What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-19 compared with 2021-05-25 · 58 added, 38 removed, 168 unchanged (36% of the section changed)

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

For the three months ended March 31, 2021 and 2020, our net losses were $658,510 and $97,260, respectively.

As discussed in Item 1, Notes 2 and 3 to the unaudited consolidated financial statements contained in this quarterly report on Form 10-Q, as a result of the reverse acquisition closing of the Merger on March 15, 2021, the historical results discussed in this section of the quarterly report on Form 10-Q are those of Envirotech Drive Systems, Inc.

(“EVTDS”) as of and for the period ended March 31, 2020 and are the results for EVTDS as of and for the three months ended March 31, 2021, including the balance sheet accounts of ADOMANI, Inc.

at March 31, 2021 and the results of operations of ADOMANI, Inc.

for the period March 16, 2021 through March 31, 2021.

For the three and six months ended June 30, 2021 and 2020, our net losses were $893,079 and $1,551,589, respectively.

As discussed in Item 1, Notes 2 and 3 to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q, as a result of the closing of the Merger on March 15, 2021, the historical results discussed in this section of the Quarterly Report on Form 10-Q are those of Envirotech Drive Systems, Inc.

(“EVTDS”) as of and for the periods ended June 30, 2020 and are the results for EVTDS as of and for the three and six months ended June 30, 2021, including the balance sheet accounts of Envirotech Vehicles, Inc.

at June 30, 2021 and the results of operations of Envirotech Vehicles, Inc.

for the period March 16, 2021 through June 30, 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.

Factors Affecting Our Performance

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design, develop and manufacture our commercial fleet vehicles and their components;

our sales and marketing to acquire new customers;

increase our sales and marketing to acquire new customers;

and increase our general and administrative functions to support our growing operations.

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Selling, general and administrative expenses include all corporate and administrative functions that support our company, including personnel-related expense and stock-based compensation costs;

costs related to investor relations

costs related to investor relations activities;

warranty costs, including product recall and customer satisfaction program costs;

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Results of Operations

The following discussion compares operating data for the three months ended March 31, 2021 to the corresponding period ended March 31, 2020:

Sales were $470,793 and $86,735 for the three months ended March 31, 2021 and 2020, respectively.

Sales for the three months ended March 31, 2021 consisted of four cargo vans sold to ADOMANI, Inc.

prior to the closing of the Merger, a box truck sold to the Pittsburg, California Unified School District, and maintenance and inspection services provided.

The following discussion compares operating data for the three and six months ended June 30, 2021 to the corresponding periods ended June 30, 2020:

Sales were $188,266 and $2,000 for the three months ended June 30, 2021 and 2020, respectively, and $659,059 and $88,735 for the six months ended June 30,2021 and 2020, respectively, Sales for the three and six months ended June 30, 2021 consisted of four cargo vans sold to ADOMANI, Inc.

prior to the closing of the Merger, a box truck sold to the Pittsburg, California Unified School District, a complete cargo van and a cab and chassis truck sold to two different factory authorized representatives, and maintenance and inspection services provided.

Cost of Sales

Cost of sales were $313,434 and $73,310 for the three months ended March 31, 2021 and 2020, respectively.

Cost of sales for the three months ended March 31, 2021 consisted of the cost related to the sale of the vehicles sold as described above and the costs of providing maintenance and inspection services.

Cost of sales were $147,932 and $250 for the three months ended June 30, 2021 and 2020, respectively, and $461,366 and $73,560 for the six months ended June 30, 2021, respectively.

Cost of sales for the three and six months ended June 30, 2021 consisted of the costs related to the sale of the vehicles sold as described above and the costs of providing maintenance and inspection services.

General and Administrative Expenses

General and administrative expenses were $585,903 and $88,185 for the three months ended March 31, 2021 and 2020, respectively, an increase of $497,718.

The increase was related primarily to legal and professional fees of $388,487, of which $274,073 related to the Merger.

Increases of $52,854 for rent expense, $27,297 in payroll related expenses, $19,567 in insurance expenses, and $9,513 in other general and administrative expenses accounted for the remainder of the increase.

General and administrative expenses were $836,246 and $78,605 for the three months ended June 30, 2021 and 2020, respectively, an increase of $757,641.

