Company Quick10K Filing
Adomani
Price0.30 EPS-0
Shares73 P/E-6
MCap22 P/FCF-7
Net Debt-3 EBIT-4
TEV19 TEV/EBIT-5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-14
10-Q 2020-03-31 Filed 2020-04-30
10-K 2019-12-31 Filed 2020-03-10
10-Q 2019-09-30 Filed 2019-10-25
10-Q 2019-06-30 Filed 2019-07-29
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-10-24
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-12
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-06-19
8-K 2020-09-02 Officers, Other Events, Exhibits
8-K 2020-08-13 Earnings, Exhibits
8-K 2020-05-17
8-K 2020-05-06
8-K 2020-05-03
8-K 2020-04-30
8-K 2020-04-09
8-K 2020-03-10
8-K 2019-10-23
8-K 2019-09-16
8-K 2019-08-13
8-K 2019-07-24
8-K 2019-05-08
8-K 2019-05-02
8-K 2019-03-28
8-K 2019-02-13
8-K 2018-10-25
8-K 2018-08-16
8-K 2018-08-02
8-K 2018-06-07
8-K 2018-06-04
8-K 2018-05-16
8-K 2018-05-09
8-K 2018-03-06
8-K 2018-02-26
8-K 2018-01-09
8-K 2018-01-05

ADOM 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 adom-ex101_46.htm
EX-10.2 adom-ex102_47.htm
EX-10.3 adom-ex103_48.htm
EX-10.4 adom-ex104_49.htm
EX-31.1 adom-ex311_9.htm
EX-31.2 adom-ex312_6.htm
EX-32.1 adom-ex321_8.htm
EX-32.2 adom-ex322_7.htm

Adomani Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
0.10.10.0-0.0-0.1-0.12017201820192020
Assets, Equity
0.10.10.0-0.0-0.1-0.12017201820192020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12017201820192020
Ops, Inv, Fin

10-Q 1 adom-10q_20200630.htm Q2 2020 10-Q adom-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

or

 

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

 

For the transition period from ___________ to ___________

 

Commission File Number: 001-38078

 

ADOMANI, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-0774222

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

4740 Green River Road, Suite 106

Corona, CA 92880

(Address of principal executive offices, including zip code)

(951) 407-9860

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

 

ADOM

 

OTC Markets Group Inc.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

The number of shares outstanding of the registrant’s common stock as of August 3, 2020 was 73,596,960.  

 

 

 


ADOMANI, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

 

 

 

PAGE

 

 

 

Part I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements:

1

 

 

 

 

Unaudited Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

1

 

 

 

 

Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019

2

 

 

 

 

Unaudited Consolidated Statement of Stockholders’ Equity for the Six Months Ended June 30, 2020 and 2019

3

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

4

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

5

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

 

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

24

 

 

 

Item 4. Controls and Procedures

24

 

 

 

Part II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

25

 

 

 

Item 1A. Risk Factors

27

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

27

 

 

 

Item 3. Defaults Upon Senior Securities

27

 

 

 

Item 4. Mine Safety Disclosures

27

 

 

 

Item 5. Other Information

28

 

 

 

Item 6. Exhibits

29

 

 

 

Signatures

30

 

 

 


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking statements” that involve substantial risks and uncertainties. Forward-looking statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will” and “would” or the negatives of these terms or other comparable terminology.

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

Our ability to continue as a going concern.

Our ability to resolve the funding backlog related to and created by the California Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”) staff that has to-date prevented us and our customers from accessing the funds, creating a significant delay in our ability to deliver products and to obtain new orders.

Our ability to generate demand for our zero-emission commercial fleet vehicles, re-power conversion kits, and drivetrain systems in order to generate revenue.

Our ability to raise capital from external sources for the financing of our operations on terms that are acceptable to us, which, in large part, will depend on our ability to mitigate the impact of certain anti-dilution and other rights contained in our outstanding warrants that have, to date, restricted our ability to obtain such funding.

Our ability to effectively execute our business plan.

Our ability and our suppliers’ ability to scale our zero-emission products assembling and converting processes effectively and quickly from low volume production to high volume production.

Our ability to manage our expansion, growth and operating expenses and reduce and adequately control the costs and expenses associated with operating our business.

Our ability to obtain, retain and grow our customers.

Our ability to enter into, sustain and renew strategic relationships on favorable terms.

Our ability to achieve and sustain profitability.

Our ability to evaluate and measure our current business and future prospects.

Our ability to compete and succeed in a highly competitive and evolving industry.

Our ability to respond and adapt to changes in electric vehicle technology.

Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand.

Our ability to respond and adapt to unexpected legal and regulatory changes resulting from the ongoing COVID-19 pandemic, such as shelter-in-place orders, travel, social distancing and quarantine policies, boycotts, curtailment of trade, and other business restrictions affecting our ability to assemble and sell our products, and provide our services.

You should read this Quarterly Report and the documents that we reference elsewhere in this Quarterly Report completely and with the understanding that our actual results may differ materially from what we expect as expressed or implied by our forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in greater detail, particularly in Part I, Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) and in Part II, Item 1A (Risk Factors) of this Quarterly Report. In light of the significant risks and uncertainties to which our forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report regardless of the time of delivery of this Quarterly Report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report.

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

 

 


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

884

 

 

$

4,432

 

Marketable securities

 

 

 

 

 

2,771

 

Accounts receivable

 

 

9

 

 

 

661

 

Notes receivable, net

 

 

 

 

 

40

 

Inventory, net

 

 

431

 

 

 

494

 

Prepaid expenses

 

 

945

 

 

 

1,197

 

Other current assets

 

 

81

 

 

 

41

 

Total current assets

 

 

2,350

 

 

 

9,636

 

Property and equipment, net

 

 

122

 

 

 

112

 

Other non-current assets

 

 

783

 

 

 

569

 

Total assets

 

$

3,255

 

 

$

10,317

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

610

 

 

$

418

 

Accrued liabilities

 

 

732

 

 

 

649

 

Notes payable, net

 

 

115

 

 

 

 

Line of credit

 

 

 

 

 

5,820

 

Total current liabilities

 

 

1,457

 

 

 

6,887

 

Long-term liabilities

 

 

 

 

 

 

 

 

Notes payable, net

 

 

297

 

 

 

 

Other non-current liabilities

 

 

305

 

 

 

148

 

Total liabilities

 

 

2,059

 

 

 

7,035

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, 5,000,000 authorized $0.00001 par value, none issued and

   outstanding as of June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, 350,000,000 authorized $0.00001 par value, 73,508,069 and

   73,125,538 issued and outstanding as of June 30, 2020

   and December 31, 2019, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

62,746

 

 

 

62,459

 

Accumulated deficit

 

 

(61,551

)

 

 

(59,178

)

Total stockholders' equity

 

 

1,196

 

 

 

3,282

 

Total liabilities and stockholders' equity

 

$

3,255

 

 

$

10,317

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

1


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30,

2020

 

 

June 30,

2019

 

 

June 30,

2020

 

 

June 30,

2019

 

Sales

 

$

130

 

 

$

4,388

 

 

$

413

 

 

$

4,808

 

Cost of sales

 

 

83

 

 

 

4,063

 

 

 

163

 

 

 

4,454

 

Gross profit

 

 

47

 

 

 

325

 

 

 

250

 

 

 

354

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,102

 

 

 

1,461

 

 

 

2,532

 

 

 

2,858

 

Consulting

 

 

58

 

 

 

77

 

 

 

102

 

 

 

154

 

Research and development

 

 

 

 

 

103

 

 

 

 

 

 

148

 

Total operating expenses, net

 

 

1,160

 

 

 

1,641

 

 

 

2,634

 

 

 

3,160

 

Loss from operations

 

 

(1,113

)

 

 

(1,316

)

 

 

(2,384

)

 

 

(2,806

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

7

 

 

 

2

 

 

 

15

 

 

 

28

 

Other income (expense)

 

 

1

 

 

 

20

 

 

 

(4

)

 

 

35

 

Total other income

 

 

8

 

 

 

22

 

 

 

11

 

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(1,105

)

 

 

(1,294

)

 

 

(2,373

)

 

 

(2,743

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,105

)

 

$

(1,294

)

 

$

(2,373

)

 

$

(2,743

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.02

)

 

$

(0.02

)

 

$

(0.03

)

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted shares used in the computation of net loss per

   share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

73,387,815

 

 

 

72,860,560

 

 

 

73,289,623

 

 

 

72,829,372

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2018

 

 

72,732,292

 

 

$

1

 

 

$

61,628

 

 

$

(54,025

)

 

$

7,604

 

Common stock issued for services

 

 

30,161

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Stock based compensation

 

 

 

 

 

 

 

 

253

 

 

 

 

 

 

253

 

Common stock issued for stock options

   exercised

 

 

71,084

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(1,449

)

 

 

(1,449

)

Balance, March 31, 2019

 

 

72,833,537

 

 

$

1

 

 

$

61,898

 

 

$

(55,474

)

 

$

6,425

 

Common stock issued for services

 

 

42,649

 

 

 

 

 

 

15

 

 

 

 

 

 

15

 

Stock based compensation

 

 

 

 

 

 

 

 

275

 

 

 

 

 

 

275

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,294

)

 

 

(1,294

)

Balance, June 30, 2019

 

 

72,876,186

 

 

$

1

 

 

$

62,188

 

 

$

(56,768

)

 

$

5,421

 

Common stock issued for services

 

 

107,854

 

 

 

 

 

 

15

 

 

 

 

 

 

15

 

Stock based compensation

 

 

 

 

 

 

 

 

202

 

 

 

 

 

 

202

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,218

)

 

 

(1,218

)

Balance, September 30, 2019

 

 

72,984,040

 

 

$

1

 

 

$

62,405

 

 

$

(57,986

)

 

$

4,420

 

Common stock issued for services

 

 

141,498

 

 

 

 

 

 

15

 

 

 

 

 

 

 

15

 

Stock based compensation

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

 

39

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,192

)

 

 

(1,192

)

Balance, December 31, 2019

 

 

73,125,538

 

 

$

1

 

 

$

62,459

 

 

$

(59,178

)

 

$

3,282

 

Common stock issued for services

 

 

104,824

 

 

 

 

 

 

15

 

 

 

 

 

 

 

15

 

Stock based compensation

 

 

 

 

 

 

 

 

 

200

 

 

 

 

 

 

 

200

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,268

)

 

 

(1,268

)

Balance, March 31, 2020

 

 

73,230,362

 

 

$

1

 

 

$

62,674

 

 

$

(60,446

)

 

$

2,229

 

Common stock issued for services

 

 

277,707

 

 

 

 

 

 

26

 

 

 

 

 

 

 

26

 

Stock based compensation

 

 

 

 

 

 

 

 

 

46

 

 

 

 

 

 

 

46

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,105

)

 

 

(1,105

)

Balance, June 30, 2020

 

 

73,508,069

 

 

$

1

 

 

$

62,746

 

 

$

(61,551

)

 

$

1,196

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

3


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

2020

 

 

June 30,

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(2,373

)

 

$

(2,743

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

24

 

 

 

23

 

Stock based compensation expense

 

 

246

 

 

 

528

 

Common stock issued for services

 

 

41

 

 

 

25

 

Provision for bad debt

 

 

100

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

653

 

 

 

(1,670

)

Notes receivable

 

 

(12

)

 

 

 

Inventory

 

 

63

 

 

 

 

Prepaid expenses

 

 

252

 

 

 

 

Other current assets

 

 

(41

)

 

 

(587

)

Other non-current assets

 

 

(283

)

 

 

35

 

Accounts payable

 

 

191

 

 

 

2,124

 

Accrued liabilities

 

 

85

 

 

 

(114

)

Other non-current liabilities

 

 

156

 

 

 

(35

)

Net cash used in operating activities

 

 

(898

)

 

 

(2,414

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

(11

)

 

 

(11

)

Investment in note receivable, net

 

 

 

 

 

(38

)

Net sales (purchases) of marketable securities

 

 

2,770

 

 

 

(1,106

)

Net cash provided by (used in) investing activities

 

 

2,759

 

 

 

(1,155

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Advances on line of credit

 

 

150

 

 

 

3,400

 

Principal repayments on line of credit

 

 

(5,970

)

 

 

(800

)

Proceeds from SBA loans

 

 

411

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

7

 

Net cash provided by (used in) financing activities

 

 

(5,409

)

 

 

2,607

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(3,548

)

 

 

(962

)

Cash and cash equivalents at the beginning of the period

 

 

4,432

 

 

 

3,759

 

Cash and cash equivalents at the end of the period

 

$

884

 

 

$

2,797

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$

32

 

 

$

51

 

Cash paid for income taxes

 

$

 

 

$

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Assets received offsetting notes receivable

 

$

22

 

 

$

 

Equipment transferred against note receivable

 

$

 

 

$

7

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

4


ADOMANI, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Operations

ADOMANI, Inc. (“we”, “us”, “our” or the “Company”) is a provider of new purpose-built zero-emission electric vehicles focused on total cost of ownership. We are also a provider of advanced zero-emission electric drivetrain systems for integration in new buses and medium to heavy-duty commercial fleet vehicles. The Company also provides re-power conversion kits to replace conventional drivetrain systems for combustion powered vehicles with zero-emission electric drivetrain systems.  The Company’s vehicles and drivetrain systems are designed to help fleet operators unlock the benefits of green technology and address the challenges of local, state and federal regulatory compliance and traditional-fuel price cost instability.

