What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-04-15 compared with 2024-03-28 · 350 added, 236 removed, 479 unchanged (55% of the section changed)

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and its Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Envirotech Vehicles, Inc.

and its Subsidiaries as of December 31, 2023 and 2022, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Envirotech Vehicles, Inc.

and its Subsidiaries as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the year ended December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Envirotech Vehicles, Inc.

and its Subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the period ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Envirotech Vehicles, Inc.

and its Subsidiaries in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Envirotech Vehicles, Inc.

and its Subsidiaries is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and auditing standards generally accepted in the United States.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill

Description of the Matter:

As of December 31, 2023, the Company’s goodwill was $9,583,836.

As disclosed in Note 2 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level.

For a reporting unit in which the Company concludes, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount (or if the Company elects to skip the optional qualitative assessment), the Company is required to perform a quantitative impairment test, which includes measuring the fair value of the reporting unit and comparing it to the reporting unit’s carrying amount.

In the year ended December 31, 2023, the Company recorded a goodwill impairment charge of $5,098,784 as disclosed in Note 2 to the consolidated financial statements.

Auditing management’s quantitative impairment test for goodwill was complex and judgmental due to the significant estimation required to determine the fair value of a reporting unit.

In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the weighted average costs of capital, revenue growth rates, operating margins, working capital and terminal value, which are affected by expectations about future market or economic conditions.

How We Addressed the Matter in Our Audit:

We performed substantive procedures which included, among others, (i) testing management’s process for estimating the fair value of the reporting units;

(ii) testing the completeness, accuracy and relevance of the data used in estimating the fair value of the reporting units;

and (iii) evaluating the reasonableness of the significant assumptions used by management.

We have served as Envirotech Vehicles, Inc.

and its Subsidiaries’ auditor since 2023.

Maddox Acquisition

The Company’s acquisition of Maddox Industries, LLC on December 18, 2024, involved significant judgment in the valuation of net assets and intangible assets.

The Company engaged a third-party valuation firm to assist with the purchase price allocation.

Auditing this matter involved evaluating the competence of the valuation specialists, reviewing the purchase agreements, assessing the purchase price allocation, and testing the reasonableness of the estimated useful lives of identified intangible assets.

We have served as the Company’s auditor since 2023.

Cypress, Texas

March 28, 2024

April 15, 2025

ENVIROTECH VEHICLES, INC.

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$ 1,941,181 $ 456,719

Restricted cash

Marketable securities

Accounts receivable, net of allowance of $ 15,306 and $ 20,929 , respectively,

1,016,666 692,102

Receivable from related party, net of allowance of $ 6,700

Inventory, net

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108,508 538,932

10,103,048 9,583,836

Intangible assets, net

Other non-current assets

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$ 1,470,102 $ 760,802

Deferred revenue

Accrued liabilities

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Operating lease liability - short-term

Notes payable - current

235,625 291,263

Options liability, at fair value

Debt - current

3,596,805 269,245

Total current liabilities

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Operating lease liability - long-term

Notes payable - long-term

10,420 16,671

Debt - long-term

Total liabilities

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Goodwill impairment charge

5,098,784 37,093,047

Total operating expenses, net

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Other income (expense):

Interest income, net

Interest income

Unrealized loss on financial instruments at fair value

( 633,981 ) —

Other (expense) income, net

Other expense

( 302,306 ) ( 4,155 )

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15,171,748 $ 152 $ 85,245,925 $ ( 64,612,499 ) $ 20,633,578

Common stock issued for services rendered by external parties

Common stock issued for cash

1,031,710 12 1,799,236 — 1,799,248

Unearned compensation issued to external party

Conversion of short-term note to common stock

505,051 5 1,046,254 — 1,046,259

Common stock issued - commitment fee (equity line of credit)

64,103 1 124,999 — 125,000

Common stock issued as consideration for acquisition (Note 3)

3,100,000 31 4,277,969 — 4,278,000

Stock based compensation

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Goodwill impairment charge

5,098,784 37,093,047

9,904 ( 10,004 )

Unrealized loss on financial instruments

Changes in assets and liabilities:

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709,300 111,838

Accrued liabilities

Accrued liabilities and deferred revenue

4,757,823 ( 189,654 )

Other non-current liabilities

( 215,139 ) —

Net cash used in operating activities

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( 430,333 ) ( 35,810 )

Purchases of marketable securities

Acquisition of Maddox Industries, net of cash

( 4,276,041 ) —

Proceeds from sales and maturities of marketable securities

2,342,643 9,619,242

Net cash provided by investing activities

Net cash (used in) provided by investing activities

( 4,706,374 ) 2,306,833

1 unchanged sentence

Proceeds from issuance of common stock

Common stock issued - Maddox acquisition

Proceeds from convertible notes

Proceeds from related party loan

Repayment of related party loan

( 300,000 ) —

Proceeds from the issuance of convertible

Proceeds from debt

648,937 467,074

Principal repayments on debt

( 567,176 ) ( 430,481 )

Net cash used in financing activities

Net cash provided by financing activities

9,695,509 36,593

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Non-cash investing and financing activities:

Common stock issued in litigation settlements accrued in previous years

$ — $ 322,431

Common stock issued for services rendered

Notes payable issued to finance prepaid insurance

$ 467,074 $ 439,087

Notes payable issued to finance purchase of property and equipment

See accompanying notes to consolidated financial statements.

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The Company’s vehicles address the challenges of traditional fuel price cost instability and local, state and federal regulatory compliance.

On June 28, 2022, we effected a 1 -for- 20 reverse stock split of our common stock with no change to authorized shares of common stock.

All share, restricted stock unit (“RSU”), and per share or per RSU information through this Annual Report on Form 10 -K has been retroactively adjusted to reflect the stock split.

The shares of common stock retain a par value of $ 0.00001 per share.

Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from “Common stock” to “Additional paid-in capital.”

On March 30 2023, the Company entered into an agreement with Berthaphil, Inc.

("Berthaphil") to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines.

The term of the lease is two years and two months with a turnover date of July 1, 2023 ( "turnover date") and a rental commencement date of September 1, 2023.

The Company intends to use the leased space as a production facility as it seeks to expand its business presence both in the region and the United States.

Summary of Significant Accounting Policies

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Unobservable inputs that are supported by little or no market data and that require the reporting entity to develop its own assumptions.

The Company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.

The Company has an option liability that is measured at fair value on a recurring basis.

See Note 7 - Notes Payable for additional disclosures.

Revenue Recognition —The Company recognizes revenue from the sales of zero -emission electric vehicles and vehicle maintenance and inspection services.

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606" ), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

For the year ended December 31, 2023 , eight customers accounted for approximately 75 percent of the annual revenue recorded.

At December 31, 2022 , three customers accounted for approximately 43 percent of the annual revenue recorded.

For the year ended December 31, 2024, eight customers accounted for approximately all of the annual revenue recorded.

At December 31, 2023, three customers accounted for approximately 70 % of the annual revenue recorded.