The increase was related primarily to payroll-related expenses of $222,875;

to legal and professional fees of $157,373;

to rent of $87,628;

to insurance of $81,460;

to investor relations expenses of $43,110;

to advertising and marketing costs of $29,706;

to travel costs of $27,488;

to depreciation of $27,379, and to $ 80,622 in other general and administrative expenses.

General and administrative expenses were $ 1,422,149 and $168,791 for the six months ended June 3 0 , 202 1 and 20 20, respectively, an increase of $1,253,358 .

The increase was related primarily to legal and professional fees of $445,302 , of which approximately $290,000 related to the M erger .

Increases in payroll - related expenses of $250,172;

rent of $ 134,897 ;

insurance of $101,027;

accounting services of $100,842;

investor relations expenses of $44,478;

depreciation of $35,376 ;

and $ 141,264 in other general and administrative expenses accounted for the remainder of the increase.

Consulting Expenses

Consulting expenses were $10,250 and $22,500 for the three months ended March 31, 2021 and 2020, respectively.

This decrease was due primarily to expenses incurred during the three months ended March 31, 2020 for an office move that were not incurred in the current year period.

Consulting expenses were $95,108 and $16,800 for the three months ended June 30, 2021 and 2020, respectively, and were $105,358 and $37,300 for the six months ended June 30, 2021 and 2020, respectively.

This increase was due primarily to payments to temporary professional firms to support operations and accounting activities of the Company due to vacant internal staff positions.

Liquidity and Capital Resources

As discussed above and in Notes 3 and 13 to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q, ADOMANI, Inc.

As discussed above and in Note 3 to the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q, ADOMANI, Inc.

had approximately $3.4 million in cash and cash equivalents at the Merger closing date, primarily the result of the approximately $5.3 million net proceeds from the December 2020 closing of the Financing discussed below.

EVTDS delivered $5 million cash at the Merger closing.

As of March 31, 2021, we had cash and cash equivalents of $8,513,416.

We believe that our existing cash and cash equivalents, combined with the net cash proceeds, net of offering costs, of approximately $16.3 million received May 7, 2021 from the second closing of the Financing discussed below, will be sufficient to fund our operations during the next eighteen months and beyond.

As of June 30, 2021, we had cash and cash equivalents of $8,542,199 and marketable securities of $12,010,190, a combined total of $20,552,389 We believe that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations during the next eighteen 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.

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Options to Purchase Common Stock

Because all outstanding unvested options to purchase ADOMANI, Inc.’s common stock became fully vested upon the closing of the Merger, the Company has 12,992,857 fully vested options outstanding as of March 31, 2021.

Because all outstanding unvested options to purchase ADOMANI, Inc.’s common stock became fully vested upon the closing of the Merger, the Company has 12,398,571 fully vested options outstanding as of June 30,2021.

See Notes 2, 3 and 8 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of March 31, 2021, the 12,992,857 vested options were comprised of options to purchase 6,000,000 shares with an exercise price of $0.10 per share;

As of June 30, 2021, the 12,398, 571 vested options were comprised of options to purchase 5,000,000 shares with an exercise price of $0.10 per share;

options to purchase 1,358,571 shares with an exercise price of $0.12 per share;

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There can be no assurance, however, that any such options will be exercised.

See Notes 2, 3, 8 and 13 to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Credit Facilities

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

The line is secured

by the cash and cash equivalents maintained by the Company in its Morgan Stanley accounts, which was approximately $ 5.7 million as of March 31, 20 21 .

The line is secured by the cash and cash equivalents maintained by the Company in its Morgan Stanley accounts, which was approximately $5.7 million as of March 31, 2021.

Borrowings under the line may not exceed 95% of such cash, cash equivalents, and marketable securities balances.

The maximum amount the Company could borrow at March 31, 20 21 , was approximately $ 5.4 million ;

The maximum amount the Company could borrow at June 30, 2021, was approximately $17.1 million;

there was no principal amount outstanding at that date.

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We do, however, purchase equipment necessary to conduct our operations on an as needed basis.

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020:

Three Months Ended

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2021 and 2020:

Six Months Ended

Consolidated Statements of Cash Flow Data:

Net cash used in operating activities

Net cash provided by investing activities

Net cash used in investing activities

Net cash provided by financing activities

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These numbers are further impacted by adjustments for changes in other balance sheet accounts.

Net cash used in operating activities increased by $2,680,505 to $2,895,880 for the three months ended March 31, 2021 compared to net cash used in operating activities of $215,375 for the three months ended March 31, 2020.

