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What changed in Envirotech Vehicles, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Envirotech Vehicles, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+159 added−222 removedSource: 10-K (2024-03-28) vs 10-K (2023-09-25)

Top changes in Envirotech Vehicles, Inc.'s 2023 10-K

159 paragraphs added · 222 removed · 132 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

46 edited+8 added−43 removed127 unchanged
Biggest changeThis represented just under 10% of 2021 vehicle sales and a doubling in EV sales versus the prior year, resulting in a total fleet of approximately 16.5 million units.
Biggest changeThis represented 14% of 2022 vehicle sales and a 62% increase in EV sales versus the prior year, resulting in a total fleet of approximately 27 million units and expected to grow to over 100 million by 2026. Sales are expected to grow by another 35% in 2023 to reach 14 million representing 18% of the overall car market.
In 2021, around half of the total growth in electric vehicles sales was in China, according to the Global EV Outlook 2022 report by the IEA. In the U.S., 630,000 new electric vehicles were sold in 2021, reflecting an acceleration in growth as this was about double the sales experienced in 2020.
In 2022, around half of the total growth in electric vehicles sales was in China, according to the Global EV Outlook 2022 report by the IEA. In the U.S., 630,000 new electric vehicles were sold in 2021, reflecting an acceleration in growth as this was about double the sales experienced in 2020.
These targets include: • Public and private schools that operate “white fleet” vehicles for non-student transportation use, such as facility service trucks, food service delivery vans/trucks, campus security vehicles and golf cart-type vehicles. • Commercial fleet operators that provide high daily mileage vehicles for use on routes in and around airports, hotels and offsite parking facilities. • Last mile delivery companies with fleets of delivery vans, short haul trucks and distribution/sorting facility center vehicles. • Large agricultural and food processing industry-focused companies that operate Class 1 through 7 trucks, buses and/or delivery vans. • Public and private transportation services that are involved in prisoner transportation. • Large companies that operate shuttle buses, transit style buses and facility-based vehicles, including on and off road-type vehicles for employee transport to/from remote parking areas, to/from special events, and the various vehicles used for facilities maintenance, services and security. • Private transportation contractors that shuttle large companies’ employees from common public transportation hubs to their campuses. • Public and private colleges and universities that operate shuttle buses, transit-style buses, facility service vans and trucks and utilize golf cart-type vehicles on their campuses. • Community-based, public/privately funded shuttle buses serving special-needs community members. • Retirement communities, municipalities, shopping malls, movie studio lots, and large warehouse facilities that currently use golf cart-type vehicles for moving people and goods. • The current market of approximately 3.5 million e-trike users in the Philippines, most of which currently operate gasoline or diesel- powered vehicles. • Public and private K-12 schools that operate Type-A, C and D school buses, and special-needs student buses. 9 Table of Contents • Student transportation contractors that serve public and private schools. • Port, railway and distribution center operators that use traditionally-fueled loading equipment, tractors, material handling equipment, forklifts, Class 1 through 7 trucks, delivery vans, yard goats, and other similar vehicles, that could be replaced with zero-emission alternatives. • Mining companies with fleets of above-ground service vehicles and underground staff transport and support vehicles. • Oil and gas companies with fleets of field trucks. • Electric utility companies with fleets of service trucks that are in the public eye. • Military-based fleet operators that have non-combat fleet vehicles of all sizes.
These targets include: • Public and private schools that operate “white fleet” vehicles for non-student transportation use, such as facility service trucks, food service delivery vans/trucks, campus security vehicles and golf cart-type vehicles. • Commercial fleet operators that provide high daily mileage vehicles for use on routes in and around airports, hotels and offsite parking facilities. • Last mile delivery companies with fleets of delivery vans, short haul trucks and distribution/sorting facility center vehicles. • Large agricultural and food processing industry-focused companies that operate Class 1 through 7 trucks, buses and/or delivery vans. • Public and private transportation services that are involved in prisoner transportation. • Large companies that operate shuttle buses, transit style buses and facility-based vehicles, including on and off road-type vehicles for employee transport to/from remote parking areas, to/from special events, and the various vehicles used for facilities maintenance, services and security. • Private transportation contractors that shuttle large companies’ employees from common public transportation hubs to their campuses. • Public and private colleges and universities that operate shuttle buses, transit-style buses, facility service vans and trucks and utilize golf cart-type vehicles on their campuses. • Community-based, public/privately funded shuttle buses serving special-needs community members. • Retirement communities, municipalities, shopping malls, movie studio lots, and large warehouse facilities that currently use golf cart-type vehicles for moving people and goods. • The current market of approximately 3.5 million e-trike users in the Philippines, most of which currently operate gasoline or diesel- powered vehicles. • Public and private K-12 schools that operate Type-A, C and D school buses, and special-needs student buses. 7 Table of Contents • Student transportation contractors that serve public and private schools. • Port, railway and distribution center operators that use traditionally-fueled loading equipment, tractors, material handling equipment, forklifts, Class 1 through 7 trucks, delivery vans, yard goats, and other similar vehicles, that could be replaced with zero-emission alternatives. • Mining companies with fleets of above-ground service vehicles and underground staff transport and support vehicles. • Oil and gas companies with fleets of field trucks. • Electric utility companies with fleets of service trucks that are in the public eye. • Military-based fleet operators that have non-combat fleet vehicles of all sizes.
(“ProGreens”), our zero-emission products may also grow to include automated charging infrastructure and “intelligent” stationary energy storage that enables fast vehicle charging, emergency back-up facility power, and access to the developing, grid-connected opportunities for the aggregate power available from groups of large battery packs.
Our zero-emission products may also grow to include automated charging infrastructure and “intelligent” stationary energy storage that enables fast vehicle charging, emergency back-up facility power, and access to the developing, grid-connected opportunities for the aggregate power available from groups of large battery packs.
In August 2016, the EPA and NHTSA jointly finalized Phase 2 standards for medium- and heavy-duty vehicles through model year 2027 to improve fleet fuel efficiency and cut carbon emissions. 16 Table of Contents The rule provides emission standards for carbon dioxide and fuel consumption standards for three main categories of vehicles: (i) combination tractors, (ii) heavy-duty pickup trucks and vans, and (iii) vocational vehicles.
In August 2016, the EPA and NHTSA jointly finalized Phase 2 standards for medium- and heavy-duty vehicles through model year 2027 to improve fleet fuel efficiency and cut carbon emissions. 14 Table of Contents The rule provides emission standards for carbon dioxide and fuel consumption standards for three main categories of vehicles: (i) combination tractors, (ii) heavy-duty pickup trucks and vans, and (iii) vocational vehicles.
We also may compete with large traditional vehicle manufacturers such as Ford, Volvo, Mercedes-Benz and Navistar. These traditional vehicle manufacturers have begun producing, or plan to produce, electric vans, buses and trucks for commercial use. 12 Table of Contents Intellectual Property The protection of our technology and intellectual property is an important component of our success.
We also may compete with large traditional vehicle manufacturers such as Ford, Volvo, Mercedes-Benz and Navistar. These traditional vehicle manufacturers have begun producing, or plan to produce, electric vans, buses and trucks for commercial use. 10 Table of Contents Intellectual Property The protection of our technology and intellectual property is an important component of our success.
For example, replace flooded lead acid (“FLA”) battery packs of existing industrial forklifts and underground mining equipment with more energy dense and higher cycle-life battery packs composed of lithium-ion cells. 10 Table of Contents Testing Our suppliers are vetted before their products are accepted for use in our products.
For example, replace flooded lead acid (“FLA”) battery packs of existing industrial forklifts and underground mining equipment with more energy dense and higher cycle-life battery packs composed of lithium-ion cells. 8 Table of Contents Testing Our suppliers are vetted before their products are accepted for use in our products.
The program gives priority to applicants located in nonattainment areas, as defined by the Clean Air Act, and projects that achieve the greatest air quality benefits, as measured by the number of emissions reduced per dollar of funds spent under the program. 15 Table of Contents Bus and Bus Facilities Grants The U.S.
The program gives priority to applicants located in nonattainment areas, as defined by the Clean Air Act, and projects that achieve the greatest air quality benefits, as measured by the number of emissions reduced per dollar of funds spent under the program. 13 Table of Contents Bus and Bus Facilities Grants The U.S.
We intend to comply with the HVIP guidelines and continue to qualify our vehicles for the HVIP vouchers. 13 Table of Contents New York Truck Voucher Incentive Program ("NYTVIP") NYT-VIP is a first-come, first-served incentive program funded by the New York State Energy Research & Development Authority.
We intend to comply with the HVIP guidelines and continue to qualify our vehicles for the HVIP vouchers. 11 Table of Contents New York Truck Voucher Incentive Program ("NYTVIP") NYT-VIP is a first-come, first-served incentive program funded by the New York State Energy Research & Development Authority.
We will monitor future actions on the proposal. 14 Table of Contents California Energy Commission ( “ CEC ” ) The California Energy Commission has several core responsibilities, including but not limited to setting energy policy, developing renewable energy, achieving energy efficiency, and transforming California’s transportation infrastructure.
We will monitor future actions on the proposal. 12 Table of Contents California Energy Commission ( “ CEC ” ) The California Energy Commission has several core responsibilities, including but not limited to setting energy policy, developing renewable energy, achieving energy efficiency, and transforming California’s transportation infrastructure.
Our vehicles are designed to help fleet operators unlock the benefits of technology that reduces GHG, NOx, PM and other pollutants, as well as to address the challenges of local, state and federal regulatory compliance and traditional-fuel price cost instability. We seek to enable our customers to: • Add Emission-Compliant Vehicles to Their Fleets .
Our vehicles are designed to help fleet operators unlock the benefits of technology that reduces GHG, NOx, PM and other pollutants, as well as to address the challenges of lo cal, state and federal regulatory compliance and traditional-fuel price cost instability. We seek to enable our customers to: • Add Emission-Compliant Vehicles to Their Fleets .
Our target customers primarily include public and private fleet operators that have an interest in meeting or exceeding local, state and federal emission regulatory guidelines while saving money on fuel and maintenance costs over the lifecycle of their fleet vehicles and that also have an interest in tangible demonstrations of their GHG-reducing efforts.
Our ta rget customers primarily include public and private fleet operators that have an interest in meeting or exceeding local, state and federal emission regulatory guidelines while saving money on fuel and maintenance costs over the lifecycle of their fleet vehicles and that also have an interest in tangible demonstrations of their GHG-reducing efforts.
Due to COVID-19 impacts and to other business challenges in 2020, we had to eliminate our in-house sales team in 2020. We have not been able to reestablish our sales team during 2021 and 2022 to help our current and future customer base, and instead relied primarily on our executives to work on sales activity.
Due to coronavirus ("COVID-19") pandemic impacts and to other business challenges in 2020, we had to eliminate our in-house sales team in 2020. We have not been able to reestablish our sales team during 2021, 2022 and 2023 to help our current and future customer base, and instead relied primarily on our executives to work on sales activity.
China and Europe have been the leaders on electric vehicle adoption and per the same report, are expected to account for nearly 80% of EV sales in 2025, with the U.S. representing 15% of the global EV market. Government policy, however, remains ever-changing and likely continues to play a foundational role in the rate of adoption around the world.
China and Europe have been the leaders on electric vehicle adoption and per the same report, are expected to account for nearly 75% of EV sales in 2026, with the U.S. representing 15% of the global EV market. Government policy, however, remains ever-changing and likely continues to play a foundational role in the rate of adoption around the world.
In response, the EPA committed to distributing $5 billion over five years via the Clean School Bus Program. In 2022, the EPA allocated approximately $1 billion in funding and is expected to do so again in 2023 as part of this program. The awards will cover the initial cost of acquiring most buses and will subsidize charging hardware and infrastructure.
In response, the EPA committed to distributing $5 billion over five years via the Clean School Bus Program. In 2022, the EPA allocated approximately $1 billion in funding and again in 2023 as part of this program. The awards will cover the initial cost of acquiring most buses and will subsidize charging hardware and infrastructure.