The Company had accounts receivable, net of $ 1,009,966 and $ 692,102 on December 31, 2024 and December 31, 2023, respectively.

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recognize the revenue as the obligation is satisfied.

Product revenue consists primarily of the sale of electric trucks and cargo vans.

These sales represent a single performance obligation with revenue recognition occurring at the time title transfers.

Transfer of title generally occurs when the customer has accepted the vehicle and signed the appropriate documentation acknowledging receipt.

Product revenue includes the sale of electric trucks and cargo vans.

These sales represent a single performance obligation and revenue is recognized when the vehicle is delivered and the customer has accepted the vehicle and signed the appropriate documentation acknowledging receipt of the vehicle.

At this time, the title of the vehicle is transferred to the customer.

The Company provides the option of financing (flooring) to Factory Authorized Representatives (“FARs”) for demo vehicles that are used in their selling process.

Flooring agreements are made either expressly or implicitly and last no longer than one year with respect to specific vehicles, as payment for the vehicles is due in full before the first anniversary of the agreement, or upon sale by the FAR of the demo vehicle.

The interest rate associated with the flooring agreement is agreed upon at the time of executing the FAR agreement.

The Company has elected the practical expedient allowed by ASC Topic 606 where consideration does not need to be adjusted for financing components of the agreement.

During the fourth quarter of 2024, the Company recorded $ 4,240,666 of payments received through a grant from the Environmental Protection Agency ("EPA") to produce electric school buses as deferred revenue.

No revenue was recognized in 2024 as the performance obligation has not been met.

The balance of deferred revenue at December 31, 2024 and December 31, 2023 is $ 4,240,666 and $ 0 , respectively.

Other revenue for the years ended December 31, 2024 and December 31, 2023 were $ 52,303 and $ 29,605 respectively, and primarily included safety inspection and document fees for compliance with United States Department of Transportation guidelines.

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Cash and Cash Equivalents —The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

The recorded value of our restricted cash and cash equivalents approximates their fair value.

Restricted Cash —The Company classifies certain bank balances as restricted cash as these balances are required to support certain minor activities.

See Concentration of Credit Risk below in this Note.

The Company had $ 0 and $ 60,399 of restricted cash at December 31, 2023 and December 31, 2022 , respectively.

Short-term Investments —The Company invests in short-term, highly liquid, marketable securities, such as U.S.

The recorded value of our cash and cash equivalents approximates their fair value.

Short-term Investments —The Company may, from time to time, invest in short-term, highly liquid, marketable securities, such as U.S.

Treasury notes, U.S.

Treasury bonds, and other government-backed securities.

The Company also invests in bank certificates of deposit.

The Company may also, from time to time, invest in bank certificates of deposit.

The Company classifies these short-term investments as held-to-maturity, as the intent is not to liquidate them prior to the respective stated maturity date.

These securities had original maturity dates ranging from 158 days to 200 days, and at December 31, 2023 , the Company had $ 0 investments in such securities.

At December 31, 2022 , the aggregate amount of the Company’s investments in marketable securities was $2,336,402.

These securities had original maturity dates ranging from 143 days to 364 days, and at December 31, 2022 , the remaining maturity dates on these securities ranged from 1 to 90 days.

The balances for these short-term investments at December 31, 2024 and December 31, 2023, were $ 0 and $ 0 , respectively.

Accounts Receivable and Allowance for Doubtful Accounts —The Company establishes an allowance for doubtful accounts through a review of several factors including historical collection experience, current aging status of the customer accounts, and financial condition of its customers.

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The Company did have a concentration of customers:

four customers’ balances account for approximately 90 percent of the outstanding accounts receivable for the year ended December 31, 2023 .

five customers’ balances account for approximately 96 % of the outstanding accounts receivable for the year ended December 31, 2024 .

If the Company is unable to collect from these customers, the Company's write-offs will significantly increase and the write-offs may have a material adverse impact on the Company's financial condition.

However, the Company does not believe the receivables balance from these customers represents a significant risk based on past collection experience.

At December 31, 2022 , three customers’ balances account for approximately 37 percent of the outstanding accounts receivable;

At December 31, 2023 , three customers’ balances account for approximately 37 % of the outstanding accounts receivable;

for the year ended December 31, 2023

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The Company had inventory deposits of $ 6,036,809 and $ 3,300,388 as of December 31, 2024 and December 31, 2023 , respectively.

Deposits paid to one vendor accounted for 99 percent of the deposits outstanding at December 31, 2023 .

Deposits paid to three vendors accounted for 70 percent of the deposits outstanding at December 31, 2022.

Deposits paid to one vendor accounted for 99 % of the deposits outstanding at December 31, 2024 .

Deposits paid to one vendor accounted for 99 % of the deposits outstanding at December 31, 2023.

Income Taxes— The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.

Envirotech Drive Systems, Inc.

("EVT") previously recorded deferred tax benefits from net operating losses in current and prior periods.

The Company previously recorded deferred tax benefits from net operating losses in current and prior periods.

The Company, in light of the uncertainty of generating future taxable income against which those losses can be offset in order to realize such benefits, has determined that 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.

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Between FDIC and the Securities Investor Protection Corporation (“SIPC”) coverage, funds up to $ 750,000 , which may include cash up to $ 500,000 , are insured.

The Company’s bank requires compensating balances, which are reported as Restricted Cash on the Company's Consolidated Balance Sheets as disclosed above, for a subsidiary’s potential lease exposure and for the Company’s credit card limit, resulting in restricted cash of $ 0 and approximately $ 60,399 at December 31, 2023 and 2022 , respectively.

Impairment of Long-Lived Assets —Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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The Company has determined that it has one reporting unit.

In 2023, the Company conducted two impairment test:

( 1 ) due to a triggering event that occurred during the quarter of 2023 and ( 2 ) the annual impairment test.

Based on the impairment tests, which predominantly utilized the Company's quoted market price and the number of outstanding shares at the end of the periods as inputs, the Company 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.

See Note 3 - Goodwill.

In 2024, the Company conducted its annual impairment test.

Based on the impairment test, which predominantly utilized the Company's quoted market price and the number of outstanding shares at the end of the period as inputs, the Company recorded no non-cash goodwill impairment charge as of December 31, 2024 and a non-cash goodwill impairment charge of $ 5,098,784 as of December 31, 2023.

See Note 4 - Goodwill for additional disclosures

Other Intangible Assets—Other Intangible assets (excluding indefinite-lived intangible assets) consist of customer lists and relationships.

These other intangible assets were acquired at fair value as a result of the Maddox Acquisition disclosed in Note 1 - Organization and Business Operations and are amortized on a straight-line basis over their estimated lives.

The Company assesses useful lives based on the period over which the asset is expected to contribute to cash flows.

Research and Development ("R&D") —Costs incurred in connection with the development of new products and manufacturing methods are charged to operating expenses as incurred.

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Recent Accounting Pronouncements—Currently Adopted

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.