The increase in net cash used in operating activities was due primarily to our net loss increasing to $658,510 over the net loss of $97,260 for the three months ended March 31, 2020, or by $561,250 and to a net increase in operating assets and liabilities that required the use of $2,245,366 of cash.

Net cash used in operating activities increased by $6,492,050 to $6,817,467 for the six months ended June 30, 2021 compared to net cash used in operating activities of $325,417 for the six months ended June 30, 2020.

The increase in net cash used in operating activities was due primarily to our net loss increasing to $1,551,589 over the net loss of $183,915 for the six months ended June 30, 2020, or by $1,367,674 and to a net increase in operating assets and liabilities that required the use of $5,291,064 of cash.

Approximately $2,877,875 of this amount related to deposits made to our supplier related to the order of new vehicles for inventory.

$1,208,657 of the use of cash for operating assets related to purchases of inventory that were received during the six months ended June 30, 2021.

The remaining $1,204,532 related primarily to cash used to reduce accounts payable and accrued liabilities, which was partially offset by changes in the other balance sheet accounts.

We expect cash used in operating activities to fluctuate significantly in future periods as a result of a number of factors, some of which are outside of our control, including, among others:

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Investing Activities

Net cash provided by investing activities during the three months ended March 31, 2021 was $3,373,332 as compared to no cash provided or used in investing activities during the three months ended March 31, 2020.

The increase in net cash provided by investing activities during the three months ended March 31, 2021 is due entirely to the acquisition of cash of this amount in the Merger.

Net cash used by investing activities during the six months ended June 30, 2021 was $8,809,744 as compared to $30,166 used by investing activities during the six months ended June 30, 2020.

The $8,779,578 increase in net cash used by investing activities during the six months ended June 30, 2021 is due to the $12.0 million purchase of marketable securities, reduced by the $3.4 million of cash acquired in the Merger and by capital expenditures of $183,076.

Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2021 was $6,105,832 as compared to no cash provided by or used in financing activities during the three months ended March 31, 2020.

Net cash provided

by financing activities during the three months ended March 31, 202 1 consisted of $ 6,415, 1 10 proceeds from the issuance of common stock by EVTDS, reduced by offering costs of $156,443 and further reduced by EVTDS repaying its SBA EIDL loan and accrued interest in the amount of $152,835.

Net cash provided by financing activities during the six months ended June 30, 2021 was $22,239,279 as compared to $49,990 provided by financing activities during the six months ended June 30, 2020.

Net cash provided by financing activities during the six months ended June 30, 2021 consisted of $6,415,110 proceeds from the issuance of common stock by EVTDS, and $16,322,049 proceeds from the issuance of common stock by the Company in May, 2021 when the second tranche of the Financing discussed above closed.

The combined financing proceeds of $22,737,159 were reduced by offering costs of $188,015 and were further reduced by both EVTDS and ADOMANI, Inc.

repaying their SBA EIDL loans and accrued interest in the amounts of $152,835 and $157,030, respectively.

Contractual Obligations

Except as set forth below, during the three months ended March 31, 2021, there were no material changes in our contractual obligations and commitments as described in the audited financial statements of Envirotech Drive Systems, Inc.

Except as set forth below, during the six months ended June 30, 2021, there were no material changes in our contractual obligations and commitments as described in the audited financial statements of Envirotech Drive Systems, Inc.

for the year ended December 31, 2020 included in ADOMANI, Inc.’s Current Report on Form 8-K/A filed with the SEC on April 22, 2021, or as described in Part II, Item 7 of the ADOMANI, Inc.

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Awards granted to directors are treated on the same basis as awards granted to employees.

Because all outstanding unvested options to purchase common stock became fully vested upon the Merger close and change in control, and because there were no new stock options granted between March 16, 2021 and March 31, 2021, no stock-based compensation is recorded in the unaudited consolidated financial statements for the three months ended March 31, 2021 included in this Quarterly Report on Form 10-Q.

Because all outstanding unvested options to purchase common stock became fully vested upon the Merger close and change in control, and

because there were no new stock options granted between March 16, 2021 and June 30 , 2021, no stock-based compensation is recorded in the unaudited consolidated financial statements for the three and six months ended June 30 , 2021 included in this Quarterly Report on Form 10-Q.

Fair Value Measurement

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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-Q

Item 2. Management’s Discussion and Analysis