Pursuant to the Exclusive Distribution Agreement, EEVI appointed EVTDS as the exclusive distributor of certain of EEVI’s products in the United States on the terms and subject to the conditions set forth therein. Unless earlier terminated in accordance with the terms thereof, the Exclusive Distribution Agreement will remain in effect for a term expiring on December 17, 2070.
Pursuant to the Exclusive Distribution Agreement, EEVI appointed us as the exclusive distributor of all of EEVI’s products in the United States on the terms and subject to the conditions set forth therein. Unless earlier terminated in accordance with the terms thereof, the Exclusive Distribution Agreement will remain in effect for a term expiring on December 17, 2070.
Through a combination of grant and incentive programs for state and local governments and the private sector, it will support the deployment of a mix of chargers in apartment buildings, in public parking, throughout communities, and across a robust network on our nation’s roadways.
Through a combination of grant and incentive programs for state and local governments and the private sector, it is expected to support the deployment of a mix of chargers in apartment buildings, in public parking, throughout communities, and across a robust network on our nation’s roadways.
As new markets develop, we plan to expand our zero-emission vehicles and systems into ancillary product verticals, such as charging infrastructure (also called Electric Vehicle Service Equipment), stationary energy storage, vehicle-to-grid hardware and capabilities. 8 Table of Contents Our Customers Our current primary focus is Class 3 to Class 5 trucks and cab and chassis, class 3 and 4 cargo vans and cutaways.
As new markets develop, we plan to expand our zero-emission vehicles and systems into ancillary product verticals, such as charging infrastructure (also called Electric Vehicle Service Equipment), stationary energy storage, vehicle-to-grid hardware and capabilities. 6 Table of Contents Our Customers Our current primary focus is Class 3 to 5 trucks, class 3 and 4 cargo vans and school buses.
Additional requests have been made by the utilities to offer favorable costs for electric bus charging. 2 Table of Contents According to the International Energy Agency ("IEA"), approximately 6.6 million passenger electric vehicles (“EVs”) were sold globally in 2021.
Additional requests have been made by the utilities to offer favorable costs for electric bus charging. 2 Table of Contents According to the International Energy Agency ("IEA"), approximately 10.5 million passenger electric vehicles (“EVs”) were sold globally in 2022.
For example, the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”) administered by CARB was meant to accelerate the purchase of cleaner, more efficient trucks and buses in California. Our vehicles are currently approved for voucher programs in California, Oregon, New York, and New Jersey. • Grow Our Manufacturing, Installation and Service Capability .
For example, the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”) administered by CARB was meant to accelerate the purchase of cleaner, more efficient trucks and buses in California. Our products are currently approved for voucher programs in California and New Jersey.
Our executives, on a limited basis, also engaged industry consultants with ties to trucking fleets, county and city transportation managers, as well as school districts and an extensive dealer network to assist with the sales activity. • Build Dealership and Service Networks . Our wholly owned subsidiary, ADOMANI ZEV Sales, Inc., is a licensed vehicle dealer in California.
Our executives, on a limited basis, also engaged industry consultants with ties to trucking fleets, county and city transportation managers, as well as school districts and an extensive dealer network to assist with the sales activity. • Build Dealership and Service Networks .
Our Products and Services Our products and services primarily include purpose-built, zero-emission vehicles and chassis of all sizes manufactured by outside OEM partners, but to be marketed, sold, warrantied and serviced through our developing distribution and service network. We engage OEMs to design and supply vehicles for us that meet our specifications.
Our Products and Services Our products and services primarily include purpose-built, zero-emission vehicles a nd chassis of all sizes manufactured by OEMs, and are marketed, sold, warrantied and serviced thro ugh our developing distribution and service network. We engage OEMs to design and supply vehicles for us that meet our specifications.
The vehicles are initially comprised of a cab, chassis and electric drivetrain system. Any customer can then customize the trucks by adding a box or stake bed to the vehicle in accordance with their needs. We received the first truck and cargo van pursuant to our arrangement with EEVI in December 2018.
Any customer can then customize the trucks by adding a box or stake bed to the vehicle in accordance with their needs. We received the first truck and cargo van pursuant to our arrangement with EEVI.
In 2022, we participated in numerous events across the United States and Canada that demonstrated our product offerings, which consist of logistic vans, and Class 3, 4, and 5 trucks and chassis. • Obtain Approvals from Incentive Programs. Our products have been approved for various local, state and federal vehicle designations and incentive programs.
In 2023 , we participated in numerous events across the United States, Canada and Asia that demonstrated our product offerings. • Obtain Approvals from Incentive Programs. Our products have been approved for various local, state and federal vehicle designations and incentive programs.
Sales and Marketing Sales Due to COVID-19 impacts and other business challenges in 2020, we eliminated our in-house sales team in 2020. In 2023, we intend to build out our marketing and sales network by hiring sales personnel to form a team of dedicated sales employees with responsibility for each of the geographic regions we serve.
Sales and Marketing Sales We intend to build out our marketing and sales network by hiring sales personnel to form a team of dedicated sales employees with responsibility for each of the geographic regions we serve.
Backlog As of December 31, 2022, we had a backlog of 1 zero-emission Class 4 trucks and 25 zero-emission Class 4 cargo vans, which consists of unfilled firm orders for products under signed contracts with customers. Employees As of December 31, 2022, we had 13 employees in total, which are all full-time employees.
Backlog As of December 31, 2023, we had a backlog of 5 zero-emission Class 4 trucks and 19 zero-emission Class 4 cargo vans, which consists of unfilled firm orders for products undersigned contracts with customers. Employees As of December 31, 2023, we h a d 14 employees in total, whi c h are all full-time employees.
We rely on intellectual property laws, including trade secret, copyright, trademark and patent laws in the United States and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property. As of December 31, 2022, we own three issued U.S. patents, which will expire in 2030 and 2033.
We rely on intellectual property laws, including trade secret, copyright, trademark and patent laws in the United States and abroad, and use contracts, confidentiality procedures, non-disclosure agreements, employee disclosure and invention assignment agreements and other contractual rights to protect our intellectual property.
In 2019, EEVI received the CARB executive order for certification. As the dealer for EEVI, we submitted additional information to the HVIP Department of CARB and received our HVIP listing in November 2019, which renders the trucks and vans eligible for buy-down funding based on the gross vehicle weight rating ("GVWR").
As the dealer for EEVI, we submitted additional information to the HVIP Department of CARB and received our HVIP listing in November 2019, which renders the trucks and vans eligible for buy-down funding based on the gross vehicle weight rating ("GVWR"). We also own certain rights under an Exclusive Supply Agreement entered into with EEVI (the “Exclusive Distribution Agreement”).
Circumstances outside of our control could pose a threat to our intellectual property rights. Effective intellectual property protection may not be available in the United States or other countries in which we provide our solution. In addition, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective.
Effective intellectual property protection may not be available in the United States or other countries in which we provide our solution. In addition, the efforts we have taken to protect our intellectual property rights may not be sufficient or effective. Any impairment of our intellectual property rights could harm our business, our ability to compete and harm our operating results.
With the federal government allocating $5 billion for the Clean School Bus Program, another $5 billion for the National Electric Vehicle Infrastructure program, and federal tax incentives, there are significant funds available to purchase electric vehicles.
With the federal government allocating $5 billion for the Clean School Bus Program, another $5 billion for the National Electric Vehicle Infrastructure program, $3 billion over 5 years to establish a new grant program to install electrified equipment and reduce emission at ports and federal tax incentives, there are significant funds available to purchase electric vehicles.
Our vehicles are manufactured by outside, OEM partners located in China, Malaysia and the Philippines and marketed, sold, warrantied and serviced through our developing distribution and service network.
Our vehicles are manufactured by OEMs locate d in China, Malaysia and the Philippines and m arketed, sold, warrantied and serviced through our developing distribution and service network.
DERA plans to distribute $150 million in 2023. Other State Incentives Every state provides a variety of electric vehicle incentives, as well as private enterprises incentives. The states with the most significant state-specific incentives include California, New Jersey, New York, Massachusetts, Pennsylvania, Texas, Colorado, South Carolina and Oklahoma.
Other State Incentives Most state provides a variety of electric vehicle incentives, as well as private enterprises incentives. The states with the most significant state-specific incentives include California, New Jersey, New York and Massachusetts.
Eligible applicants are school districts, state and local government programs, federally recognized Indian tribes, non-profit organizations, and eligible contractors. Heavy-Duty Zero Emission Vehicle ("ZEV") and Infrastructure Grants By February 12, 2023, the EPA will create a grant program for heavy-duty ZEVs and associated infrastructure. Grant award amounts vary and may cover up to 100% of total project costs.
Eligible applicants are school districts, state and local government programs, federally recognized Native American tribes, non-profit organizations, and eligible contractors. Heavy-Duty Zero Emission Vehicle ("ZEV") and Infrastructure Grants By the early spring of 2024, the EPA is expected to create a grant program for heavy-duty ZEVs and associated infrastructure.
According to Bloomberg New Energy Finance (“Bloomberg NEF”) per their Electric Vehicle Outlook 2022 report, annual passenger EV sales are estimated to more than triple between 2021 and 2025 to just below 21 million and increase to almost 80 million in 2050.
According to Bloomberg New Energy Finance (“Bloomberg NEF”) per their Electric Vehicle Outlook 2023 report, annual passenger EV sales are estimated to more than double between 2022 and 2026 to 26.6 million.
The Inflation Reduction Act The Inflation Reduction Act invests $1 billion to replace dirty heavy-duty vehicles with clean, zero-emission vehicles, support zero-emission vehicle infrastructure, and to train and develop workers. The EPA will be distributing this $1 billion in funding for clean heavy-duty vehicles between now and 2031. $400 million is designated for communities in nonattainment areas.
The EPA will be distributing this $1 billion in funding for clean heavy-duty vehicles between now and 2031. $400 million is designated for communities in nonattainment areas.
Prior to the completion of our acquisition of EVTDS, EEVI was the parent company of EVTDS. Prior to the completion of the Merger, we engaged EEVI to design and supply a series of zero-emission electric Class 3 and 6 trucks, cargo vans and chassis built to our specifications and requirements.
Previously, we engaged EEVI to design and supply a series of zero-emission electric Class 3 and 6 trucks, cargo vans and chassis built to our specifications and requirements. The vehicles are initially comprised of a cab, chassis and electric drivetrain system.
In 2023, we also intend to install the manufacturing equipment in Osceola required to begin producing our vehicles ourselves in the United States, which will be a key step towards our longer-term strategy of becoming a fully integrated electric vehicle manufacturer. Distribution We intend to distribute our products both inside and outside of our current U.S. market.
We also intend to install the manufacturing equipment in Osceola required to begin producing our vehicles ourselves in the United States, which will be a key step towards our longer-term strategy of becoming a fully integrated electric vehicle manufacturer. 9 Table of Contents Envirotech Electric Vehicles Incorporated ("EEVI") EEVI is a Canadian company engaged in the design, prototyping and certification of electric components and vehicles, including complete drivetrain systems.
The study concluded that the costs of battery packs, and therefore the cost of electric trucks and buses, will decline such that by 2030, they will be the most attractive technology from a total cost of ownership perspective for nearly all truck and bus classes, even without incentives. 3 Table of Contents Electricity Cost Considerations Despite higher electricity consumption of electric trucks, more widespread adoption could lead to more efficient utilization of utility and power generation assets and thus not necessarily lead to higher rates.
The study concluded that the costs of battery packs, and therefore the cost of electric trucks and buses, will decline such that by 2030, they will be the most attractive technology from a total cost of ownership perspective for nearly all truck and bus classes, even without incentives. 3 Table of Contents Trucks Some of the main markets for electric trucks include delivery vans, shuttle buses, and utility or work trucks, each of which has its own set of challenges.
