What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-03-28 compared with 2023-09-25 · 50 added, 67 removed, 144 unchanged (45% of the section changed)

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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.

As of September 19, 2023, we had approximately 160 record holders of our common stock.

Our common stock trades on the Nasdaq market under the symbol “EVTV.”

As of March 22, 2024, we had approximately 157 shareholders of record 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.

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We did not purchase any of our equity securities during the period covered by this Annual Report.

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.

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.

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Our vehicles address the challenges of traditional fuel price instability and local, state and federal regulatory compliance.

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.

(“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.

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.

On May 26, 2021, the Company filed a Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware to change its name from ADOMANI, Inc., to Envirotech Vehicles, Inc., effective as of May 26, 2021.

For the 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.

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 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:

COVID-19 pandemic .

Global health concerns related to the ongoing COVID-19 pandemic have resulted in social, economic and labor instability in the countries in which we or the third parties with whom we engage operate, and resulted in unexpected legal and regulatory changes, such as travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions that have negatively affected our ability to procure and sell our products and provide our services.

Accordingly, our future performance will depend in part upon our ability to successfully respond and adapt to these challenges.

We have developed, and continue to develop, plans to address the ongoing effects and help mitigate the potential negative impact of the pandemic on our business.

Availability of government subsidies, rebates and economic incentives .

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Sales are recognized from the sales of new, purpose-built zero-emission electric vehicles and from providing vehicle maintenance and safety inspection services.

Sales are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 606, as discussed in Note 2 to our consolidated financial statements included in this Annual Report.

Cost of Sales

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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;

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;

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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.

An impairment charge is recorded when our fair value is less than the carrying value of our net assets.

Other Income/Expenses, Net

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Provision for Income Taxes

We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) ASC 740 “Income Taxes,”

which requires the recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) ASC 740 “Income Taxes,” which requires the recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations.

Because we have incurred only losses to this point, no provision for income taxes has been made in 2022, and the income tax benefit recorded in 2020 has been reversed in 2021 and effectively reserved as well.

Because we have incurred only losses to this point, no provision for income taxes has been made in 2023 and 2022.

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:

The following discussion compares operating data for the year ended December 31, 2023 to the data for the year ended December 31, 2022:

Year Ended December 31,

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.

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, 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.

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.

Cost of Goods Sold

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Cost of goods sold

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 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%.

The decrease in gross margin percentage was primarily due to higher outbound freight costs in 2023 compared to the same period in 2022.

Operating Expenses

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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.

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.

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.

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.

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.

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.

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 $37,093,047 as of December 31, 2022.

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.

Other Income (Expense)

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Interest income, net consists primarily of interest earned on short-term investments, partially offset by interest expense on debt.

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.

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.

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.

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, 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.

As of December 31, 2023, we had cash and cash equivalents of $456,719 and working capital of $10,282,613.

We believe that our existing cash, cash equivalents and short-term investments will be sufficient to fund our present operations during the next 12 months and beyond.

However, we may not successfully execute our business plan, and if we do not, we may need additional capital to continue our operations and support the increased working capital requirements associated with the fulfillment of purchase orders.

In February 2022, we announced Osceola, Arkansas as the site of our state-of-the-art manufacturing facility and new corporate offices.

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.

In February 2022, we moved into an approximately 580,000 square foot facility in Osceola, Arkansas.

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.

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.

We are not currently contractually obligated to make the expenditures.

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2023 and 2022:

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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.

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.

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.

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.

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.

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.

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, 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.

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.

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.

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.

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:

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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.

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.

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.

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.

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, 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 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.

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.

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, the Company secured a line of credit from Centennial Bank.

Effective August 4, 2022, we secured a line of credit from Centennial Bank.

Borrowings under the line of credit bear interest at 2.75% annually.

There is no maturity date for the line, but Centennial Bank may at any time, in its sole discretion and without cause, demand the Company to immediately repay any and all outstanding obligations under the line of credit in whole or in part.

The line is secured by the cash and cash equivalents maintained by the Company in its Centennial Bank accounts.

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.

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.

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.

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 on Form 10-K for the year ended December 31, 2022, the Company has no contractual obligations.

Other than as disclosed in the consolidated financial statements in Item 8 of this Annual Report, we have no contractual obligations.

Off-Balance Sheet Arrangements

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Smaller Reporting Company Status

We are a “smaller reporting company”

as defined in Rule 12b-2 under the Exchange Act.

We are a “smaller reporting company” as defined in Rule 12b-2 under the Exchange Act.

We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million as of the last business day of our most recently completed second fiscal quarter.

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Recent Accounting Pronouncements

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

On 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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity