
Options Granted at $3.62 Exercise Price		2,762		$	3.62
Options Granted at $9.00 Exercise Price		1,111		$	9.00
Exercised		(50,000	)	$	2.40
Cancelled / Forfeited at $9.00 Exercise Price		(25,000	)	$	9.00
Subtotal, as follows:		608,266
Outstanding Options at $2.00 Exercise Price		250,000		$	2.00		9.55
Outstanding Options at $2.40 Exercise Price		90,893		$	2.40		9.55
Outstanding Options at $3.62 Exercise Price		2,762		$	3.62		4.59
Outstanding Options at $9.00 Exercise Price		257,861		$	9.00		8.46
Outstanding Options at $26.20 Exercise Price		6,750		$	26.20		5.80
Outstanding at June 30, 2022		608,266		$	5.30		9.02

On January 7, 2022, the Company’s Compensation Committee granted Phillip W. Oldridge, the Company’s

Chief Executive Officer,

options to purchase 150,000 shares of common stock at an exercise price of $2.00 per share and options to purchase 50,000 shares of common stock at an exercise price of $2.40 per share. The options vested immediately and expire on the tenth anniversary of grant.

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

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

.

On March 

15

,

2022

, options to purchase

50,000

shares of common stock were exercised by the former President and CEO of the Company at a price of $

2.40

per share, resulting in a payment to the Company of $

120,000

. Also on March 

15

,

2022

, options to purchase an aggregate of

25,000

shares of common stock with an exercise price of $

9.00

per share were forfeited by the former executive, as they were not exercised prior to their expiration on March 

15

,

2022

.

As of June 30, 2022, outstanding options had intrinsic value of $1,069,171.

13

8. Related Party Transactions

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 $2,730.

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 June 30, 2022.

9. Commitments

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 future minimum payments under contractual commitments, excluding debt, as of June 30, 2022:

	Payments due by period
									More
			Less than				4 - 5		than 5
	Total		one year		1 - 3 years		years		years
Operating lease obligations	$	13,563	$	12,038	$	1,525	$	—	$	—
Employment contracts		2,255,000		500,000		1,500,000		250,000		—
Total	$	2,268,563	$	512,038	$	1,501,525	$	250,000	$	—

1

4

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.

On May 10, 2022, the Company, together with other defendants, filed a Motion to Dismiss and/or Stay the lawsuit pending the outcome of the Canadian litigation. Hearing on this motion is set for October 7, 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.

15

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. Electric Drivetrains has, on several occasions, forwarded its proposed Fifth Amended Complaint, in which it: i) drops certain class allegations; ii) adds certain state law claims; iii) and drops certain factual allegations but leaves the remaining claims against defendants intact. The Company is considering whether to stipulate the most recent proposed Fifth Amended Compliant. 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 in exchange for the Company paying fifty thousand dollars ($50,000) in cash and 20,415

shares of common stock and mutual releases between parties. On August 5, 2022, the Santa Clara Superior Court approved this Settlement rendering it finally effective, with consideration being forthcoming. There are no longer any cross claims pending in the Mollik action.

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.

11. Leases

As of June 30, 2022, the Company is a party to 9 operating leases. Four 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 June 30, 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.

The Company has entered into the SRI Equipment Leases (see Note 8). Rent expense under the SRI Equipment Leases for the three and six months ended June 30, 2022 was $23,312 and $46,624, respectively, and for the three and six months ended June 30, 2021 was $23,313 and $42,745, respectively.

The Company has entered into the SRI Office Lease (see Note 8). Rent expense under the SRI Office Lease for the three and six months ended June 30, 2022 was $7,280 and $10,010, respectively, and for the three and six months ended June 30, 2021 was $2,730 and $5,460, respectively.

The Company has entered into the ABCI Office Lease (see Note 8). Rent expense under the ABCI Office Lease for the three and six months ended June 30, 2022 was $8,400 and $16,800, respectively, and for the three and six months ended June 30, 2021 was $8,400 and $16,800, respectively.

The Company has entered into the Toledo Jet Center Lease for office space in the Ft. Lauderdale Florida area

effective

 February 15, 2022. The lease has a

one

year term with the option to renew after one year. Rent expense for the Toledo Jet Center Lease for the three and six months ended June 30, 2022 was $4,815 and $7,223, respectively.

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.

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6

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.