The Company conducted two impairment tests in 2023:

( 1 ) during the first quarter when a triggering event occurred and ( 2 ) at year-end during its annual impairment test.

in accordance with ASC 350 - 20, Goodwill .

The Company conducted its annual impairment test in 2022.

As a result of these tests, the Company recorded goodwill impairment charges of $ 5,098,784 and $ 37,093,047 for the years ended December 31, 2023 and December 31, 2022, respectively.

2023 - 07, “ Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosure ”

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures (“ASU 2023 - 07” ), which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023 - 07, as well as existing segment disclosures and reconciliation required under Accounting Standard Codification (“ASC”) 280 on an interim and annual basis.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and for the interim periods beginning after December 15, 2024, with early adoption permitted.

The Company has adopted this guidance within the Company’s Annual Report on Form 10 -K for the year ending December 31, 2024.

There anticipates no material impact on the Company's consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

2023 - 09, "Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures"

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures (ASU 2023 - 09 ) , which requires public entities, on an annual basis, to provide disclosure of specific categories in the reconciliation of the effective tax rate, as well as disclosure of income taxes paid, disaggregated by jurisdiction.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023 - 09 and will adopt the guidance when it becomes effective on a prospective basis.

2024 - 03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses

On November 4, 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024 - 03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses (“ASU 2024 - 03” ) , that improves financial reporting by requiring public companies to disclose additional information about certain expenses in the notes to the financial statements.

The amendments in the ASU 2024 - 03 are effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting ASU 2023 - 07 and intends to adopt and report on this topic as required by this ASU.

On October 30, 2024, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Maddox Industries, LLC, a Puerto Rico limited liability company (“Maddox Industries”), and Jason Maddox, the sole member of Maddox Industries (the “Seller”), pursuant to which, subject to the terms and conditions of the Purchase Agreement, the Company purchased from the Seller all of the issued and outstanding membership interests (the “Purchased Interests”) in Maddox Industries (the “Maddox Acquisition”).

As consideration for the Purchased Interests, at the closing of the Maddox Acquisition on December 18, 2024 ( the “Closing”), the Company issued 3,100,000 shares of common stock to the Seller (the “Stock Consideration”).

In addition, during the six -month period following the Closing (the “Earnout Period”), the Seller was eligible to receive up to six monthly cash payments in an aggregate amount of up to $ 1 million (each such monthly payment, an “Earnout Payment”), which the Earnout Payment for each calendar month being equal to the aggregate amount of gross revenue received by Maddox Industries in respect of any closing receivable, as specified in the Purchase Agreement, during such calendar month, subject to an aggregate limit of $ 1 million with respect to all Earnout Payments payable under the Purchase Agreement.

The Maddox Acquisition was consummated on December 18, 2024.

The final purchase price of $ 4,276,041 , net of cash acquired of $ 1,959 , has been allocated to the fair values of assets and liabilities acquired as of December 18, 2024.

The following table summarizes the consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of Maddox Acquisition:

Fair Values at December 18, 2024

Receivable from related party

Customer relationships

Trade names and trademarks

Fair value of assets acquired

Less fair value of liabilities acquired

( 1,243,171 )

Purchase price, net of cash acquired

Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies.

Goodwill related to the acquisition is not expected to be deductible for tax purposes.

Unaudited Supplemental Pro Forma Information

The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the Maddox Acquisition discussed above as if it had occurred on January 1, 2023.

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations for the year ended December 31, 2024 and December 31, 2023, respectively, that would have been realized if the Maddox Acquisition had occurred on January 1, 2023, nor does it purport to project the results of the combined entity in future periods.

The pro forma financial information does not give effect to any anticipated integration costs related to the combined entities.

For the years ended December 31,

$ 4,867,581 $ 3,300,183

$ ( 6,294,107 ) $ ( 13,212,266 )

Goodwill and Intangible Assets

The Company conducted an impairment test in 2024 at year-end during its annual impairment test in accordance with ASC 350 - 20, Goodwill.

The Company also conducted its annual impairment test in 2023 as a result of a triggering event that occurred during the first quarter of 2023.

As a result of these tests, the Company recorded no goodwill impairment charge in December 31, 2024 and a goodwill impairment charge of $ 5,098,784 for the year ended December 31, 2023.

The following table presents a reconciliation of the carrying amount of goodwill for the year ended December 2024.

Balance at January 1, 2022

Goodwill as of December 31, 2022

Impairment charge

( 5,098,784 )

Balance at December 31, 2022

Goodwill impairment charge ( 5,098,784 )

Balance at December 31, 2023 $ 9,583,836

Goodwill as of December 31, 2023

Increase due to acquisitions

Goodwill as of December 31, 2024

The following table presents the carrying amount of intangible assets for the year ended December 31, 2024:

As of December 31, 2024

Weighted average amortization period (in years)

Gross carrying amount

Accumulated amortization

Intangible assets:

Customer relationships

$ 2,100,000 $ ( 24,932 ) $ 2,075,068 2.96

Trade names and trademarks

1,900,000 ( 6,767 ) $ 1,893,233 9.96

Intangible assets, net

$ 4,000,000 $ ( 31,699 ) $ 3,968,301

Amortization for the year ended December 31, 2024 was $ 31,699 .

The estimated amortization expense for the next five years and thereafter is as follows:

Amortization expense

2029 and beyond

Property and equipment, net

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The cumulative estimated net operating loss (“NOL”) carry-forward is $ 49,785,163 and $ 44,188,133 at December 31, 2024 and 2023, respectively.

$ 29,810,794 of this carry-forward may be carried forward indefinitely while $ 14,377,339 is subject to expiration over a 20 -year period.

Of this amount as of December 31, 2024, $ 35,407,824 of this NOL may be carried forward indefinitely while $ 14,377,339 is subject to expiration over a 20 -year period.

Due to the enactment of the Tax Cuts and Jobs Act of 2017, the corporate tax rate for those tax years beginning with 2018 has been reduced to 21%.

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Notes Payable

On June 15, 2021, the Company entered into an equipment financing agreement with Navitas Credit Corp.

in connection with the purchase of certain inventory management software.

The $ 63,576 loan is payable over twenty-four months, beginning in July 2021, with monthly payments of $ 2,649 .

The balance of this note is $ 0 and $ 13,245 on December 31, 2023 and December 31, 2022, respectively.

On August 10, 2022, the Company entered into an equipment financing agreement with Wells Fargo in connection with the purchase of facility grounds equipment.

The $ 25,007 loan is payable over 48 months, beginning in August 2022, with required monthly payments of $ 521 .

The balance of this note is $ 16,671 and $ 22,923 on December 31, 2023 and December 31, 2022, respectively.

On December 31, 2023, $ 6,252 is classified as Notes Payable - current and $ 10,420 is classified as Notes Payable - long term on the Company's Consolidated Balance Sheets.

On December 31, 2022, $ 6,252 is classified as Notes Payable - current and $ 16,671 is classified as Notes Payable - long term on the Company's Consolidated Balance Sheets.