In addition, we are building an international dealership and service network for the sales and service of our purpose-built zero-emission electric commercial vehicles either manufactured by or for us, via Factory Authorized Representative (“FAR”) Agreements.
We are building an international dealership and service network for the sales and service of our purpose-built zero-emission electric commercial vehicles either manufactured by or for us. • Develop Third-Party Relationships . We have completed existing negotiations with partners and are seeking additional partners for sales, service and support. • Provide Demonstrations .
For the years ended December 31, 2022 and 2021, our net losses were $43.8 million and $7.7 million, respectively. Our net loss for 2022 includes a non-cash goodwill impairment charge of $37.1 million.
For the years ended December 31, 2023 and 2022, our net losses were $12.7 million and $43.8 million, respectively. Included in the net losses for 2023 and 2022 were non-cash charges of approximately $6.4 million and $38.7 million, respectively.
In 2022, we increased our integration efforts and began completing the final assembly of sub-assembly components at our Osceola, Arkansas facility. In 2023, we also intend to install the manufacturing equipment in Osceola required to begin producing our vehicles ourselves in the United States.
In 2024, we also intend to install the manufacturing equipment in Osceola required to begin producing our vehicles ourselves in the United States.
In addition, we maintain a trademark portfolio including common law trademarks and service marks and have three service marks registered and two trademark registrations in the United States. We have one pending trademark and service mark application in Ukraine, and one allowed trademark application pending in the Philippines.
We maintain a trademark portfolio including common law trademarks and service marks and have three service marks registered and two trademark registrations in the United States. Circumstances outside of our control could pose a threat to our intellectual property rights.
As a result of our zero-emission systems, drivers, operators, customers and the communities they serve could have healthier environments in and around these vehicles. 6 Table of Contents Our Strengths We believe the following attributes and capabilities provide us with long-term competitive advantages: • Product Diversity .
As a result of our zero-emission systems, drivers, operators, customers and the communities they serve could have healthier environments in and around these vehicles. 5 Table of Contents Our Strategy We intend to capitalize on these opportunities by pursuing the following key strategies: • Develop Sales Staff .
We currently offer electric Class 4 logistics vans, cutaway vans, right-hand drive vans and urban trucks. Our vehicles are manufactured by outside, Original Equipment Manufacturer ("OEM") partners located in China, Malaysia and the Philippines that can be marketed, sold, warrantied and serviced through our developing distribution and service network.
Our vehicles are manufactured by original equipment manufacturers ("OEM") located in China, Malaysia and the Philippines and can be marketed, sold, warrantied and serviced through our developing distribution and service network. Our vehicles include options for telemetrics for remote monitoring, electric power-export and various levels of grid-connectivity.
Furthermore, California and New York have introduced legislation to completely ban the sale of internal combustion engines and fossil fuel vehicles by 2035.
Furthermore, California and New York have introduced legislation to completely ban the sale of internal combustion engines and fossil fuel vehicles by 2035. See “—Governmental Programs and Incentives” for additional discussion of certain relevant incentive programs. 4 Table of Contents Our Solution We are a provider of purpose-built zero-emission electric vehicles focused on reducing the total cost of ownership.
Some geographic areas have considerably more charging stations than others, contributing to more significant electric vehicle usage in those regions.
Some geographic areas have considerably more charging stations than others, contributing to more significant electric vehicle usage in those regions. Commercial Vehicles In 2022, nearly 66,000 electric buses and 60,000 medium- and heavy-duty trucks were sold worldwide, representing about 4.5% of all bus sales and 1.2% of truck sales worldwide.
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Our vehicles can include options for telemetrics for remote monitoring, electric power-export and various levels of grid-connectivity. Pending the completion of the transactions contemplated by our letter of intent to purchase certain battery manufacturing equipment from ProGreens New Energy Technology Co. Ltd.
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We currently offer Class 2 through 4 logistics vans, class 4 through 5 urban trucks, school buses, electric forklifts, street sweepers, neighborhood electric vehicles (“NEV”) and right-hand drive vans and urban trucks.
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On March 15, 2021, we completed our acquisition of EVTDS, a Delaware corporation, a supplier of zero-emission trucks, cargo vans, chassis and other commercial vehicles from which we have previously purchased vehicles designed to meet our specifications. The transaction was completed in accordance with the Agreement and Plan of Merger, with EVTDS and EVT Acquisition Company, Inc.
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China continues to dominate production and sales of electric (and fuel cell) trucks and buses. However, the global market is growing and is expected to continue to grow in the foreseeable future.
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("EVT"), a Delaware corporation and our wholly owned subsidiary (“Merger Sub”). As a result of this transaction, Merger Sub was merged with and into EVTDS, with EVTDS surviving as our wholly owned subsidiary (the “Merger”).
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Additionally, the Senate passed the Inflation Reduction Act, the budget reconciliation bill that includes $3 billion over five years to establish a new grant program to install electrified equipment and reduce emission at ports.
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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.
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Our class 4 through 8 vehicles also qualify for up to $40,000 of the federally available tax credit. • Grow Our Manufacturing, Installation and Service Capability . In 2023 , we increased our integration efforts and began completing the final assembly of sub-assembly components at our Osceola, Arkansas facility.
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As a result of the Merger, we issued an aggregate of 7,129,887 shares of our common stock to the former EVTDS stockholders, which shares represented approximately 56% of the total issued and outstanding shares of our common stock as of immediately following the effective time of the Merger. Our company was formerly known as ADOMANI, Inc.
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We are hiring sales personnel and other internal staf f currently to su pport our current and planned operations.
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On May 26, 2021, we filed a Certificate of Amendment of our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to change our company’s name from ADOMANI, Inc. to Envirotech Vehicles, Inc.
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Grant award amounts vary and may cover up to 100% of total project costs. The Inflation Reduction Act invests $1 billion to replace dirty heavy-duty vehicles with clean, zero-emission vehicles, support zero-emission vehicle infrastructure, and to train and develop workers.
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Commercial Vehicles According to the aforementioned IEA report, electric trucks accounted for just 0.3% of global truck sales in 2021, with sales highly concentrated in China due to government support as the country accounted for 90% of new electric truck and bus registrations.
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Company Information We file electronically with the U.S. Securities and Exchange Commission (the “SEC”) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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However, the global market is growing, with an estimated 170 models available outside China in 2021 according to the IEA. Because light duty passenger vehicles represent the largest potential market and have received the most attention from both analysts and policymakers, most global forecasts look at light duty electric vehicle sales.
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The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Our website is www.evtvusa.com. The information contained on or that can be accessed through our website is not incorporated by reference into this Annual Report.
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As relatively simple as the pricing analysis is for individual consumers, the purchase and deployment of heavy-duty commercial vehicles involves consideration of many more variables. Here, the type of customer is a major determinant, whether it is a commercial customer buying trucks for a fleet, a school district, or a municipal entity purchasing buses for public use.
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At this point, deployment of electric trucks and buses is still too insignificant to assess their full impact on electricity prices. As a study by the clean transportation nonprofit organization CALSTART emphasizes, evaluating this impact will involve weighing potential efficiency benefits, the impact on utility distribution grids, including the cost of potential upgrades, and the need for additional infrastructure.
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In this regard, several public utilities have applied to their state’s Public Utility Commissions (“PUCs”) for rate increases to be used for the purchase or leasing of electric vehicles and infrastructure. Additional requests have been made by the utilities to offer favorable costs for electric school bus charging.
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Trucks Some of the main markets for electric trucks include delivery vans, shuttle buses, and utility or work trucks, each of which has its own set of challenges.
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Districts can apply for up to 25 buses a year. Market Drivers A number of factors, including the general world-wide desire to improve the health of people, impact both the supply and demand for various types of electric vehicles and we believe that we are well positioned to benefit from these driving forces.
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Except for energy storage technologies discussed earlier, subsequent sections will address these market drivers in greater detail.
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We believe prominent drivers of supply include: • the declining cost and higher availability of energy storage technologies, specifically the cost and capacity of rechargeable lithium-ion batteries; • grants, loans, tax breaks, and other financial support available for energy storage and electric vehicle research and development; 4 Table of Contents • requirements that a specific percentage of automakers’ models be electric or other zero-emission vehicles; and • fuel economy standards that require automakers to meet certain fleet-wide miles per gallon benchmarks that effectively require them to sell electric or other zero-emission vehicles.
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We believe prominent drivers of demand include: • mandates that government fleets purchase certain percentages of low emission, energy efficient, or other alternative fuel vehicles; • mandates for transport agencies, ports or school districts to purchase or convert to electric or other alternative fuel vehicles; • rebates, tax credits, and other incentives for purchasing or leasing electric or other alternative fuel vehicles; • the availability of charging stations and other charging infrastructure, driven in turn by government funding, tax credits, rebates, and other incentives and regulatory initiatives aimed at increasing the number of charging stations; • the desire of state agencies to deploy electric vehicles to reduce the effects of climate change and to reduce the impact of pollutants on the health and well-being of their population; • the cost of electricity to recharge plug-in electric vehicles, impacted by special rates introduced by utilities; • preferential treatment in registration, emissions testing, and access to highways, city centers, and High Occupancy Vehicles ("HOV") lanes; and • the cost of traditional petroleum-based fuels compared to the resultant incremental costs of owning and operating an electric vehicle.
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The Governor of California has issued Executive Order N-79-20, which sets 2035 for a 100 percent ban on the sale of internal combustion engines for passenger cars and pickup trucks within California, with later target dates for similar bans on medium- and heavy-duty trucks.
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In New York, legislation has been passed banning new fossil fuel vehicle sales after 2034 and will require all new cars to produce zero emissions.
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See “—Governmental Programs and Incentives” for additional discussion of certain relevant incentive programs. 5 Table of Contents Fleet Operator Challenges Fleet operators and their companies face several challenges in the market today, including: • Difficulty complying with existing and new federal and state emission restrictions and compliance requirements.
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Federal regulatory agencies, such as the EPA, and state regulatory agencies, such as CARB, have set forth mandates designed to reduce emissions from mobile sources. According to CARB, 12 other states and the District of Columbia have adopted California’s greenhouse gas emissions standards for vehicles. • Finding cost savings while managing high fuel, maintenance and repair costs .
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In August 2021, the EPA proposed to revise existing national greenhouse gas ("GHG") emissions standards for passenger cars and light trucks for model years 2023 through 2026. The proposed standards would achieve significant GHG emissions reductions along with reductions in other criteria of pollutants.
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The proposal would result in substantial public health and welfare benefits, while providing consumers with savings from lower fuel costs. • Extending the lives of existing vehicles .
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Due to reductions in capital expenditure budgets and legislatively mandated addition of expensive and limiting emission reduction equipment, it is challenging to prolong the lives of existing vehicles because of the increased cost of expensive maintenance, service and repairs. • Difficulty planning for the operation of their fleet when fuel supplies are interrupted, such as during a natural disaster.
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Existing vehicles rely on fuel that must be pumped (using electricity), which may be a challenge to source when supply is interrupted during natural or man-made disasters. It may be possible for emergency service organizations to use large battery packs of electric-driven, commercial fleet vehicles as a mobile source of stored electrical energy.
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This electrical energy could supplement traditionally fueled back-up generators. • Difficulty in improving the environment around these heavy-duty commercial fleets . Many studies have shown that the air quality in and around vehicles fueled by fossil fuels poses a health risk not only to drivers of these vehicles but to their passengers and those in and around these vehicles.