The Company’s total net rent expense for the three and six months ended June 30, 2022 was $55,118 and $128,167, respectively, and for the three and six months ended June 30, 2021 was $132,949 and $190,796, respectively.

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

	Six Months Ended June 30,
	2022			2021
Lease expenses
Operating lease expenses	$	50,371		$	29,487
Short-term lease expenses		77,796			183,515
Total lease cost	$	128,167		$	213,002
Other information
Cash paid for the amounts included in the measurement of lease liabilities for operating leases:
Operating cash flows	$	51,160		$	27,906
Weighted-average remaining lease term (in years):
Operating leases		0.80			1.56
Weighted-average discount rate:
Operating leases		14	%		14	%

12. Subsequent Events

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.

1

7

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

The following discussion of our financial condition and the results of operations should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly Report on Form

10-Q

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

Overview

We are a provider of purpose-built

zero-emission

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

As discussed in Item 1, Notes 2 and 3 to 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 June 30, 2022, which include the consolidated balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and subsidiaries, and for the fiscal period ended June 30, 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 March 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. 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 June 30, 2022 and 2021, we generated sales revenue of $2,087,700 and $188,266, respectively, and our net losses were $1,010,264 and $893,079, respectively. For the six months ended June 30, 2022 and 2021, we generated sales revenue of $3,196,200 and $659,059, respectively, and our net losses were $3,557,661 and $1,551,589, respectively. The 2022 loss includes approximately $1.65 million of

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 thecountries 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 economicincentives 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 andcost-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 ouroperations. Accordingly, our future performance will depend in part upon our ability to achieve independence from external sources for the financing of our operations.

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Investment in growth.

We plan to continue to invest for long-term growth. We anticipate that our operating expenses will increase in the foreseeablefuture as we invest in research and development to enhance our

zero-emission

electric vehicles and systems; design, develop and manufacture our commercial fleet vehicles and their components; increase our sales and marketing to acquire new customers; and increase our general and administrative functions to support our growing operations. We believe that these investments will contribute to our long-term growth, although they will adversely affect our results of operations in the near term. In addition, the timing of these investments can result in fluctuations in our annual and quarterly operating results.

Zero-emission electric vehicle experience.

Our dealer and service network is not currently completely established, although we do have certainagreements 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 asmore 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 inadequate 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.

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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.

Results of Operations

The following discussion compares operating data for the three and six months ended June 30, 2022 to the corresponding periods ended June 30, 2021:

Sales

Sales were $2,087,700 and $188,266 for the three months ended June 30, 2022 and 2021, respectively, and $3,196,200 and $659,059 for the six months ended June 30, 2022 and 2021, respectively. Sales for the three months ended June 30, 2022 consisted of three cargo vans sold to factory authorized representatives, one cargo van sold to a dealer and 11 cargo vans sold primarily to customers in New Jersey who utilized a voucher from the NJ Zip program, three cab and chassis trucks and three resale buses were also sold. Sales for the six months ended June 30, 2022 consisted of the sales in the second quarter plus 10 cargo vans sold to factory authorized representatives and two vans sold to the Newark Public Library in New Jersey who utilized a voucher from the NJ Zip program. Sales attributable to higher vehicle selling price were $317,150 and $192,736 for the three and six months ended June 30, 2022, respectively.

Cost of Sales

Cost of sales were $1,260,480 and $147,932 for the three months ended June 30, 2022 and 2021, respectively, and $1,952,042 and $461,366 for the six months ended June 30, 2022 and 2021, respectively. Cost of sales for the three and six months ended June 30, 2022 and 2021 consisted of the costs related to the sale of the vehicles sold as described above and for the costs of providing maintenance and inspection services.

General and Administrative Expenses

General and administrative expenses were $1,646,136 and $836,246 for the three months ended June 30, 2022 and 2021, respectively, an increase of $809,890. The increase was primarily due to $389,036 of professional fees mostly legal fees; to $199,640 of increased payroll expense; to contract labor costs of $95,062 primarily related to engineering and technical assistance; to advertising and marketing expenses of $75,923; to insurance costs of $52,568; and to travel and related expenses of $62,000 related primarily to tradeshows; and to increases in other general and administrative expenses of $12,780. These increases were partially reduced by a reduction in rents of $77,117 compared to the 2021 period. The second quarter 2022 general and administrative expenses include $18,948

non-cash

depreciation expense. The general and administrative expenses for the three months ended June 30. 2021 included

non-cash

depreciation expense of $27,380.

General and administrative expenses were $4,522,984 and $1,422,149 for the six months ended June 30, 2022 and 2021, respectively, an increase of $3,100,835. 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 first quarter of 2022 compared to no similar expense recorded during the 2021 period. Other increases were due to payroll-related expenses of $542,409; to professional fees of $229,082 mostly legal fees; to contract labor costs of $190,917 primarily related to engineering and technical assistance; to advertising and marketing expenses of $169,073; to travel and related expenses of $139,959 related primarily to finalizing logistics and moving into the Osceola, Arkansas manufacturing location and tradeshows; to insurance costs of $135,402; and to increases in other general and administrative expenses of $163,983. These increases were partially reduced by a reduction in rents of $84,835 compared to the 2021 period. The general and administrative expenses for the six months ended June 30, 2022 include $1,652,453 in

non-cash

charges, with depreciation expense of $37,608 being added to the stock-based compensation expense discussed above. The general and administrative expenses for the six months ended June 30. 2021 included

non-cash

depreciation expense of $35,576.

Consulting Expenses

Consulting expenses were $99,518 and $95,108 for the three months ended June 30, 2022 and 2021, respectively, and $170,318 and $105,358 for the six months ended June 30, 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 cost of the ASC 805 valuation report related to the Merger.

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Research and Development Expenses

Research and development expenses were $87,412 for the three and six months ended June 30, 2022 and no expense for the three and six months ended June 30, 2021. The increase in the current year period was due to the development of a new product lines.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021:

	Six months ended June 30,
	2022			2021
Cash flows (used in), provided by operating activities	$	(6,626,388	)	$	(6,817,467	)
Cash flows provided by investing activities		5,943,620			(8,809,744	)
Cash flows provided by financing activities		106,755			22,239,279
Net change in cash, restricted cash and cash equivalents	$	(576,013	)	$	6,612,068

Operating Activities

Cash (used in) operating activities is primarily the result of our operating losses, reduced by the impact of

non-cash

expenses, including

non-cash

stock-based compensation, and changes in the asset and liability accounts.

Net cash used in operating activities for the six months ended June 30, 2022 was $6,626,388 versus net cash used in operating activities of $6,817,467 for the six months ended June 30, 2021, a decrease of $191,079. The decrease in net cash used in operating activities was due to a decrease in prepaid expenses of $2,235,846, an increase in

non-cash

expenses of $1,617,077 (primarily stock-based compensation expense of $1,614,845), a reduction in decreased accrued liabilities of $1,470,482, and a decrease in inventory deposits of $276,983. These uses of cash were partially offset by an increase in net loss of $1,992,574, an increase in accounts receivable of $2,967,461, and an increase in inventory additions of $547,937.

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 six months ended June 30, 2022 increased by $14,753,364 to $5,943,620, as compared to cash used in investing activities of $8,809,744 during the six months ended June 30, 2021. The increase in net cash provided by investing activities during the six months ended June 30, 2022 is primarily due to a decrease in investments in marketable securities of $9,996,091 and the increased sale of marketable securities of $8,000,000, partially offset by the absence in 2022 of the $3,373,332 cash acquired in merger in 2021.

Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2022 decreased by $22,132,524 to $106,755 from cash provided by financing activities in 2021 of $22,239,279. The decrease consisted primarily of the

pre-merger

$6,415,110 proceeds from the issuance of common stock raised by EVTDS in 2021 in anticipation of the Merger and a second common stock offering post-merger which raised $16,322,049 versus $120,000 raised in 2022 from the issuance of stock for stock options that were exercised. The 2021 cash provided was reduced by offering costs of $188,015; there were no offering costs incurred in the 2022 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 $309,865.

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Liquidity and Capital Resources

As of June 30, 2022, we had cash and cash equivalents of $4,270,421 and marketable securities of $2,002,472, a combined total of $6,272,894 and working capital of approximately $20.0 million. We believe that our existing 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 and is currently in final stages of due diligence and contract negotiation with the City of Osceola and the Arkansas Economic Development Commission. However, additional debt and/or equity capital will be required in order to purchase related equipment and set up production lines and is expected to require up to $80 million of additional investment through 2027. Investments and employee hiring requirements over the next 10 years will provide an opportunity for the Company to obtain local tax incentives granted to the Company of up to $27 million, provided that the qualifying expenditures are made. The Company is not currently contractually obligated to make the expenditures.