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

Borrowings under the line of credit bearing interest at 3.25 % annually.

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

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

Borrowings under the line may not exceed cash, cash equivalents, and marketable securities balances up to $ 1,000,000 .

This line of credit was closed during the third quarter of 2023 and there was no amount outstanding at the time of closing.

Effective June 15, 2022, the Company entered into a premium financing agreement with First Insurance Funding to finance certain insurance coverage.

The $ 225,000 loan is payable over nine months, beginning in July 2022, and bears interest at 5.8 % with monthly payments of $ 25,608 .

The balance of this note is $ 0 on December 31, 2023.

The balance of this note is $ 76,087 and is classified as Notes Payable - Current on the Company's Consolidated Balance Sheets on December 31, 2022.

Effective August 20, 2022, the Company entered into a second premium financing agreement with First Insurance Funding to finance other insurance coverages.

The $ 214,088 loan is payable over nine months, beginning in September 2022, and bears interest at 6.3 % with monthly payments of $ 24,416 .

The balance of this note is $ 0 on December 31, 2023.

The balance of this note is $ 120,182 and is classified as Notes Payable - Current on the Company's Consolidated Balance Sheets on December 31, 2022.

Effective August 20, 2023, the Company entered into a third premium financing agreement with First Insurance Funding to finance other insurance coverages.

On July 15, 2022, the Company entered into an equipment financing agreement with Wells Fargo Bank, N.A.

in connection with the purchase of facility grounds equipment.

The $ 25,007 loan is payable over 36 months, beginning in August 2022, with monthly payments of $ 521 .

The balance of this note is $ 10,420 of which $ 6,252 is classified as Notes Payable - current and $ 4,168 is classified as Notes Payable - long term on the Company's consolidated balance sheets as of December 31, 2024.

Effective August 20, 2023, the Company entered into a premium financing agreement with First Insurance Funding to finance insurance coverages other than its directors' and officers' insurance coverages.

The $ 467,074 loan is payable over nine months, beginning in September 2023, and bears interest at 8.2 % with monthly payments of $ 53,675 .

The balance of this note is $ 262,993 on December 31, 2023 and is classified as Notes-Payable - current on the Company's Consolidated Balance Sheets.

The following table depicts the future annual minimum principal payments as of December 31, 2023:

There was no balance under this note as of December 31, 2024.

Effective June 15, 2024, the Company entered into a premium financing agreement with First Insurance Funding to finance its directors' and officers' insurance coverages.

The $ 232,067 loan is payable over nine months, beginning in July 2024, and bears interest at 8.25 % with monthly payments of $ 24,093 .

The balance of this note, including accrued interest, is $ 94,739 as of December 31, 2024.

Effective August 20, 2024, the Company entered into a premium financing agreement with AFCO Insurance Premium Finance to finance insurance coverages other than its directors' and officers' insurance coverages.

The $ 417,050 loan is payable over eleven months, beginning in September 2024, and bears interest at 8.24 % with monthly payments of $ 39,493 .

The balance of this note, including accrued interest, is $ 269,015 as of December 31, 2024.

Convertible Note

On January 18, 2024, the Company entered into a convertible promissory note agreement ("Note") for $ 1,000,000 with an unrelated third -party investor (the "Holder").

The origination fee of the Note was $ 99,000 and the maturity date of the Note was September 30, 2024.

The Holder was entitled to convert the Note into common stock at the greater of $ 1.50 per share or at 90 % of the share price of the Company's common stock on the maturity date.

The Holder also had a security interest in the assets of the Company in the event of non-payment of the Note.

In addition, the Holder received options to purchase 800,000 share of the Company's common stock at $ 1.50 per share.

These options expire two years from the date of the Note.

On May 6, 2024, the Note was cancelled and replaced with a short-term note.

During the third quarter of 2024, the short-term note was converted into 505,051 shares of common stock.

The Company has elected to measure the Note and options at fair value.

In estimating the fair value of the Note, a Monte Carlo simulation model is applied.

The required inputs include the current stock price, the risk-free rate and volatility of the common stock.

The Note's fair value is classified as Level 2 under the fair value hierarchy as provided by ASC 820.

In estimating the fair value of the options, the Black-Scholes Merton Model is used.

The required inputs include the current stock price, the exercise price, the term of the options, the risk-free rate and the volatility of the common stock.

The options' fair value is classified a Level 2 under the air value hierarchy as provided by ASC 820.

The fair valuation of the Note and options uses inputs other than quoted prices that are observable either directly or indirectly.

The net proceeds of $ 901,000 received by the Company from the issuance of the Note are bifurcated between the Note and the options.

The amount allocated to the options is $ 431,405 which is the fair value on the date of the Note.

The remaining proceeds received are allocated to the Note.

Under the fair valuation election, both the Note and options are remeasured to their respective fair values at the reporting date.

Changes in fair values for the Note and options are recorded as an unrealized gain or loss on convertible note fair value in Other (Expense)/Income in the Company's consolidated statements of operations for the year ended December 31, 2024.

As a result of this election, the Company recorded an unrealized loss $ 556,174 for the year ended December 31, 2024 for the Note and an unrealized gain of $ 298,993 for the year ended December 31, 2024 for the options, respectively.

Related Party Loan

On August 13, 2024, the Company entered into a long-term loan arrangement (the "Oldridge Loan") with Phillip W.

Oldridge ("Mr.

Oldridge") whereby Mr.

Oldridge loaned $ 300,000 to the Company.

The Oldridge Loan carried an interest rate of 8 % and matures on January 1, 2026.

The Oldridge Loan was paid off in full on December 31, 2024.

The amount paid to satisfy the Oldridge Loan was $ 309,000 of which $ 9,000 represented accrued interest on the loan.

Amended and Restated Standby Equity Purchase Agreement ("A&R SEPA")

On October 31, 2024, the Company entered into A&R SEPA with YA II PN, Ltd.

(the "Investor").

The A&R SEPA amends and restates in its entirety the Original SEPA.

Pursuant to the A&R SEPA, except for so long as there is a balance outstanding under the Promissory Notes, the Company has the right, from time to time, until November 1, 2027, to require the Investor to purchase up to $ 25 million of shares of common stock, subject to certain limitations and conditions set forth in the A&R SEPA, by delivering written notice to the Investor.

Pursuant to the A&R SEPA, the Investor advanced to the Company the Pre-Paid Advance of $ 3 million in exchange for the Company’s issuance to the Investor of the Promissory Notes in two tranches, resulting in net proceeds (net of discounts and fees) to the Company of $ 2,635,500 .

The Company received the first tranche of the Pre-Paid Advance in the principal amount of $ 2 million on October 31, 2024 in exchange for the Promissory Note dated October 31, 2024, and the second tranche of the Pre-Paid Advance in the principal amount of $ 1 million on December 17, 2024 in exchange for the Promissory Note dated December 17, 2024.

The Promissory Notes accrue interest on the outstanding principal balance at an annual rate equal to 0 %, which will increase to an annual rate of 18 % upon the occurrence of an Event of Default (as defined in the Promissory Notes) or a Registration Event (as defined in the Promissory Notes) for so long as such event remains uncured.

The Promissory Notes mature on November 13, 2025, which may be extended at the option of the Investor.

The Promissory Notes are convertible at a conversion price equal to the lower of (i) $ 2.1480 per share or (ii) 93 % of the lowest daily volume weighted average price of the Common Stock on Nasdaq as reported by Bloomberg L.P.

during the five consecutive trading days immediately preceding the conversion date (but no lower than the “floor price” then in effect, which is $ 0.3580 per share, subject to adjustment from time to time in accordance with the terms contained in the Promissory Notes).

Pursuant to the terms of the Original SEPA, the Company issued 64,103 shares of common stock to the Investor as a commitment fee.

The Company has elected to measure the Promissory Notes at fair value.

In estimating the fair value of the Note, a lattice model is applied.

The required inputs include the current stock price, the term, the conversion price, the risk-free rate and volatility of the common stock.

The Promissory Notes' fair values are classified as Level 2 under the fair value hierarchy as provided by ASC 820.

As a result of this election, the Company recorded an unrealized loss of $ 251,200 for the $ 2,000,000 Promissory Note and $ 125,600 for the $ 1,000,000 Promissory Note.

The following table depicts the future annual minimum payments of the Company's outstanding debt as of December 31, 2024:

Total payments

Stockholders' Equity

The Company has 5,000,000 authorized preferred stock with $ 0.00001 par value per share on December 31, 2024 and December 31, 2023.

There was no outstanding preferred stock on December 31, 2024 and December 31, 2023.

The Company has 350,000,000 authorized common stock of which 15,171,748 and 15,021,088 were outstanding on December 31, 2023 and December 31, 2022, respectively.

The Company has 350,000,000 authorized common stock of which 19,872,612 and 15,171,748 shares of the Company's common stock were outstanding on December 31, 2024 and December 31, 2023, respectively.

The par value of the Company's common stock is $0.00001.

150,660 shares of the Company's common stock were issued during 2023 to external parties in conjunction with certain services rendered during the period.

During the first quarter of 2024, the Company entered into securities purchase agreements with five private investors with respect to the private placement of an aggregate of 348,889 shares of the Company’s common stock at a price of $ 1.68 per share.

The Company received aggregate gross cash proceeds from this private placement of $ 585,499 .

On May 3, 2024, the Company entered into securities purchase agreements with a private investor with respect to the private placement of an aggregate of 170,774 shares of the Company’s common stock at a price of $ 2.13 per share.

The Company received aggregate gross cash proceeds from this private placement of $ 363,749 .

On September 12, 2024, the Company entered into securities purchase agreements with four private investors with respect to the private placement of an aggregate of 512,047 shares of the Company’s common stock at a price of $ 1.66 per share and warrants to purchase up to an aggregate of 512,047 shares of Common Stock.

The Company received aggregate gross cash proceeds from this private placement (exclusive of proceeds from any future exercise of the warrants) of $ 850,000 .

The warrants have a term of two years and are exercisable at any time after September 16, 2024, at an exercise price of $ 1.66 per share.

The warrants expire on September 11, 2026.

See Note 9 - Stock Warrants.

As disclosed in Note 7 - Debt, the Company entered into the Note with the Holder.

During the third quarter of 2024, the Note was converted into 505,051 shares of common stock.

See further disclosures under the heading, "Convertible Note," in Note 7 - Debt.

As disclosed in Note 3 - Acquisition, the Company acquired Maddox Industries, a provider of government contracting solutions based in Puerto Rico.

As consideration for the Purchased Interests, at the Closing, the Company issued the Stock Consideration to the Seller.

In addition, during the Earnout Period, the Seller was eligible to receive up to six Earnout Payments, with the Earnout Payment for each calendar month being equal to the aggregate amount of gross revenue received by Maddox Industries in respect of any closing receivable, as specified in the Purchase Agreement, during such calendar month, subject to an aggregate limit of $ 1 million with respect to all Earnout Payments payable under the Purchase Agreement.

Stock Warrants

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958,334 $ 20.00 1.35

Outstanding warrants expiring September 11, 2026

512,047 $ 1.66 1.71

Outstanding warrants on December 31, 2024

1,901,631 $ 12.79 1.16

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

December 2020 Warrants

The warrants issued pursuant to that certain Securities Purchase Agreement, dated as of December 24, 2020, that the Company entered into with certain institutional and accredited investors and pursuant to which, among other things, the Company sold and issued, and the investors purchased, shares of the Company’s common stock and related warrants to purchase additional shares of the Company’s common stock in a series of two closings, contain a call provision whereby the Company, after the 13 -month anniversary of the issuance date, and if the volume weighted average price of the common stock for such date exceeds four times the exercise price of the warrants for 20 consecutive trading days, may call the warrants that have not previously been exercised, and the warrant holders have ten trading days within which to exercise before the warrants may be cancelled.

From among these warrants, warrants for 12,833 shares of common stock expired in 2023, warrants for 431,250 shares of common stock will expire on January 28, 2025, and warrants for 958,334 shares of common stock will expire on May 7, 2026.

September 2024 Warrants

See Note 8 - Stockholders' Equity for disclosures related to the warrants issued in conjunction with the private placements on September 12, 2024.

As of December 31, 2024 and 2023 , the outstanding warrants have no intrinsic value.

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588,495 $ 2.10

Options Granted at $3.62 Exercise Price

Options Granted at $9.00 Exercise Price

Options Expired at $9.00 Exercise Price

( 1,111 ) $ 9.00

Canceled/Forfeited

Options Expired at $3.62 Exercise Price

( 2,762 ) $ 3.62

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15,000 $ 2.65 9.29

Outstanding Options at $2.10 Exercise Price

588,495 $ 2.10 9.53

Outstanding at December 31, 2023

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Options Granted during 2024:

Options expired during 2024

( 2,778 ) $ 2.65

Options Granted at $2.11 Exercise Price

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25,000 $ 2.66

Options expired at $9.00 Exercise Price

Options Granted at $2.44 Exercise Price

100,000 $ 2.44

Options expired at $3.62 Exercise Price

Options Granted at $1.50 Exercise Price

800,000 $ 1.50

Options Granted at $2.75 Exercise Price

2,000,000 $ 2.75

Options forfeited at $2.65 Exercise Price

( 7,222 ) $ 2.65

Options Granted at $1.76 Exercise Price

100,000 $ 1.76

Options Granted at $1.49 Exercise Price

20,000 $ 1.49

Options Granted at $2.20 Exercise Price

20,000 $ 2.20

Outstanding at December 31, 2024

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6,750 $ 26.20 3.32

Options Granted at $2.65 Exercise Price

Outstanding options at $2.65 Exercise Price

5,000 $ 2.65 8.30

Options Granted at $2.10 Exercise Price

Outstanding Options at $2.10 Exercise Price

588,495 $ 2.10 8.53

Outstanding at December 31, 2022

Outstanding Options at $2.11 Exercise Price

1,378,364 $ 2.11 9.22

Exercisable at December 31, 2022

Outstanding Options at $2.66 Exercise Price

25,000 $ 2.66 9.12

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

Oldridge, the Company’s Chief Executive Officer, options to purchase 150,000 shares of common stock at an exercise price of $ 2.00 per share and options to purchase 50,000 shares of common stock at an exercise price of $ 2.40 per share.

The options vested immediately and expire on the tenth anniversary of grant.

On January 7, 2022, the Company’s Compensation Committee granted Susan M.

Emry, the Company’s Executive Vice President, options to purchase 100,000 shares of common stock at an exercise price of $ 2.00 per share and options to purchase 40,893 shares of common stock at an exercise price of $ 2.40 per share.

The options vested immediately and expire on the tenth anniversary of grant.

On January 31, 2022, the Company’s Compensation Committee granted Christian S.

Rodich, the Company’s former Chief Financial Officer, options to purchase 2,762 shares of common stock at an exercise price of $ 3.62 per share and options to purchase 1,111 shares of common stock at an exercise price of $ 9.00 per share.

The options vest ratably at 1/60th per month over five years and expire on the tenth anniversary of grant.

These options were forfeited three months after Mr.

Rodich resigned from his employment with the Company.

On March 15, 2022, options to purchase 50,000 shares of common stock were exercised by the former President and CEO of the Company at a price of $ 2.40 per share, resulting in a payment to the Company of $ 120,000 .

Also on March 15, 2022, options to purchase an aggregate of 25,000 shares of common stock with an exercise price of $ 9.00 per share were forfeited by the former executive, as they were not exercised prior to their expiration on March 15, 2022.

On April 19, 2023 options to purchase 15,000 shares of common stock at an exercise price of $ 2.65 per share were granted to two employees.

These options vest ratably over three years.

On July 11, 2023, the Company’s Compensation Committee granted the Board of Directors options to purchase 588,495 shares of common stock at an exercise price of $ 2.10 per share.

The options vested immediately and expire on the tenth anniversary of grant.

Outstanding Options at $2.44 Exercise Price

100,000 $ 2.44 9.15

Outstanding Options at $1.50 Exercise Price

800,000 $ 1.50 2.05

Outstanding Options at $2.75 Exercise Price

2,000,000 $ 2.75 2.1

Outstanding Option at $1.76 Exercise Price

100,000 $ 1.76 9.49

Outstanding Options at $1.49 Exercise Price

20,000 $ 1.49 9.49

Outstanding Options at $2.20 Exercise Price

20,000 $ 2.20 9.48

Outstanding at December 31, 2024

5,641,252 $ 2.59 5.33

On December 31, 2024, stock options for 3,505,418 shares of common stock were exercisable.

On January 18, 2024, in conjunction with the Note disclosed in Note 7 - Debt, the Company issued 800,000 options to purchase 800,000 shares of the Company's common stock with an exercise price of $ 1.50 to the Holder.

See Note 4 - Debt, for additional disclosures related to this issuance.

On February 14, 2024, the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors (the "Board") granted an employee options to purchase 25,000 shares of the Company's common stock at an exercise price of $ 2.66 per share.

The options vest ratably over 36 months and expire on the tenth anniversary of the grant date.

On February 23, 2024, the Compensation Committee granted to Franklin Lim, the Company’s Chief Financial Officer, options to purchase 100,000 shares of the Company's common stock at an exercise price of $ 2.44 per share.

The options vested immediately upon grant and expire on the tenth anniversary of the grant date.

On March 19, 2024, the Compensation Committee granted the non-employee directors and certain executives and consultants options to purchase 1,378,364 shares of common stock at an exercise price of $ 2.11 per share.

The options vested immediately and expire on the tenth anniversary of the grant date.

On April 17, 2024, the Compensation Committee granted to an employee option to purchase 20,000 shares of the Company's common stock at an exercise price of $ 2.20 per share.

The options vest ratably over 36 months and expire on the tenth anniversary of the grant date.

On June 3, 2024, the Compensation Committee granted to an employee option to purchase 20,000 shares of the Company's common stock at an exercise price of $ 1.49 per share.

The options vest ratably over 36 months and expire on the tenth anniversary of the grant date.

On June 17, 2024, the Compensation Committee granted to an employee option to purchase 100,000 shares of the Company's common stock at an exercise price of $ 1.76 per share.

The options vest ratably over 36 months and expire on the tenth anniversary of the grant date.

On February 28, 2024, the Company issued options to an external party to purchase 2,000,000 shares of the Company's common stock at an exercise price of $ 2.75 per share, contingent upon achieving certain sales targets.

On September 30, 2024, the sales targets were not met and therefore, no compensation expense was recorded.

These options expire on February 5, 2027.

The options granted during 2024 were valued using the Black-Scholes option pricing model, resulting in a weighted average fair market value of approximately $ 4.71 per option for the years ended December 31, 2024 .

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Expected dividend yield

As of December 31, 2023 , the outstanding options had $ 0 intrinsic value.

The Company recorded total stock compensation expense of $ 1,095,199 for the year ended December 31, 2023.

As of December 31, 2024 , the outstanding options had no intrinsic value.

Restricted Shares

During the first quarter of 2023, the Company awarded 85,000 restricted shares to a vendor that will vest over a six -month period in exchange for marketing services to be provided over the same period.

As a result, the Company recorded stock compensation expense $ 204,850 during the year ended December 31, 2023.

These restricted shares were issued as common stock in the third quarter of 2023.

During the fourth quarter of 2023, the Company awarded 65,660 restricted shares to a vendor in exchange for marketing services to be provided over a six -month period.

As a result, the Company recorded stock compensation expense $ 22,528 during the year ended December 31, 2023.,

In November 2023, the Company awarded 65,660 restricted shares to a vendor that vested over a six -month period in exchange for marketing services to be provided over the same period.

As a result, the Company recorded stock compensation expense of $ 58,671 during the year ended December 31, 2024.

The Company recorded total stock compensation expense of $ 1,889,353 and $ 1,095,199 for the years ended December 31, 2024 and December 31, 2023, respectively.

Related Party Transactions

The Company has entered into lease agreements with SRI Professional Services, Incorporated (“SRI”), pursuant to which the Company leases equipment used in connection with the operation of its business (the “SRI Equipment Leases”).

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, serves as an executive officer and a member of the board of directors of SRI.

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, serves as an executive officer and a member of the board of directors of SRI.

The SRI Equipment Leases provide for the leasing of two vehicles that commenced on January 1, 2020 and the combined rent under such leases is $ 3,880 per month, and a separate SRI Equipment Lease provides for a trailer lease that commenced on December 1, 2019, under which the rent is $ 3,891 per month.

The total monthly payment obligation of the Company under the SRI Equipment Leases is $ 7,771 .

As a result of these agreements, the Company recorded rent expense of $ 93,247 for the year ended December 31, 2023.

The Company has entered into a cancelable month-to-month lease with SRI (the “SRI Office Lease”), pursuant to which EVTDS has leased office and warehouse space in the Porterville, California area for a term that commenced on January 1, 2020.

The monthly rent under the SRI Office Lease is $ 2,730 .

The Company recorded rent expense of $ 13,650 for the year ended December 31, 2023 in connection with this agreement.

As a result of the SRI Equipment Leases, the Company recorded rent expense of $ 93,248 for the year ended December 31, 2024, respectively.

The Company has entered into a commercial lease agreement (the “ABCI Office Lease”) with Alpha Bravo Charlie, Inc.

1 unchanged sentence

The monthly rent for this facility is approximately $ 5,000 .

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

The Company recorded rent expense of $ 68,400 for the year ended December 31, 2023 in connection with this agreement.

The rent included for a short period in 2023, payments of $ 8,400 for hangar facilities.

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board is a director of ABCI.

The Company recorded rent expense of $ 60,000 for the year ended December 31, 2024, respectively, in connection with the ABCI Office Lease.

As disclosed in Note 3 - Acquisition, the Company recorded a $ 1,000,000 receivable that was due from Maddox Defense, an entity of which Jason Maddox, the President of the Company, is the sole stockholder.

During 2023 , the Company reimbursed Phillip W.

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, $ 81,269 for use of the CEO's personal airplane for certain business-related activities.

During the second quarter of 2023, the Company purchased a vehicle from Phillip W.

Oldridge for $ 45,216 , which remains unpaid as of December 31, 2023.to

The Company also paid 42Motorsports LTD $ 150,000 for engineering consulting services, the owner of which is a sibling of the Company's Chief Executive Officer and Chairman of the Board.

The Company incurred $ 150,000 of costs related to engineering consulting services from 42Motorsports LTD, the owner of which is a sibling of the Company's Chief Executive Officer and Chairman of the Board for the year ended December 31, 2024, respectively.

See Note 7 - Debt for disclosures related to the Oldridge Loan, a related party loan that was transacted during the third quarter of 2024 and paid off in the fourth quarter of 2024.

Other Agreements

1 unchanged sentence

Oldridge (the “Oldridge Agreement”), its Chief Executive Officer, and with Susan M.

Emry (the “Emry Agreement”), its Executive Vice President.

Emry (the “Emry Agreement”), its then Executive Vice President.

According to the Oldridge Agreement, effective as of March 1, 2021, Mr.

2 unchanged sentences

Under the Oldridge Agreement, Mr.

Oldridge will also receive an amount equal to five percent of the net income of the Company on an annual basis and will be eligible for a bonus at the sole discretion of the Company’s Board of Directors (the “Board”).

Oldridge will also receive an amount equal to 5% of the net income of the Company on an annual basis and will be eligible for a bonus at the sole discretion of the Board.

The Oldridge Agreement also provides for an automobile monthly allowance of $ 1,500 .

2 unchanged sentences

Oldridge will be entitled to receive (i) one -year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Oldridge Agreement, (iii) any bonus that would have been payable within the twelve months following the date of termination, and (iv) the value of any accrued and unused paid time off as of the date of termination.

There are no future minimum payments under the terms of the Oldridge Agreement as Mr.

Oldridge has the right to terminate the Oldridge Agreement without any contractual payments other than what has been stated in the Oldridge Agreement.

According to the Emry Agreement, effective on January 1, 2022, Mrs.

Emry will receive an annual base salary of $ 200,000 and will be eligible for a bonus at the sole discretion of the Board.

Emry will also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans.

Emry’s employment shall continue until terminated in accordance with the Emry Agreement.

Emry is terminated without cause or if she terminates her employment for good reason, Mrs.

Emry will be entitled to receive (i) one -year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Emry Agreement, and (iii) the value of any accrued and unused paid time off as of the date of termination.

There are no future minimum payments under the terms of both agreements as each party has a right to terminate the agreement without any contractual payments other than what has been stated in their respective contracts.

In March 2023, the Company entered into an agreement with Berthaphil to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines.

Emry would receive an annual base salary of $ 200,000 and was eligible for a bonus at the sole discretion of the Board.

Emry would also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans.

The Emry Agreement provided that Mrs.

Emry’s employment would continue until terminated in accordance with the Emry Agreement.

Emry was terminated without cause or if she terminated her employment for good reason, Mrs.

Emry was entitled to receive (i) one -year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Emry Agreement, and (iii) the value of any accrued and unused paid time off as of the date of termination.

Emry terminated her employment with the Company on October 15, 2024.

On March 28, 2023, the Company entered into an agreement with Berthaphil, Inc.

("Berthaphil") to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines (the "Berthaphil Sublease").

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.

See Note 13 - Leases for further disclosures.

The Company had originally intended to use the leased space as a production facility as it seeks to expand its business presence in that region and the United States.

However, in December 2024, the Company decided not to use the leased space for its original purpose.

See Note 14 - Leases for further information.

On March 18, 2024, the Company entered into a Sale and Purchase Agreement (the "PlugD Agreement") with PlugD Commercial Electric Leasing and Rentals Inc.

("PlugD"), a Texas-based commercial electric vehicles leasing company.

Under the terms of the PlugD Agreement, the Company will deliver 200 electric high roof vans and trucks to PlugD for a total of approximately $ 16.2 million.

The sale is expected to take place over the next 13 months.

Contingencies

3 unchanged sentences

On December 17, 2019, GreenPower Motor Company Inc., a public company incorporated under the laws of British Columbia (“GreenPower”), of which Phillip W.

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, and a member of its board of directors, previously served as a senior officer and a member of its board of directors, filed a notice of civil claim, captioned GreenPower Motor Company Inc.

Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, previously served as a senior officer and a member of its board of directors, filed a notice of civil claim, captioned GreenPower Motor Company Inc.

Phillip Oldridge et al., Action No.

S- 1914285, in the Supreme Court of British Columbia, against Phillip Oldridge, his trust, EVT and certain other companies affiliated therewith.

S- 1914285, in the Supreme Court of British Columbia, against Phillip Oldridge, his trust, Envirotech Drive Systems, Inc.

and certain other companies affiliated therewith.

On February 2, 2020, the Company and the other companies affiliated therewith named in the notice of civil claim filed a response to the civil claim in which they denied certain of the allegations.

Fact discovery, through document disclosure and examinations for discoveries, in this matter remain ongoing.

We believe that the lawsuit is without merit and intend to vigorously defend the action.

Fact discovery, through document disclosure and examinations for discoveries, in this matter remains ongoing.

The Company believes it has meritorious defenses against GreenPower's claims and intends to vigorously defend itself against those claims.

On or about July 18, 2021, GreenPower and GP GreenPower Industries Inc.