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Especially at risk are children as passengers on older diesel fueled buses, as their lungs, brains and other organs have not fully developed and the air quality surrounding a typical school bus using diesel fuel can pose serious health risks.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch risks are discussed more fully below and include, but are not limited to, risks related to: ● Being delinquent in our SEC reporting obligations; ● The review and subsequent restatement of our financial statements; ● Business interruptions resulting from the COVID-19 pandemic; ● Our ability to execute our business plan to generate revenue and create a sustainable growth trajectory; ● Our history of losses and our ability to achieve and/or sustain profitability in the future; ● Difficulty in evaluating our current business and future prospects in light of our limited operating history; ● Our future growth being dependent upon demand for new mid-sized zero-emission trucks and cargo vans, and other fleet vehicles; ● Our ability to compete successfully against current and future competitors; 17 Table of Contents ● Our sales cycle, which can be long and unpredictable and require considerable time and expense before executing a customer agreement, which may make it difficult to project when, if at all, we will obtain new customers and generate revenue from those customers; ● Developments in alternative technologies or improvements in the internal combustion engine, which may materially adversely affect the demand for electric vehicles and our products; ● Our ability to keep up with advances in zero-emission electric vehicle technology, which will impact our ability to obtain or maintain a competitive position in the market; ● The demand for commercial zero-emission electric vehicles depending, in part, on the continuation of current trends resulting from historical dependence on fossil fuels; ● Our ability to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs; ● Our ability to manage our anticipated growth effectively, which will affect our ability to execute our business plan, maintain high levels of service and adequately address competitive challenges; ● The possible performance of our zero-emission electric vehicles in a manner that is not consistent with our customers’ expectations, which could harm our ability to develop, market and sell our vehicles; ● Our dependence on third parties to deliver raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to us; ● The possibility that the facilities or operations of our third party providers could be damaged or adversely affected as a result of disasters or unpredictable events; ● Our dependence on information technology and the possibility that any breakdown, interruption or breach of our information technology systems could subject us to liability or interrupt the operation of our business; ● Harm to our brand image that could result from a failure of our suppliers to use ethical business practices and comply with applicable laws and regulations; ● The success of our strategic relationships with third parties and our ability to identify and form adequate strategic relationships in the future; ● The ability of our suppliers to scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production; ● Our exposure to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims; ● The possibility of being compelled to undertake product recalls; 18 Table of Contents ● The adequacy of our warranty reserves to cover future warranty claims; ● The adequacy of our insurance strategy to protect us from all business risks; ● Our ability to design, develop, market and sell zero-emission electric vehicles and other product offerings that address additional market opportunities; ● The availability and amounts of government subsidies and incentives and the application of regulations that encourage conversion to electric vehicles; ● Our service model, which may be costly for us to operate and may not address the service requirements of our prospective customers; ● Our decentralized assembly, sales and service model; ● Our exposure to substantial regulation and unfavorable changes in such regulations; ● Vehicle dealer and distribution laws, which could adversely affect our ability to sell our commercial zero-emission electric vehicles; ● Environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly facilities; ● Failure to protect our intellectual property rights, which could impair our ability to protect our proprietary technology; ● Our exposure to claims of infringement of another party’s intellectual property rights; ● Legal proceedings that could result in substantial liabilities; ● Current or future litigation or administrative proceedings; ● Our use of battery packs composed of lithium-ion battery cells, which, if not appropriately managed and controlled, on rare occasions have been observed to catch fire or vent smoke and flames; ● Unfavorable conditions in the global economy, rising interest rates and capital market liquidity issues; 19 Table of Contents ● Our dependence on our Chief Executive Officer and management team, retaining and attracting qualified management, key employees and technical personnel and expanding our sales and marketing capabilities; ● Forecasts of market growth that may prove to be inaccurate, and our ability to grow our business at similar rates, or at all; ● The availability of additional capital on acceptable terms, if at all, to support business growth; ● Our possible pursuit of acquisitions of complementary businesses and technologies; ● Our ability to maintain effective internal control over financial reporting and effective disclosure controls and procedures; ● Our ability to utilize a significant portion of our net operating loss or research and development tax credit carryforwards; ● Changes in accounting principles generally accepted in the United States that may have an adverse impact on our results of operations; ● Volatility in the price of our common stock, which could result in substantial losses for our stockholders; ● Costs and demands upon management as a result of complying with the laws and regulations affecting public companies; ● Securities or industry analysts not publishing research or publishing inaccurate or unfavorable research about our business; ● Our ability to meet our publicly announced guidance or other expectations about our business; ● Our intent to not pay dividends for the foreseeable future; and ● Provisions in our charter documents and under Delaware law that could discourage a takeover that stockholders may consider favorable. ● In the future, we may be subject to additional environmental, social and governance ("ESG") disclosure requirements and these additional disclosures may make our common stock less attractive to investors. 20 Table of Contents Risks Related to Our Business Business interruptions resulting from the COVID-19 pandemic have adversely affected, and could continue to adversely affect, our business, results of operations, and financial condition.
Biggest changeSuch risks are discussed more fully below and include, but are not limited to, risks related to: ● Being delinquent in our SEC reporting obligations; ● The review and subsequent restatement of our financial statements; ● Our ability to execute our business plan to generate revenue and create a sustainable growth trajectory; ● Our history of losses and our ability to achieve and/or sustain profitability in the future; ● Difficulty in evaluating our current business and future prospects in light of our limited operating history; ● Our future growth being dependent upon demand for new mid-sized zero-emission trucks and cargo vans, and other fleet vehicles; ● Our ability to compete successfully against current and future competitors; 15 Table of Contents ● Our sales cycle, which can be long and unpredictable and require considerable time and expense before executing a customer agreement, which may make it difficult to project when, if at all, we will obtain new customers and generate revenue from those customers; ● Developments in alternative technologies or improvements in the internal combustion engine, which may materially adversely affect the demand for electric vehicles and our products; ● Our ability to keep up with advances in zero-emission electric vehicle technology, which will impact our ability to obtain or maintain a competitive position in the market; ● The demand for commercial zero-emission electric vehicles depending, in part, on the continuation of current trends resulting from historical dependence on fossil fuels; ● Our ability to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs; ● Our ability to manage our anticipated growth effectively, which will affect our ability to execute our business plan, maintain high levels of service and adequately address competitive challenges; ● The possible performance of our zero-emission electric vehicles in a manner that is not consistent with our customers’ expectations, which could harm our ability to develop, market and sell our vehicles; ● Our dependence on third parties to deliver raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to us; ● The possibility that the facilities or operations of our third-party providers could be damaged or adversely affected as a result of disasters or unpredictable events; ● Our dependence on information technology and the possibility that any breakdown, interruption or breach of our information technology systems could subject us to liability or interrupt the operation of our business; ● Harm to our brand image that could result from a failure of our suppliers to use ethical business practices and comply with applicable laws and regulations; ● The success of our strategic relationships with third parties and our ability to identify and form adequate strategic relationships in the future; ● The ability of our suppliers to scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production; ● Our exposure to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims; ● The possibility of being compelled to undertake product recalls; 16 Table of Contents ● The adequacy of our warranty reserves to cover future warranty claims; ● The adequacy of our insurance strategy to protect us from all business risks; ● Our ability to design, develop, market and sell zero-emission electric vehicles and other product offerings that address additional market opportunities; ● The availability and amounts of government subsidies and incentives and the application of regulations that encourage conversion to electric vehicles; ● Our service model, which may be costly for us to operate and may not address the service requirements of our prospective customers; ● Our exposure to substantial regulation and unfavorable changes in such regulations; ● Vehicle dealer and distribution laws, which could adversely affect our ability to sell our commercial zero-emission electric vehicles; ● Environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly facilities; ● Failure to protect our intellectual property rights, which could impair our ability to protect our proprietary technology; ● Our exposure to claims of infringement of another party’s intellectual property rights; ● Legal proceedings that could result in substantial liabilities; ● Current or future litigation or administrative proceedings; ● Our use of battery packs composed of lithium-ion battery cells, which, if not appropriately managed and controlled, on rare occasions have been observed to catch fire or vent smoke and flames; ● Unfavorable conditions in the global economy, rising interest rates and capital market liquidity issues; 17 Table of Contents ● Our dependence on our Chief Executive Officer and management team, retaining and attracting qualified management, key employees and technical personnel and expanding our sales and marketing capabilities; ● Forecasts of market growth that may prove to be inaccurate, and our ability to grow our business at similar rates, or at all; ● The availability of additional capital on acceptable terms, if at all, to support business growth; ● Our ability to maintain effective internal control over financial reporting and effective disclosure controls and procedures; ● Our ability to utilize a significant portion of our net operating loss or research and development tax credit carryforwards; ● Changes in accounting principles generally accepted in the United States that may have an adverse impact on our results of operations; ● Volatility in the price of our common stock, which could result in substantial losses for our stockholders; ● Securities or industry analysts not publishing research or publishing inaccurate or unfavorable research about our business; ● Our ability to meet our publicly announced guidance or other expectations about our business; ● Our intent to not pay dividends for the foreseeable future; and ● Provisions in our charter documents and under Delaware law that could discourage a takeover that stockholders may consider favorable. ● In the future, we may be subject to additional environmental, social and governance ("ESG") disclosure requirements and these additional disclosures may make our common stock less attractive to investors. 18 Table of Contents Risks Related to Our Business We may not successfully execute our business plan to generate revenue and create a sustainable growth trajectory.
The ability of our suppliers to scale their manufacturing and assembling processes is in part dependent on ours and their supply chain and on our collective ability to execute on our decentralized production strategy.
The ability of our suppliers to scale their manufacturing and assembling processes is in part dependent on ours and their supply chain and on our collective ability to execute our decentralized production strategy.
The market price and volume of our common stock could fluctuate, and in the past has fluctuated, relative to our limited public float. We are particularly subject to fluctuations as reported on the NASDAQ Stock Market LLC.
The market price and volume of our common stock could fluctuate, and in the past has fluctuated, relative to our limited public float. We are particularly subject to fluctuations as reported on the Nasdaq Stock Market LLC ("Nasdaq").
Factors that may influence the market acceptance of new zero-emission vehicles include: • perceptions about zero-emission electric vehicle quality, safety design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of any electric vehicle; • perceptions about the limitations in the technology resulting in a limited range over which zero-emission electric vehicles may be driven on a single battery charge (increases in distance requires additional batteries, which increases weight, and, at some point, too much weight diminishes the additional distance being sought before requiring a charge); 22 Table of Contents • perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology; • the availability of alternative fuel vehicles, including competitive vehicles and improvements in the fuel economy of the internal combustion engine may cause a slow-down in the demand to switch to zero-emission electric vehicles; • the availability of service for zero-emission electric vehicles; • the environmental consciousness of owners of diesel- and gasoline-powered buses, truck and other fleet vehicles; • changes in the cost of oil and gasoline; • government regulations and economic incentives, including a change in the administrations and legislations of federal and state governments, promoting fuel efficiency and alternate forms of energy; • access to charging stations both public and private, standardization of electric vehicle charging systems and perceptions about convenience and cost to charge an electric vehicle; • the availability of tax and other governmental incentives and rebates to purchase and operate electric vehicles or future regulation requiring increased use of zero-emission or hybrid vehicles; • perceptions about and the actual cost of alternative fuel; and • macroeconomic factors such as, among other things, inflation and rising interest rates which could diminish our ability to access the capital markets for funding our business.
Factors that may influence the market acceptance of new zero-emission vehicles include: • perceptions about zero-emission electric vehicle quality, safety design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of any electric vehicle; • perceptions about the limitations in the technology resulting in a limited range over which zero-emission electric vehicles may be driven on a single battery charge (increases in distance requires additional batteries, which increases weight, and, at some point, too much weight diminishes the additional distance being sought before requiring a charge); 20 Table of Contents • perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology; • the availability of alternative fuel vehicles, including competitive vehicles and improvements in the fuel economy of the internal combustion engine may cause a slow-down in the demand to switch to zero-emission electric vehicles; • the availability of service for zero-emission electric vehicles; • the environmental consciousness of owners of diesel- and gasoline-powered buses, truck and other fleet vehicles; • changes in the cost of oil and gasoline; • government regulations and economic incentives, including a change in the administrations and legislations of federal and state governments, promoting fuel efficiency and alternate forms of energy; • access to charging stations both public and private, standardization of electric vehicle charging systems and perceptions about convenience and cost to charge an electric vehicle; • the availability of tax and other governmental incentives and rebates to purchase and operate electric vehicles or future regulation requiring increased use of zero-emission or hybrid vehicles; • perceptions about and the actual cost of alternative fuel; and • macroeconomic factors such as, among other things, inflation and rising interest rates which could diminish our ability to access the capital markets for funding our business.