2. Summary of Significant Accounting Policies

Basis of Presentation—The consolidated financial statements and related disclosures as of June 30, 2020 and for the fiscal periods ended June 30, 2020 and 2019 are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with our audited financial statements for the years ended December 31, 2019 and 2018 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The results of operations for the fiscal period ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

 

Going Concern— As of June 30, 2020, we had cash and cash equivalents of $883,949. We do not believe that our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations during the next eighteen months unless we are able to resolve the California Air Resources Board’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”) funding issues created by the HVIP staff in the near-term or we are able to mitigate the impact of certain anti-dilution and other rights contained in our outstanding warrants that have, to date, restricted our ability to raise additional debt or equity capital on terms that are acceptable to us. Such determination that our present capital resources will likely not be sufficient to fund our planned operations for the eighteen months following the date of this Quarterly Report raises substantial doubt about our ability to continue as a going concern.

In the event we are unable to resolve the HVIP funding issues in the near-term and successfully execute our business plan, we will likely need additional capital to continue our operations and support the increased working capital requirements associated with the fulfillment of purchase orders.

The sale of additional equity securities in the future could result in additional dilution to our stockholders and those securities may have rights senior to those of our common stock. In particular, the warrants issued and sold in our January 2018 public offering include anti-dilution rights, which provide that if, at any time the warrants are outstanding, we issue or are deemed to have issued any shares of common stock or securities that are convertible into or exchangeable for shares of common stock (except for certain exempt issuances, including the issuance of certain stock options, shares of common stock upon the exercise of securities outstanding prior to January 2018 and securities issued in connection with certain acquisitions or strategic transactions) for consideration less than the then current exercise price of the warrants, which is currently $4.50 per share and subject to adjustment pursuant to the terms thereof, the exercise price of such warrants is automatically reduced to the price per share of such new issuance. Further, simultaneously with any adjustment to the exercise price of such warrants, the number of shares of common stock that may be purchased upon exercise of such warrants will be increased or decreased proportionately, such that after such adjustment the aggregate exercise price payable thereunder for the adjusted number of shares of common stock underlying such warrants will be the same as the aggregate exercise price in effect immediately prior to such adjustment. To the extent that we issue or are or deemed to have issued securities for consideration that is substantially less than the exercise price of the warrants issued in our January 2018 public offering, holders of our common stock will experience dilution, which may be substantial and which could lower the

5


market price of our securities. Further, the potential application of such anti-dilution rights has, to date, restricted our ability to obtain additional financing on terms that are acceptable to us. In the event that we are unable to mitigate the impact of such anti-dilution rights and raise additional capital to finance our operations and continue to support our growth initiatives, we may not be able to continue as a going concern and may be forced to curtail all of our activities and, ultimately, cease our operations.

Principles of Consolidation—The accompanying financial statements reflect the consolidation of the individual financial statements of ADOMANI, Inc., ADOMANI California, Inc., Adomani (Nantong) Automotive Technology Co. Ltd., ADOMANI ZEV Sales, Inc., formerly known as School Bus Sales of California, Inc., Zero Emission Truck and Bus Sales of Arizona, Inc., and ZEV Resources, Inc. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments—The carrying values of our financial instruments, including cash, notes receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 820, “Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs that are supported by little or no market data and that require the reporting entity to develop its own assumptions.

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

Revenue Recognition— The Company recognizes revenue from the sales of zero-emission electric vehicles; from the sales of zero-emission electric drivetrain systems for fleet vehicles; and from contracting to provide related engineering and, effective February 2020, vehicle maintenance and inspection services. The Company recognizes revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers”, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

In applying ASC Topic 606, the Company is required to:

(1) Identify any contracts with customers.

(2) Determine if multiple performance obligations exist.

(3) Determine the transaction price.

(4) Allocate the transaction price to the respective obligation; and,

(5) Recognize the revenue as the obligation is satisfied.

6


As part of the termination agreement with Blue Bird, the Company is to be paid $5,000 for each electric drivetrain Blue Bird ordered from Cummins Corporation during the period of June 1, 2019 through September 30, 2019.  This agreement is a single performance obligation with the Company recognizing revenue upon notification from Blue Bird that delivery has been made to its customer. The final customer delivery by Blue Bird was made in April, 2020; thus, no additional revenue will be recorded by ADOMANI related to the termination agreement.