(collectively “the GreenPower entities”), filed a counterclaim against David Oldridge, Phillip Oldridge, the Company and other companies in Supreme Court of British Columbia Action No.

The pleadings in this lawsuit have not closed and the Company intends to vigorously defend the counterclaim.

The pleadings in this lawsuit have not closed and the Company intends to vigorously defend itself against the counterclaim.

On February 8, 2022, GreenPower Motor Company, Inc., a Delaware corporation, and GreenPower Motor Company Inc., a Canadian corporation, filed a complaint captioned GreenPower Motor Company, Inc.

6 unchanged sentences

GreenPower case will not proceed while Canadian litigation is pending.

The Company believes that the lawsuit is without merit and intend to vigorously defend the action.

The Company believes that it has meritorious defenses against the Greenpower entities' claims and intends to vigorously defend itself against such claims.

Operating leases

2 unchanged sentences

Although these leases have terms that are either month-to-month or terms that are one year or less (with renewal options), the Company concluded in the fourth quarter of 2023 that the term renewal options are reasonably certain to be exercised.

As a result of changes in certain circumstances related to some of the Company's short-term leases, the Company was required to classify such leases as operating leases in accordance with the provisions of ASC 842 - Leases.

Therefore, the Company recognized operating lease liabilities with corresponding Right-Of-Use ("ROU") assets based on the present value of the minimum rental payments of such leases during the fourth quarter of 2023.

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.

The term of the lease is two years and two months with a turnover date of July 1, 2023 ( "turnover date") and a rental commencement of September 1, 2023.

However, the warehouse building was not available for use to the Company till the early part of the fourth quarter of 2023.

Therefore, the commencement date is deferred until the fourth quarter of 2023, which is when the Company was given access to use the warehouse building.

There is a grace period of two months for rental payments starting from the turnover date.

Therefore, the Company recognized operating lease liabilities with corresponding Right-of-Use ("ROU") assets based on the present value of the minimum rental payments of such leases.

On March 28, 2023, the Company entered into the Berthaphil Sublease with Berthaphil to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines.

The term of the Berthaphil Sublease is two years and two months with a turnover date of July 1, 2023 ( the "turnover date") and a rental commencement of September 1, 2023.

However, the warehouse building was not available for use to the Company until the early part of the fourth quarter of 2023.

Therefore, the commencement date was deferred until the fourth quarter of 2023, which is when the Company was given access to use the warehouse building.

There was a grace period of two months for rental payments starting from the turnover date.

The monthly rent for the first year is $ 15,000 , escalating to $ 15,750 for the second year and $ 16,530 for the remaining term.

In addition to the monthly rent, the Company is required to pay an additional 5 % of the monthly rent as common area maintenance costs.

The sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions.

The Company intends to use the leased space as a production facility as it seeks to expand its business presence in the region and the United States.

The Company accounted for this lease as an operating lease under ASC Topic 842 and recorded an operating lease liability and a corresponding ROU asset for this lease.

The Berthaphil Sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions.

The Company intended to use the leased space as a production facility as it seeked to expand its business presence in the region and the United States.

The Company accounted for this lease as an operating lease under ASC 842 and recorded an operating lease liability and a corresponding ROU asset for this lease.

As disclosed in Note 12 - Commitments, the Company decided to not use this facility for its original intended purpose.

As a result, the Company recorded an impairment of $ 129,062 with respect the corresponding ROU asset.

On July 1, 2024, the Company entered into a month-to-month lease contract with Southern Management Corporation to lease a residence in Osceola, Arkansas for the purpose of housing certain of the Company's employees.

The monthly lease cost is $ 3,000 .

This lease is treated as a short-term lease expense.

On August 26, 2024, the Company entered into a one -year lease contract with 120 Park SD, LLC to lease a location in Manalapan, New Jersey with the purpose of servicing the Company's New Jersey customers.

The monthly lease cost is $ 2,900 and at the end of the one -year lease term, the lease converts into a month-to-month arrangement.

This lease is treated as a short-term lease expense.

The Company's lease agreements do not provide an implicit borrowing rate.

1 unchanged sentence

The Company benchmarked itself against other companies of similar credit ratings and comparable credit quality and derived an incremental borrowing rate to discount each of its lease liabilities based on the remaining lease terms.

ROU assets at December 31, 2023 were $ 538,932 .

Short-term and long-term operating lease liabilities were $ 291,263 and $ 235,625 at December 31, 2023, respectively.

As required by ASC 842, in conjunction with the Corona, California lease, the Company recognized an operating liability with a corresponding ROU asset of the same amounts based on the present value of the minimum rental payments of such lease.

As of March 31, 2022, the ROU asset and related liability accounts were written off against each other due to the Company leaving the Corona California office and warehouse effective April 1, 2022 and to Masters taking over the remaining lease obligation for the facility.

ROU assets at December 31, 2024 and December 31, 2023 were $ 108,508 and $ 538,932 , respectively.

Short-term operating lease liabilities were $ 235,625 and $ 291,263 at December 31, 2024 and December 31, 2023, respectively.

Long-term operating lease liabilities were $ 0 and $ 235,625 at December 31, 2024 and December 31, 2023, respectively.

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

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Subsequent Events

The Company evaluates subsequent events through March 28, 2024, which is the date the financial statements were issued or available to be issued.

The Company evaluates subsequent events through April 15, 2025, which is the date the financial statements were issued or available to be issued.

There are two types of subsequent events:

( 1 ) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and ( 2 ) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

first quarter of

2024, the Company issued

348,889 shares of its common stock for proceeds of

$ 585,500 to various parties.

The weighted average issue price per share of common stock sold was approximately

The proceeds will be used to fund the Company's operations.

The Company also entered into a convertible note agreement for

$ 1,000,000 with an unrelated

third -party investor.

The origination fee of this note was

The maturity date of the note is the earlier of the next S-

September 30, 2024.

The investor is entitled to convert the note into common stock at the greater of

$ 1.50 per share or at

90 % of the share price on the maturity date.

The investor also has a security interest in the Company's assets in the event of non-payment of the debt.

March 18, 2024, the Company entered into a Sale and Purchase Agreement (the "Agreement") with PlugD Commercial Electric Leasing and Rentals Inc.

("PlugD"), a Texas-based commercial electric vehicle leasing company.

Under the terms of the Agreement, the Company will deliver

200 electric high roof vans and trucks to PlugD for a total of approximately

$ 16.2 million.

The sale will take place over the next

On February 12, 2025, the Company announced the relocation of its corporate headquarters and the establishment of a new 86,000 square foot facility in Houston, Texas.

This strategic move reinforces the Company's commitment to expanding U.S.

manufacturing, strengthening fleet services, and supporting the growing demand for commercial electric vehicles.

The Company plans to open its new corporate headquarters and manufacturing facility in 2025.

As a result of this relocation, the Company may incur additional capital expenditure and one -time relocation costs, which at the time of filing, are being estimated.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data