The market price of our common stock is and is likely to remain volatile and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets; • the development and sustainability of an active trading market for our common stock; • our operating performance and the performance of other similar companies; • changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock; • press releases or other public announcements by us or others, including our filings with the SEC; • changes in the market perception of all-electric and hybrid products and services generally or in the effectiveness of our products and services in particular; • announcements of technological innovations, new applications, features, functionality or enhancements to products, services or products and services by us or by our competitors; • announcements of acquisitions, strategic alliances or significant agreements by us or by our competitors; • announcements of customer additions and customer cancellations or delays in customer purchases; • announcements regarding litigation involving us; • recruitment or departure of key personnel; • changes in our capital structure, such as future issuances of debt or equity securities; • our entry into new markets; 37 Table of Contents • regulatory developments in the United States or foreign countries; • the economy as a whole, market conditions in our industry, and the industries of our customers; • the expiration of market standoff or contractual lock-up agreements; • the size of our market float; and • any other factors discussed in this report.
The market price of our common stock is and is likely to remain volatile and may fluctuate significantly in response to numerous factors, many of which are beyond our control, including: • overall performance of the equity markets; • the development and sustainability of an active trading market for our common stock; • our operating performance and the performance of other similar companies; • changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock; • press releases or other public announcements by us or others, including our filings with the SEC; • changes in the market perception of all-electric and hybrid products and services generally or in the effectiveness of our products and services in particular; • announcements of technological innovations, new applications, features, functionality or enhancements to products, services or products and services by us or by our competitors; • announcements of acquisitions, strategic alliances or significant agreements by us or by our competitors; • announcements of customer additions and customer cancellations or delays in customer purchases; • announcements regarding litigation involving us; • recruitment or departure of key personnel; • changes in our capital structure, such as future issuances of debt or equity securities; • our entry into new markets; 32 Table of Contents • regulatory developments in the United States or foreign countries; • the economy as a whole, market conditions in our industry, and the industries of our customers; • the expiration of market standoff or contractual lock-up agreements; • the size of our market float; and • any other factors discussed in this report.
These risks include the following: • changes to the regulations governing the assembly, transportation and disposal of lithium-ion batteries; • revisions in motor carrier safety laws in the United States to further enhance motor vehicle safety generally and to ensure that electric vehicles achieve levels of safety commensurate with other cars, trucks, and buses could increase the costs associated with the component parts and the manufacture, assembly, and conversion of our drivetrain systems; and • revisions in consumer protection laws to ensure that consumers are fully informed of the particular operational characteristics of vehicles could increase our costs associated with warning labels or other related customer information dissemination. 30 Table of Contents To the extent the laws governing our business and vehicles change, some or all of our zero-emission electric products may not comply with applicable international, federal, state or local laws, and certain of the competitive advantages of our products may be reduced or eliminated, which could have an adverse effect on our business.
These risks include the following: • changes to the regulations governing the assembly, transportation and disposal of lithium-ion batteries; • revisions in motor carrier safety laws in the United States to further enhance motor vehicle safety generally and to ensure that electric vehicles achieve levels of safety commensurate with other cars, trucks, and buses could increase the costs associated with the component parts and the manufacture, assembly, and conversion of our drivetrain systems; and • revisions in consumer protection laws to ensure that consumers are fully informed of the particular operational characteristics of vehicles could increase our costs associated with warning labels or other related customer information dissemination. 28 Table of Contents To the extent the laws governing our business and vehicles change, some or all of our zero-emission electric products may not comply with applicable international, federal, state or local laws, and certain of the competitive advantages of our products may be reduced or eliminated, which could have an adverse effect on our business.
Further, the performance of our zero-emission products may be negatively impacted by other factors, such as limitations inherent in existing battery technology and extreme weather conditions. 25 Table of Contents Any vehicle product defects or any other failure of our commercial zero-emission electric vehicles to perform as expected could harm our reputation and result in delivery delays, product recalls, product liability claims, significant warranty and other expenses, customer losses and lost revenue, any of which could have a material adverse impact on our business, financial condition, operating results and prospects.
Further, the performance of our zero-emission products may be negatively impacted by other factors, such as limitations inherent in existing battery technology and extreme weather conditions. 23 Table of Contents Any vehicle product defects or any other failure of our commercial zero-emission electric vehicles to perform as expected could harm our reputation and result in delivery delays, product recalls, product liability claims, significant warranty and other expenses, customer losses and lost revenue, any of which could have a material adverse impact on our business, financial condition, operating results and prospects.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our applications and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; 34 Table of Contents • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: • inability to integrate or benefit from acquired technologies or services in a profitable manner; • unanticipated costs or liabilities associated with the acquisition; • incurrence of acquisition-related costs; • difficulty integrating the accounting systems, operations and personnel of the acquired business; • difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; • difficulty converting the customers of the acquired business onto our applications and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company; • diversion of management’s attention from other business concerns; • adverse effects to our existing business relationships with business partners and customers as a result of the acquisition; • the potential loss of key employees; • use of resources that are needed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which could have an adverse effect on our business, prospects, financial condition and operating results. 24 Table of Contents We may not be able to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs.
If diesel or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which could have an adverse effect on our business, prospects, financial condition and operating results. 22 Table of Contents We may not be able to reduce and adequately control the costs and expenses associated with operating our business, including our material and production costs.
If we are unable to successfully source and execute on strategic relationship opportunities in the future, our overall growth could be impaired, and our business, prospects and operating results could be materially adversely affected. 27 Table of Contents Our suppliers must scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production.
If we are unable to successfully source and execute on strategic relationship opportunities in the future, our overall growth could be impaired, and our business, prospects and operating results could be materially adversely affected. 25 Table of Contents Our suppliers must scale their zero-emission vehicle manufacturing and assembling processes effectively and quickly from low volume production to high volume production.
In addition, future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability. 36 Table of Contents Our reported financial results may be adversely affected by changes in GAAP.
In addition, future issuances of our stock could cause an “ownership change.” It is possible that any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability. 31 Table of Contents Our reported financial results may be adversely affected by changes in GAAP.
If our guidance is not accurate or varies from actual results due to our inability to meet our assumptions or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly. 38 Table of Contents We do not intend to pay dividends for the foreseeable future.
If our guidance is not accurate or varies from actual results due to our inability to meet our assumptions or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly. 33 Table of Contents We do not intend to pay dividends for the foreseeable future.
Such recalls, voluntary or involuntary, involve significant expense and diversion of management attention and other resources, which would adversely affect our brand image in our target markets and could adversely affect our business, prospects, financial condition and results of operations. 28 Table of Contents Our warranty reserves may be insufficient to cover future warranty claims, which could adversely affect our financial performance.
Such recalls, voluntary or involuntary, involve significant expense and diversion of management attention and other resources, which would adversely affect our brand image in our target markets and could adversely affect our business, prospects, financial condition and results of operations. 26 Table of Contents Our warranty reserves may be insufficient to cover future warranty claims, which could adversely affect our financial performance.
A disruptive technology advancement in the electric vehicle industry by a competitor, such as in energy storage, traction motors or power electronics, could affect the sales of our products. 23 Table of Contents Demand in the zero-emission electric vehicle industry is volatile, which may lead to lower vehicle unit sales, which could adversely affect our operating results.
A disruptive technology advancement in the electric vehicle industry by a competitor, such as in energy storage, traction motors or power electronics, could affect the sales of our products. 21 Table of Contents Demand in the zero-emission electric vehicle industry is volatile, which may lead to lower vehicle unit sales, which could adversely affect our operating results.
In making such determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. The Company recognized a full valuation allowance for all deferred tax assets for the years ended December 31, 2022 and December 31, 2021.
In making such determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. The Company recognized a full valuation allowance for all deferred tax assets for the years ended December 31, 2023 and December 31, 2022.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder. 39 Table of Contents Item 1B.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder becomes an “interested” stockholder. 34 Table of Contents Item 1B.
As a result of such changes, our management concluded that we were unable to maintain the levels of segregation of duties during such periods at the levels of prior periods, and that such changes to our disclosure controls and procedures significantly affected our internal control over financial reporting during the year ended December 31, 2022.
As a result of such changes, our management concluded that we were unable to maintain the levels of segregation of duties during such periods at the levels of prior periods, and that such changes to our disclosure controls and procedures significantly affected our internal control over financial reporting during the year ended December 31, 2021, 2022 and 2023.
Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. 31 Table of Contents Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.
Any patents issued in the future may not provide us with competitive advantages or may be successfully challenged by third parties. 29 Table of Contents Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.
Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain. 26 Table of Contents The facilities or operations of our third party providers could be damaged or adversely affected as a result of disasters or unpredictable events.
Our business, prospects, financial condition and operating results could be adversely affected if we experience disruptions in our supply chain. 24 Table of Contents The facilities or operations of our third-party providers could be damaged or adversely affected as a result of disasters or unpredictable events.
Our success in implementing our strategy of producing and selling new purpose-built zero-emission vehicles could also slow our revenue growth. 21 Table of Contents We have a history of losses and we may not achieve and/or sustain profitability in the future.
Our success in implementing our strategy of producing and selling new purpose-built zero-emission vehicles could also slow our revenue growth. 19 Table of Contents We have a history of losses and we may not achieve and/or sustain profitability in the future.
The application process for these funds and other incentives is and will continue to be highly competitive. 29 Table of Contents Our service model may be costly for us to operate and may not address the service requirements of our prospective customers.
The application process for these funds and other incentives is and will continue to be highly competitive. 27 Table of Contents Our service model may be costly for us to operate and may not address the service requirements of our prospective customers.
We did not generate significant revenues for the years ended December 31, 2022 and 2021, due in part to the combined impact of COVID-19 restrictions and the absence of HVIP funding available to our customers.
We did not generate significant revenues for the years ended December 31, 2023 and 2022, due in part to the combined impact of COVID-19 restrictions and the absence of HVIP funding available to our customers.
Following the completion of the Merger, we assessed our ability to use certain deferred tax benefits from net operating losses that were recorded by EVTDS in certain prior periods and determined that, in light of the uncertainty of generating future taxable income against which those losses can be offset in order to realize such benefits, recording a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized is appropriate.
Following the completion of the our acquisition of EVT, we assessed our ability to use certain deferred tax benefits from net operating losses that were recorded by EVT in certain prior periods and determined that, in light of the uncertainty of generating future taxable income against which those losses can be offset in order to realize such benefits, recording a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized is appropriate.
While we believe that our existing cash and cash equivalents as of December 31, 2022 will be sufficient to fund our operations during the next twelve months, we may not successfully execute our business plan, and if we do not, we may need additional capital to continue our operations.
While we believe that our existing cash and cash equivalents and our working capital as of December 31, 2023 will be sufficient to fund our operations during the next twelve months, we may not successfully execute our business plan, and if we do not, we may need additional capital to continue our operations.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology. Our success and ability to compete depend in part upon our intellectual property.
Risks Related to Intellectual Property Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology. Our success and ability to compete depend in part upon our intellectual property.
We may not be able to utilize a significant portion of our net operating loss or research and development tax credit carryforwards, which could adversely affect our profitability. As of December 31, 2022, we had federal and state net operating loss carryforwards (“NOLs”) due to prior period losses.
We may not be able to utilize a significant portion of o ur net o perating loss or research and development tax credit carryforwards, which could adversely affect our profitability. As of December 31, 2023, we had federal and state net operating loss carryforwards (“NOLs”) due to prior period losses.
It is difficult to predict our future revenues and appropriately budget for our expenses, although we recently decreased our operating expenses significantly and intend to only increase these expenses as we perceive that the COVID-19 pandemic is subsiding and that customers are willing to move forward with our vehicles.
It is difficult to predict our future revenues and appropriately budget for our expenses, although we decreased our operating expenses significantly and have recently increased these expenses as we perceive that the COVID-19 pandemic is subsiding and that customers are willing to move forward with our vehicles.
Similar rules may apply under state tax laws. As discussed elsewhere in this report, the Merger with Envirotech Drive Systems, Inc. resulted in their shareholders owning approximately 56% of the Company’s outstanding shares at the Merger closing date, which is an ownership change under Section 382. As a result, the future utilization of the ADOMANI, Inc.
Similar rules may apply under state tax laws. As discussed elsewhere in this report, the acquisition of EVT resulted in their shareholders owning approximately 56% of the Company’s outstanding shares at the closing date of the acquisition, which is an ownership change under Section 382. As a result, the future utilization of the ADOMANI, Inc.
In addition, the impact of the COVID-19 pandemic has led to a disruption of the global supply chain, which has adversely impacted, and may continue to adversely impact, our ability and that of our manufacturing partners to procure the components needed to produce our vehicles on terms acceptable to us and has resulted in delays in the delivery of our products to customers.
In addition, the impact of the COVID-19 pandemic disrupted the global supply chain, which adversely impacted our ability and that of our manufacturing partners to procure the components needed to produce our vehicles on terms acceptable to us and resulted in delays in the delivery of our products to customers.
If our zero-emission electric vehicles fail to perform as expected, our ability to develop, market and sell our vehicles could be harmed. Our zero-emission vehicles may not perform in a manner that is consistent with our customers’ expectations for a variety of reasons.
Risks Relating to the Design, Supply and Manufacturing of our Products If our zero-emission electric vehicles fail to perform as expected, our ability to develop, market and sell our vehicles could be harmed. Our zero-emission vehicles may not perform in a manner that is consistent with our customers’ expectations for a variety of reasons.
We are subject to substantial regulation, which is evolving, and unfavorable changes or any failure by us to comply with these regulations could substantially harm our business and operating results.
Risks Relating to the Legal and Regulatory Matters We are subject to substantial regulation, which is evolving, and unfavorable changes or any failure by us to comply with these regulations could substantially harm our business and operating results.
The complexity in our business is expected to grow as we introduce new products and services. We have limited experience in simultaneously designing, testing, manufacturing, upgrading, adapting and selling our zero-emission products as well as limited experience allocating our available resources among the design and production of multiple zero-emission units.
We have limited experience in simultaneously designing, testing, manufacturing, upgrading, adapting and selling our zero-emission products as well as limited experience allocating our available resources among the design and production of multiple zero-emission units. As we add complexity to our product line and introduce new products and services, we may experience unexpected delays.
In the future, if our acquisitions do not yield expected returns, we may be required to record impairment charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
In the future, if our acquisitions do not yield expected returns, we may be required to record impairment charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations. Acquisitions could also result in dilutive issuances of equity securities and/or the incurrence of debt, which could adversely affect our operating results.
In February 2022, we acquired a US manufacturing facility in Osceola Arkansas that will require additional debt and/or equity capital in order to purchase related equipment and set up production lines which is expected to require up to $80 million of additional investment through 2027.
In February 2022, we acquired a US manufacturing facility in Osceola Arkansas that will require additional debt and/or equity capital in order to purchase related equipment and set up production lines which is expected to require up to $80 million of additional investment through 2027. Our limited operating history makes it difficult to evaluate our current business and future prospects.
Our relatively short operating history, recent changes to our business model, the lack of available HVIP funding to assist our customers, and our inability to predict the ultimate duration and severity of COVID-19 impacts on our business make it difficult to evaluate our current business and our future prospects.
Our relatively short operating history, recent changes to our business model and the lack of available HVIP funding to assist our customers make it difficult to evaluate our current business and our future prospects.
Regardless of the outcome, such proceedings could have an adverse impact on us because of legal costs, diversion of management and other personnel and other factors.
Such proceedings are inherently uncertain, and their results cannot be predicted. Regardless of the outcome, such proceedings could have an adverse impact on us because of legal costs, diversion of management and other personnel and other factors.
Although we have yet to fully resolve such deficiencies as of the date of this report, we have engaged, and continue to seek the assistance of additional, experienced accounting professionals with relevant expertise to supplement our efforts and mitigate the negative effects of the above-described deficiencies in the effectiveness of our disclosure controls and procedures. 35 Table of Contents If we fail to detect errors on a timely basis, our financial statements may be materially misstated and if we are unable to comply with the requirements of Section 404 of the Sarbanes Oxley Act, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
If we fail to detect errors on a timely basis, our financial statements may be materially misstated and if we are unable to comply with the requirements of Section 404 of the Sarbanes Oxley Act, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, if and when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.
If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline.
If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price would likely decline.
We may be involved from time to time in various legal and other proceedings, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters, in the ordinary course of business. Such proceedings are inherently uncertain, and their results cannot be predicted.
We may be involved in leg al p roceedings that could result in su bstantia l liabilities. We may be involved from time to time in various legal and other proceedings, such as title, royalty or contractual disputes, regulatory compliance matters and personal injury or property damage matters, in the ordinary course of business.
Accruals for such liability, penalties or sanctions may be insufficient, and judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material. 32 Table of Contents Current or future litigation or administrative proceedings could have a material adverse effect on our business, our financial condition and our results of operations.
Accruals for such liability, penalties or sanctions may be insufficient, and judgments and estimates to determine accruals or range of losses related to legal and other proceedings could change from one period to the next, and such changes could be material.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common stock would be negatively affected.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline. The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.
Such legal proceedings could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation. Further, if any such proceedings were to result in an unfavorable outcome, it could have a material adverse effect on our business, financial position and results of operations.
Further, if any such proceedings were to result in an unfavorable outcome, it could have a material adverse effect on our business, financial position and results of operations. Our management has determined that our disclosure controls were not effective as of December 31, 2023.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. We need sufficient capital to fund our ongoing operations and continue our development, especially if we begin manufacturing our vehicles in the United States.
We need sufficient capital to fund our ongoing operations and continue our development, especially if we begin manufacturing our vehicles in the United States.
In addition, certain components we or our third-party suppliers integrate may not be available on a consistent basis or in large quantities. Our business, prospects, financial condition and operating results could be adversely affected if we or our suppliers experience disruptions in our respective supply chains or if we or they cannot obtain materials of sufficient quality at reasonable prices.
Our business, prospects, financial condition and operating results could be adversely affected if we or our suppliers experience disruptions in our respective supply chains or if we or they cannot obtain materials of sufficient quality at reasonable prices. The complexity in our business is expected to grow as we introduce new products and services.
For the years ended December 31, 2022 and 2021, we incurred net losses of $44.1 million and $7.7 million, respectively. The 2022 loss includes approximately $39.4 million of non-cash expenses, including a goodwill impairment charge of $37.1 million. As of December 31, 2022, we had working capital of approximately $16.9 million and accumulated deficit of approximately $52.2 million.
For the years ended December 31, 2023 and 2022, we incurred net losses of $12.7 million and $43.8 million, respectively. The 2023 and 2022 losses included approximately $5.1 million and $37.1 million of non-cash goodwill impairment charges, respectively. As of December 31, 2023, we had working capital of approximately $10.3 million and accumulated deficit of approximately $64.6 million.
Emry or an inability to attract, retain and motivate additional highly skilled employees required for the planned development and expansion of our business, could delay or prevent the achievement of our business objectives and could materially harm our business. 33 Table of Contents The forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, if at all.
Emry or an inability to attract, retain and motivate additional highly skilled employees required for the planned development and expansion of our business, could delay or prevent the achievement of our business objectives and could materially harm our business.
Even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.
Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.
We may be involved in legal proceedings, administrative proceedings, claims, and other litigation that arise in the ordinary course of business. In addition, we may become involved in securities class action litigation or shareholder litigation in connection with our offering of common stock under Regulation A.
In addition, we may become involved in securities class action litigation or shareholder litigation in connection with our offering of common stock under Regulation A. Such legal proceedings could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate. Forecasts relating to the expected growth in zero-emission electric vehicles, electric drivetrain systems and conversions and other markets may prove to be inaccurate.
Forecasts relating to the expected growth in zero-emission electric vehicles, electric drivetrain systems and conversions and other markets may prove to be inaccurate. Even if these markets experience the forecasted growth, we may not grow our business at similar rates, or at all.
Once we are no longer either an “emerging growth company” or a “smaller reporting company,” such report must be attested to by our independent registered public accounting firm. The Sarbanes-Oxley Act also requires that our principal executive officer and principal financial officer conclude as to the effectiveness of our disclosure controls and procedures on a quarterly basis.
Once we are no longer either a “smaller reporting company,” such report must be attested to by our independent registered public accounting firm.
In making such conclusion, our management determined that such deficiencies were primarily due to certain staff reductions and voluntary resignations we experienced beginning in the fourth quarter of 2020 and continuing through the closing of the Merger in March 2021, during such periods and for all periods thereafter through the date of such determination, we increased our reliance on outsourced accounting help.
(:EVT") March 2021, during such periods and for all periods thereafter through the date of such determination, we increased our reliance on outsourced accounting help.
Acquisitions could also result in dilutive issuances of equity securities, as in the case of our recent acquisition of EVT per the Merger Agreement, and/or the incurrence of debt, which could adversely affect our operating results. We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities.
We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and that are not adequately covered by indemnities. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer.
Furthermore, our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. We may be involved in legal proceedings that could result in substantial liabilities.
Furthermore, our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligation. 30 Table of Contents Risks Related to our Financial Condition We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. We may not successfully execute our business plan to generate revenue and create a sustainable growth trajectory.
In addition, to the extent such significant health crises may adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risk factors in this section.
Removed
In December 2019, a novel strain of a virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease, or COVID-19, was reported to have surfaced in Wuhan, China, and has reached multiple other regions and countries, including the United States. In March 2020, the World Health Organization declared COVID-19 a global pandemic.
Added
Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition. A significant public health crisis, pandemic or disease outbreak, such as COVID-19, could adversely impact our business as well as those of our suppliers and customers.
Removed
Since that time, the coronavirus pandemic has continued to spread, and to date has led to the implementation of various responses, including government-imposed quarantines, travel restrictions, and other public health safety measures that have adversely affected workforces, organizations, economies, and financial markets globally, leading to economic uncertainty and increased market volatility.
Added
For example, the COVID-19 pandemic disrupted the global vehicle industry and customer sales, production volumes, supply of components critical to our business, and purchases of zero-emission electric vehicles by end-consumers. Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products.
Removed
Global health concerns related to the COVID-19 pandemic have resulted in social, economic and labor instability in the countries in which we or the third parties with whom we engage operate, and resulted in unexpected legal and regulatory changes, such as travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions that have negatively affected our ability to procure and sell our products and provide our services.
Added
In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business.
Removed
More recently, the COVID-19 pandemic has led to a disruption of the global supply chain, which has adversely impacted, and may continue to adversely impact, our ability and that of our manufacturing partners to procure the components needed to produce our vehicles on terms acceptable to us and has resulted in delays in the delivery of our products to customers.
Added
Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business. The extent to which a pandemic or similar significant health crises will impact our business in the future is uncertain.
Removed
Additionally, the COVID-19 pandemic has negatively impacted our ability to market our vehicles to new and existing customers, increased our production and sales cycle times and harmed our business, results of operations, financial condition, and could have other currently unforeseen negative impacts on us.
Added
The forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business may not grow at similar rates, if at all. Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates, which may not prove to be accurate.
Removed
We expect these negative impacts, among others, will continue due to the ongoing effects of the COVID-19 pandemic.
Added
In addition, certain components we or our third-party suppliers integrate into may not be available on a consistent basis or in large quantities.
Removed
While we have developed, and continue to develop, plans to address such ongoing effects and help mitigate the potential negative impact of the pandemic on our business, these efforts may not be effective, and a protracted economic downturn will likely limit the ability of our mitigation efforts to be successful.