Line of Credit

Effective August 4, 2022, EVT secured a line of credit from Centennial Bank. Borrowings under the line of credit bears interest of 5.9% 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. There was no principal amount outstanding on June 30, 2022 and there is no current plan to borrow from 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 will begin increasing those expenditures as the Company transfers assembly and corporate functions to the newly announced Osceola Arkansas facility.

Contractual Obligations

Other than as disclosed in the unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form

10-Q

for the three and six months ended June 30, 2022, the Company has no contractual obligations.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with AAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

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

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including reduced disclosure about our executive compensation arrangements, exemption from the requirements to hold non-binding advisory votes on executive compensation and golden parachute payments and exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting. We may take advantage of these exemptions until the last day of the fiscal year following the fifth anniversary of our initial public offering or until such earlier time that we are no longer an “emerging growth company.”

We are also a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million as of the last business day of our most recently completed second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. We do not currently face material market risks such as interest rate fluctuation risk and foreign currency exchange risk. Our cash and cash equivalents include cash in readily available checking and money market accounts. These investments are not dependent on interest rate fluctuations that may cause the principal amount of these investments to fluctuate, and we do not expect such fluctuation will have a material impact on our financial conditions. If we issue additional debt in the future, we will be subject to interest rate risk. The majority of our expenses are denominated in the U.S. dollar.

We may face risks associated with the costs of raw materials, primarily batteries, as we go into production. To the extent these and other risks materialize, they could have a material effect on our operating results or financial condition. We currently anticipate that our international selling, marketing and administrative costs related to foreign sales, if any, will be largely denominated in United States dollars, which may create foreign currency exchange risk exposure.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules

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 June 30, 2022. We have yet to fully resolve such deficiencies as of the date of this filing. We have engaged, and continue to seek additional, experienced accounting professionals with relevant expertise to provide additional accounting services intended to supplement our efforts and mitigate the negative effects of such recent changes to our disclosure controls and procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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 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.

On May 10, 2022, the Company, together with other defendants, filed a Motion to Dismiss and/or Stay the lawsuit pending the outcome of the Canadian litigation. Hearing on this Motion set for October 7, 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.

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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. Electric Drivetrains has, on several occasions, forwarded its proposed Fifth Amended Complaint, in which it: i) drops certain class allegations; ii) adds certain state law claims; iii) and drops certain factual allegations but leaves the remaining claims against defendants intact. The Company is considering whether to stipulate the most recent proposed Fifth Amended Complaint. A status conference is scheduled for September, 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 in exchange for the Company paying fifty thousand dollars ($50,000) in cash and 20,415 shares of common stock and mutual releases between parties. On August 5, 2022, the Santa Clara Superior Court approved this Settlement rendering it finally effective, with consideration being forthcoming. There are no longer any cross claims pending in the Mollik action.

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 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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ITEM 1A. RISK FACTORS

There were no material changes from the risk factors previously disclosed in the 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-K

for the year ended December 31, 2021, as filed with the SEC on April 26, 2022.

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

In connection with the settlement of the Brooks Case, the Company issued 38,495 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 at the end of this Quarterly Report on Form

10-Q

for the information required by this item.

Exhibit Number		Incorporated by Reference
	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer						X
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer						X
32.1#	18 U.S.C. Section 1350 Certification of Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002						X
32.2#	18 U.S.C. Section 1350 Certification of Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002						X
101.INS	Inline XBRL Instance Document*						X
101.SCH	Inline XBRL Taxonomy Extension Schema Document*						X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*						X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*						X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*						X
101.DEF	Inline XBRL Taxonomy Extension Definitions Linkbase Document*						X

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

# The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Quarterly Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

* In accordance with Rule 402 of Regulation S-T, this interactive data file is deemed not filed or part of this Quarterly Report for purposes of Sections 11 or 12 of the Securities Act or Section 18 of the Exchange Act and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Envirotech Vehicles, Inc.
Date: August 15, 2022	By:	/s/ Phillip W. Oldridge Phillip
		W. Oldridge Chief
		Executive Officer
		(Principal Executive Officer)
Date: August 15, 2022	By:	/s/ Christian S. Rodich
		Christian S. Rodich Chief
		Financial Officer
		(Principal Financial and Accounting Officer)

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