Added
Current or future litigation or administrative proceedings could have a material adverse ef f ect on our business, our financial condition and our results of operations. We may be involved in legal proceedings, administrative proceedings, claims, and other litigation that arise in the ordinary course of business.
Removed
Accordingly, our future performance will depend in part upon our ability to successfully respond and adapt to these challenges and 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.
Added
Based on the evaluation required by Section 404 of the Sarbanes-Oxley Act, our management determined that our internal control over financial reporting was not effective as of December 31, 2023, primarily due to certain staff reductions and voluntary resignations we experienced beginning in the fourth quarter of 2020 and continuing through the closing of our acquisition of Envirotech Drive Systems, Inc.
Removed
It is not possible for us to predict the duration or magnitude of the adverse results of the COVID-19 pandemic as new strains of the virus emerge and its effects on our business, results of operations, or financial condition at this time.
Added
Although we have yet to fully resolve such deficiencies as of the date of this Annual Report, we have engaged, and continue to seek the assistance of additional, experienced accounting professionals with relevant expertise to supplement our efforts and mitigate the negative effects of the above-described deficiencies in the effectiveness of our disclosure controls and procedures.
Removed
Our limited operating history and the pandemic makes it difficult to evaluate our current business and future prospects.
Added
During the period January 1, 2023 through December 31, 2023, the closing price of a share of our common stock reached a high of $3.92 and a low of $1.03, with daily trade volumes reaching a high of 291,200 and a low of 1,500.
Removed
If we are unable to effectively address such challenges and mitigate the potentially negative impacts of the pandemic and related supply chain disruptions on our business, it could result in additional delivery delays and canceled orders, reduced demand for our products and solutions, and adversely affect our customers’ ability to pay for our products and solutions.
Removed
As we add complexity to our product line and introduce new products and services, we may experience unexpected delays.
Removed
In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position may suffer. Our management has determined that our disclosure controls were not effective as of December 31, 2022.
Removed
Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, 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 the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Removed
We may be subject to additional environmental, social and corporate governance ( “ ESG ” ) disclosure requirements which may increase our costs of compliance. There is an increasing focus from certain investors, employees, partners, and other stakeholders concerning ESG matters.
Removed
We may be, or be perceived to be, not acting responsibly in connection with these matters, which could negatively impact us.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease other office and storage space on month-to-month leases or for terms expiring within one year.
Biggest changeWe also lease other office and storage space on month-to-month leases or for terms expiring within one year. In March 2023, the Company entered into an agreement with Berthaphil, Inc. to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines.
Added
The term of the lease is two years and two months with a turnover date of July 1, 2023 and a rental commencement of September 1, 2023. The Company intends to use the leased space as a production facility as it seeks to expand its business presence in the region and the United States.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed1 unchanged
Biggest changeHolders As of September 19, 2023, we had approximately 160 record holders of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Biggest changeThe actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. The number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Instead, we currently plan to retain any earnings to finance the growth of our business. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on our financial condition, results of operations and capital requirements as well as other factors deemed relevant by our board of directors.
Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on our financial condition, results of operations and capital requirements as well as other factors deemed relevant by our board of directors.
The number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any dividends on our common stock and do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future.
Dividend Policy We have never declared or paid any dividends on our common stock and do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we currently plan to retain any earnings to finance the growth of our business.
Item 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the NASDAQ market under the symbol “EVTV.” Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock trades on the Nasdaq market under the symbol “EVTV.” Holders As of March 22, 2024, we had approximately 157 shareholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

26 edited+8 added−22 removed28 unchanged
Biggest changeOperating Expenses Year Ended December 31, 2022 2021 $ Change % Change General and administrative 1 $ 7,996,906 $ 8,238,531 $ (241,625 ) (3 )% Consulting 339,505 188,703 150,802 80 % Research and Development 149,912 58,139 91,773 158 % Goodwill impairment charge 37,093,047 — 37,093,047 N/A Total operating expenses, net $ 45,579,370 $ 8,485,373 $ 37,093,997 451 % 1 Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 $ Change % Change Stock-based compensation expense $ 1,614,845 $ 3,414,440 $ (1,799,595 ) (53 )% General and Administrative Expenses General and administrative expenses for the year ended December 31, 2022 were $7,996,906, compared to $8,238,531 for 2021, a decrease of $241,625, which was primarily related to a decrease in non-cash stock-based compensation expense of $1,799,595 and to the effect of $685,000 of lawsuit settlement expense in 2021, partially offset by increases in other general administrative expenses which increased in order to prepare for future expected growth.
Biggest changeOperating Expenses Year Ended December 31, 2023 2022 $ Change % Change General and administrative $ 8,171,344 $ 7,996,906 $ 174,438 2 % Consulting 213,930 339,505 (125,575 ) -37 % Research and Development 236,181 149,912 86,269 158 % Goodwill impairment charge 5,098,784 37,093,047 (31,994,263 ) N/A Total operating expenses, net $ 13,720,239 $ 45,579,370 $ (31,859,131 ) 451 % 1 Includes stock-based compensation expense as follows: Year Ended December 31, 2023 2022 $ Change % Change Stock-based compensation expense $ 1,322,577 $ 1,614,845 $ (292,268 ) (18 )% General and Administrative Expenses General and administrative expenses for the year ended December 31, 2023 were $8,171,344, compared to $7,996,906 for 2022 General and administrative expenses increased slightly by $174,438 primarily due to higher payroll costs due to additional hiring of certain key management positions and higher rent expense due to our Philippines warehouse that was rented starting in 2023, partially offset by lower bad debt expense and stock-based compensation expense.
Investments and employee hiring requirements over the next 10 years will provide an opportunity for us to obtain local tax incentives granted to the Company of up to $27 million, provided that the qualifying expenditures are made. We are not not currently contractually obligated to make the expenditures.
Investments and employee hiring requirements over the next 10 years will provide an opportunity for us to obtain local tax incentives granted to the Company of up to $27 million, provided that the qualifying expenditures are made. We are not currently contractually obligated to make the expenditures.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our financial statements and related notes included in Part II, Item 8 of this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties.
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.
General and Administrative Expenses 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.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 47 Table of Contents Indemnification Agreements As we have generated sales, we have provided customers with indemnification of varying scope against claims of intellectual property infringement by third parties arising from the use of our products.
Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 41 Table of Contents Indemnification Agreements As we have generated sales, we have provided customers with indemnification of varying scope against claims of intellectual property infringement by third parties arising from the use of our products.
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. 43 Table of Contents • Zero-emission electric experience.
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. 37 Table of Contents • Zero-emission electric experience.
No critical accounting policies existed at December 31, 2022. Smaller Reporting Company Status We are a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act.
No critical accounting policies existed at December 31, 2023. Smaller Reporting Company Status We are a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act.
Sales for the year ended December 31, 2022 consisted of [58] logistic cargo vans sold primarily to customers in New Jersey who utilized a voucher from the NJ ZIP program, [5] cab and chassis trucks sold to FAR distributors and other customers and three used buses.
Sales for the year ended December 31, 2022 consisted of 58 logistics cargo vans and trucks sold primarily to customers in New Jersey who utilized vouchers from the NJ ZIP program, 5 cab and chassis trucks sold to FAR distributors and other customers and three used buses. Sales decreased primarily due to, among other things, less favorable market demand.
There is no maturity date for the line, but Centennial Bank may at any time, in its sole discretion and without cause, demand the Company to immediately repay any and all outstanding obligations under the line of credit in whole or in part.
There is no maturity date for the line, but Centennial Bank may at any time, in its sole discretion and without cause, demand that we immediately repay any and all outstanding obligations under the line of credit in whole or in part. The line is secured by the cash and cash equivalents maintained by us in our Centennial Bank accounts.
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. 46 Table of Contents Investing Activities Net cash provided by investing activities during the year ended December 31, 2022 was $5,507,719, as compared to cash used in investing activities of $4,677,839 during the year ended December 31, 2021.
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. 40 Table of Contents Investing Activities Net cash provided by investing activities during the year ended December 31, 2023 was $2,306,833, primarily due to the sale of our marketable securities of $2,342,643, partially offset by $35,810 of capital expenditures.
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.
This facility is the site of our state-of-the-art manufacturing facility and new corporate offices. 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.
The increased expense in 2022 was due to the development of new product lines, which includes a school bus and Class 5 cab over chassis truck. Goodwill Impairment Charge Based on the annual impairment test, we recorded a non-cash goodwill impairment charge of $37,093,047 as of December 31, 2022.
The increased expense in 2023 was due to the development of new product lines. Goodwill Impairment Charge Based on the annual impairment test, we recorded a non-cash goodwill impairment charge of $5,098,784 and $37,093,047 as of December 31, 2023 and December 31, 2022, respectively.
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. In February 2022, we announced Osceola, Arkansas as the site of our state-of-the-art manufacturing facility and new corporate offices.
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. In February 2022, we moved into an approximately 580,000 square foot facility in Osceola, Arkansas.
Cost of Goods Sold Year Ended December 31, 2022 2021 $ Change % Change Cost of goods sold $ 2,772,673 $ 1,281,468 $ 1,491,205 116 % Cost of sales related to the sales revenue described above were approximately $2.77 million for the year ended December 31, 2022, which resulted in gross profit of $1.73 million and a gross margin percentage of 38%, compared to $1.28 million for the year ended December 31, 2021, which resulted in gross profit of $0.76 million and a gross margin percentage of 37%.
Cost of Goods Sold Year Ended December 31, 2023 2022 $ Change % Change Cost of goods sold $ 1,857,273 $ 2,772,673 $ (915,400 ) -33 % Cost of sales related to the sales revenue described above were approximately $1.86 million for the year ended December 31, 2023, which resulted in gross profit of $1.01 million and a gross margin percentage of 35%, compared to approximately $2.7 million for the year ended December 31, 2022, which resulted in gross profit of $1.73 million and a gross margin percentage of 38%.
Because we have incurred only losses to this point, no provision for income taxes has been made in 2022, and the income tax benefit recorded in 2020 has been reversed in 2021 and effectively reserved as well. 44 Table of Contents Results of Operations The following discussion compares operating data for the year ended December 31, 2022 to the data for the year ended December 31, 2021: Sales Year Ended December 31, 2022 2021 $ Change % Change Sales $ 4,504,621 $ 2,042,844 $ 2,461,777 121 % Sales were approximately $4.50 million for the year ended December 31, 2022, compared to $2.04 million for the year ended December 31, 2021.
Because we have incurred only losses to this point, no provision for income taxes has been made in 2023 and 2022. 38 Table of Contents Results of Operations The following discussion compares operating data for the year ended December 31, 2023 to the data for the year ended December 31, 2022: Sales Year Ended December 31, 2023 2022 $ Change % Change Sales $ 2,862,853 $ 4,504,621 $ (1,641,768 ) -36 % Sales were approximately $2.9 million for the year ended December 31, 2023, compared to $4.5 million for the year ended December 31, 2022.
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.
We do, however, purchase equipment necessary to conduct our operations on an as needed basis and will begin increasing those expenditures as we transfer assembly and corporate functions to the Osceola Arkansas facility. Contractual Obligations Other than as disclosed in the consolidated financial statements in Item 8 of this Annual Report, we have no contractual obligations.
Other Income (Expense) Year Ended December 31, 2022 2021 $ Change % Change Interest income, net $ 45,026 $ 4,412 $ 40,614 921 % Other (expense) income, net (1,764 ) 288,185 (289,949 ) (101 )% Total other income $ 43,262 $ 292,597 $ (249,335 ) (85 )% Interest income, net consists primarily of interest earned on short-term investments, partially offset by interest expense on debt.
Other Income (Expense) Year Ended December 31, 2023 2022 $ Change % Change Interest income, net $ 34,835 $ 45,026 $ (10,191 ) (23 )% Other (expense) income, net (4,155 ) (1,764 ) (2,391 ) 136 % Total other income $ 30,680 $ 43,262 $ (12,582 ) (29 )% Interest income, net consists primarily of interest earned on short-term investments, partially offset by interest expense on debt.
Although we reported a net loss of $43,804,160 for the year ended December 31, 2022, the loss included $39,040,349 of non-cash expenses, including a goodwill impairment charge of $37,093,047 and stock-based compensation of $1,614,845. Net loss for 2021 was $7,652,100, which included net non-cash expenses of $3,502,751, including stock-based compensation of $3,414,440.
Net cash used in operating activities for the year ended December 31, 2022 was $7,432,087, primarily due to a net loss of $43,804,160 and changes in operating assets and liabilities, net of $2,668,276, partially offset by non-cash operating charges of $39,040,349, of which $37,093,047 was related to a non-cash goodwill impairment charge and $1,614,845 was related to stock-based compensation expense.
Cash Flows The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Cash flows used in operating activities $ (7,432,087 ) $ (12,936,755 ) Cash flows provided by (used in) investing activities 5,507,719 (4,677,839 ) Cash flows (used in ) provided by financing activities (156,690 ) 20,590,987 Net change in cash, restricted cash and cash equivalents $ (2,081,058 ) $ 2,976,393 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 goodwill impairment charges and stock-based compensation, and changes in the asset and liability accounts.
Cash Flows The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Cash flows used in operating activities $ (4,245,100 ) $ (7,432,087 ) Cash flows provided by (used in) investing activities 2,306,833 5,507,719 Cash flows (used in ) provided by financing activities (430,481 ) (156,690 ) Net change in cash, restricted cash and cash equivalents $ (2,368,748 ) $ (2,081,058 ) Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $4,245,100, primarily due to a net loss of $12,683,979, partially offset by changes in operating assets and liabilities, net of $1,857,884 and non-cash operating charges of $6,580,995, of which $5,098,784 was related to a non-cash goodwill impairment charge and $1,322,577 was related to non-cash stock-based compensation expense.
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 .
The 2023 loss includes approximately $6.4 million of non-cash expenses, including a goodwill impairment charge of approximately $5.1 million. 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: • Availability of government subsidies, rebates and economic incentives .
For the years ended December 31, 2022 and 2021, respectively, we generated sales revenue of approximately $4.5 million and $2.0 million, respectively, and our net losses were $43.8 million and $7.7 million, respectively. The 2022 loss includes approximately $39.1 million of non-cash expenses, including a goodwill impairment charge of approximately $37.1 million.
Our vehicles address the challenges of traditional fuel price instability and local, state and federal regulatory compliance. For the years ended December 31, 2023 and 2022, respectively, we generated sales revenue of approximately $2.9 million and $4.5 million, respectively, and our net losses were $12.7 million and $43.8 million, respectively.
The line is secured by the cash and cash equivalents maintained by the Company in its Centennial Bank accounts. Borrowings under the line may not exceed cash, cash equivalents, and marketable securities balances up to $1,000,000. There was no principal amount outstanding on December 31, 2022 and there is no current plan to borrow from it.
Borrowings under the line may not exceed cash, cash equivalents, and marketable securities balances up to $1,000,000. There was no principal amount outstanding on December 31, 2023 and the line of credit was closed in 2023. Capital Expenditures We do not have any contractual obligations for ongoing capital expenditures at this time.
Financing Activities Net cash used in financing activities during the year ended December 31, 2022 was $156,690 and net cash provided by financing activities in 2021 was $20,590,987. Net cash used in financing for 2022 primarily consisted of principal repayments of debt of $276,690, partially offset by proceeds from the issuance of common stock for options exercised of $120,000.
Net cash used by financing activities during the year ended December 31, 2022 was $156,690, primarily from the issuance of common stock of $120,000, partially offset by payments on notes payable of $276,690. Line of Credit Effective August 4, 2022, we secured a line of credit from Centennial Bank. Borrowings under the line of credit bear interest at 2.75% annually.
Consulting Consulting expenses were $339,505 for the year ended December 31, 2022, as compared to $188,703 for 2021, 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 payments to another firm that assists the Company with public affairs, media and public relations. 45 Table of Contents Research and Development Research and development expenses were $149,912 for the year ended December 31, 2022, compared to $58,139 for the year ended December 31, 2021.
Consulting Consulting expenses were $213,930 for the year ended December 31, 2023, as compared to $339,505 for 2022, The decrease in consulting expenses was primarily due to a decrease in costs related to public affairs consulting, partially offset by increased search costs for key employees. 39 Table of Contents Research and Development Research and development expenses were $236,181 for the year ended December 31, 2023, compared to $149,912 for the year ended December 31, 2022.
Sales for the year ended December 31, 2021 consisted of 21 vehicles, (cargo vans and trucks) sold to customers and FAR distributors, as well as maintenance and inspection services provided.
Sales for the year ended December 31, 2023 consisted of 24 logistic cargo vans sold primarily to customers in New Jersey and California through the states incentives programs, 2 cab and chassis trucks sold to other customers.
The net cash used by changes in our operating assets and liabilities was $2,668,276 for the year ended December 31, 2022, due primarily to increases of $890,880 in accounts receivable and $1,820,785 in inventory.
The changes in operating assets and liabilities, net was due to an increase in inventory of $1,820,785, an increase in accounts receivable of $890,880, a decrease in accrued liabilities of $305,065, an increase in inventory deposits of $326,854 and a decrease in other non-current liabilities of $2,427, partially offset by an increase in accounts payable of $365,284 and a decrease in prepaid expenses of $325,638 and an increase in other assets of $143,270.
Removed
Our vehicles address the challenges of traditional fuel price instability and local, state and federal regulatory compliance.
Added
Consulting and Research and Development Costs These expenses are substantially related to our external consulting and research and development activity. Goodwill Impairment Charge In accordance with ASC 350-20 "Intangibles-Goodwill and Other - Goodwill", an impairment test is required at least annually or when a triggering event occurs.
Removed
As discussed in Item 8, Notes 2 and 3 to the consolidated financial statements of Envirotech Vehicles, Inc. contained in this Annual Report on Form 10-K, as a result of the closing of the Merger on March 15, 2021, the historical results discussed in this section of the Annual Report are those of Envirotech Drive Systems, Inc.
Added
An impairment charge is recorded when our fair value is less than the carrying value of our net assets. Other Income/Expenses, Net Other income/expenses include non-operating income and expenses, including interest income and expense.
Removed
(“EVTDS”) as of and for the years ended December 31, 2022 and 2021, including the balance sheet accounts of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.), at December 31, 2022 and 2021, and including the consolidated results of operations of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and EVTDS for the entire annual period ended December 31, 2022.
Added
The decrease in gross margin percentage was primarily due to higher outbound freight costs in 2023 compared to the same period in 2022.
Removed
The consolidated results of operations for the fiscal period ended December 31, 2021, include the results of operations of EVTDS for the entire annual period and include the consolidated results of operations of Envirotech Vehicles, Inc. (formerly ADOMANI, Inc.) and its subsidiaries for the post-merger period March 16, 2021 through December 31, 2021.
Added
Interest income, net decreased by $10,191 in 2023 compared to 2022, primarily due to lower balances on our short-term investments during 2023. Other (expense) income, net consists of miscellaneous non-operating items. Liquidity and Capital Resources As of December 31, 2023, we had cash and cash equivalents of $456,719 and working capital of $10,282,613.
Removed
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.
Added
The changes in operating assets and liabilities, net was due to an increase in accounts receivable of $1,360,660 as cash collections outpaced sales, a decrease of $1,529,545 in inventory deposits, a decrease in prepaid expenses of $298,798, an increase in accounts payable of $111,838 partially offset by an increase in inventory of $1,159,267 as we ramp up for future growth in sales, an increase in other non-current assets of $72,230, an increase in other current assets of $21,806 and a decrease in accrued liabilities of $189,654.
Removed
Global health concerns related to the ongoing COVID-19 pandemic have resulted in social, economic and labor instability in the countries in which we or the third parties with whom we engage operate, and resulted in unexpected legal and regulatory changes, such as travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions that have negatively affected our ability to procure and sell our products and provide our services.
Added
Net cash provided by investing activities during the year ended December 31, 2022 was $5,507,719, primarily due to the net sale of our marketable securities of $5,676,302, partially offset by $168,583 of capital expenditures. Financing Activities Net cash used in financing activities during the year ended December 31, 2023 was $430,481 as a result of repayment of certain notes payable.
Removed
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 .
Added
Recent Accounting Pronouncements On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASC 326”). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.
Removed
Consulting and Research and Development Costs These expenses are substantially related to our external consulting and research and development activity. Other Income/Expenses, Net Other income/expenses include non-operating income and expenses, including interest income and expense.
Added
CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, such as accounts receivable. The adoption of ASU 2016-13 did not have a material impact on the Company’s consolidated financial statements.
Removed
Interest income, net increased to $45,026 for the year ended December 31, 2022 compared to $4,412 for the year ended December 31, 2021, primarily due to higher interest rates earned on short-term investments during 2022.
Removed
Other income of $288,185 for the year ended December 31, 2021 primarily consists of a gain of $290,520 on forgiveness of the Company’s loan under the Paycheck Protection Program established pursuant to the CARES Act.
Removed
Income Tax Expense Income tax for the year ended December 31, 2021 consists primarily of $218,300 of EVTDS deferred income tax benefits reversed following the Merger. Liquidity and Capital Resources As of December 31, 2022, we had cash and cash equivalents of $2,765,068 and short-term investments of $2,336,402, a combined total of $5,101,470, and working capital of $16,867,201.
Removed
We 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.
Removed
Net cash used in operating activities for the year ended December 31, 2022 was $7,432,087 compared to $12,936,755 for the year ended December 31, 2021, a decrease of cash used of $5,504,668.
Removed
The decrease in net cash used in operating activities was due primarily to lower cash used by changes in our operating assets and liabilities, primarily related to accounts receivable, inventory and inventory deposits.
Removed
This compares to net cash used by changes in our operating assets and liabilities of $8,787,406 for 2021, due primarily to increases of $4,503,079 in inventory deposits, $3,198,877 in inventory and $1,415,657 in accounts receivable.
Removed
The remainder of the decrease in net cash used in operating activities compared to 2021 was due to a lower net loss in 2022 after accounting for non-cash expenses.
Removed
Net cash provided in 2022 consisted of proceeds from sales and maturities of marketable securities of $9,619,242, partially offset by purchases of marketable securities of $3,942,940 and capital expenditures of $168,583.
Removed
Net cash used in 2021 consisted of purchases of marketable securities of $16,233,213 and capital expenditures of $27,958, partially offset by proceeds from sales of and maturities of marketable securities of $8,210,000 and cash acquired in the merger of $3,373,332.
Removed
Net cash provided by financing activities in 2021 consisted primarily of the pre-merger $4,621,200 proceeds from the issuance of common stock raised by EVTDS in 2021 in anticipation of the Merger; a second common stock offering post-merger which raised $16,274,991, and $211,219 raised in 2021 from the issuance of stock for stock options that were exercised, partially offset by offering costs of $188,015 and debt repayments of $328,408.
Removed
Line of Credit Effective August 4, 2022, the Company secured a line of credit from Centennial Bank. Borrowings under the line of credit bear interest at 2.75% annually.
Removed
Contractual Obligations Other than as disclosed in the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2022, the Company has no contractual obligations.
Removed
Recent Accounting Pronouncements Management has considered all recent accounting pronouncements issued, but not effective, and does not believe that they will have a significant impact on the Company’s financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed3 unchanged
Biggest changeWe currently anticipate that our international selling, marketing and administrative costs related to foreign sales will be largely denominated in the same foreign currency, which may mitigate our foreign currency exchange risk exposure. 48 Table of Contents
Biggest changeWe currently anticipate that our international selling, marketing and administrative costs related to foreign sales will be largely denominated in the same foreign currency, which may mitigate our foreign currency exchange risk exposure. 42 Table of Contents

Other EVTV 10-K year-over-year comparisons