Product revenue also includes the sale of electric trucks and cargo vans. These sales represent a single performance obligation with revenue recognition occurring at the time title transfers. Transfer of title occurs when the customer has accepted the van and signed the appropriate documentation acknowledging receipt.

The Company is the recipient of a purchase order issued from GerWeiss EV USA LLC (“GerWeiss”) to produce all-electric tricycles (“e-trikes”), or all-electric light weight commercial vehicles. The Company has agreed to provide deposits to GerWeiss to fund the procurement of the supplies and assembly of the tricycles. The purchase order represents a single performance obligation with the Company recognizing revenue upon notification that the assembled units have been completed  by GerWeiss. Upon the recording of revenue, the corresponding deposits are recorded as cost of goods sold.

Other revenue includes, effective February 2020, performing basic vehicle maintenance and detailing, as well as safety inspections for compliance with United States Department of Transportation guidelines. These sales represent a single performance obligation with revenue recognition occurring at the time services are invoiced.

 

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

Marketable Securities—The Company invests in short-term, highly liquid, marketable securities, such as U.S. Treasury notes, U.S. Treasury bonds, and other government-backed securities. The Company classifies these marketable securities as held-to-maturity, as the intent is not to liquidate them prior to the respective stated maturity date.

Accounts Receivable and Allowance for Doubtful Accounts—The Company establishes an allowance for bad debts through a review of several factors including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. The Company does not generally require collateral for its accounts receivable. The Company had trade accounts receivable of $8,500 and $661,352 as of June 30, 2020 and December 31, 2019, respectively. Because the trade accounts receivable balance as of June 30, 2020 is immaterial, and because all but $15,000 of the trade accounts receivable balance as of December 31, 2019, respectively, related to two California government agencies, and was paid to ADOMANI during the three months ended June 30, 2020,  no allowance has been recorded relative to the trade accounts receivable balance as of June 30, 2020 and December 31, 2019, respectively.  

Notes Receivables— The Company also had notes receivable of $823,848 and $834,491 as of June 30, 2020 and December 31, 2019, respectively. The Company provided an allowance for notes receivable of $571,000 and $471,000 as of June 30, 2020 and December 31, 2019, respectively (see Note 4 below).

Inventory and Inventory Valuation AllowanceThe Company records inventory at the lower of cost or market, and uses a First In, First Out (“FIFO”) accounting valuation methodology. The Company had inventory on hand of $431,470 and $494,158 as of June 30, 2020 and December 31, 2019, respectively. The Company provided no inventory allowance as of June 30, 2020 and December 31, 2019, respectively.

Inventory Deposits―The Company records all inventory deposits as prepaid assets. Upon completion of production, and acceptance by the Company, deposits are reclassified to either inventory or cost of goods, depending on whether a sale of the product has occurred.  The Company had inventory deposits of $801,204 and $935,204 as of June 30, 2020 and December 31, 2019, respectively.

Net Loss Per Share—Basic net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the diluted weighted average number of shares of common stock outstanding during the period. The diluted

7


weighted average number of shares of common stock outstanding is the basic weighted number of shares of common stock adjusted for any potentially dilutive debt or equity securities. As of June 30, 2020, the Company had 13,904,436 and 7,556,323 stock options and stock warrants outstanding, respectively .

Concentration of Credit Risk—The Company has credit risks related to cash and cash equivalents on deposit with a federally insured bank, as at times it exceeds the $250,000 maximum amount insured by the Federal Deposit Insurance Corporation.

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. The Company evaluates these assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets. If the estimated undiscounted cash flows are less than the carrying value of the assets, the assets are written down to their fair value. There was no impairment of long-lived assets, or property and equipment, as of June 30, 2020 and December 31, 2019, respectively.

Research and Development—Costs incurred in connection with the development of new products and manufacturing methods are charged to operating expenses as incurred. Research and development costs were $0 and $147,656 for the six months ended June 30, 2020 and 2019, respectively.

Stock-Based Compensation—The Company accounts for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, “Compensation-Stock Compensation”, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.

Property and Equipment— Property and equipment are stated at cost, less accumulated depreciation and amortization. The Company provides for depreciation using the straight-line method over the estimated useful lives of the assets, which range from three to five years, except leasehold improvements, which are being amortized over the life of the lease term. Property and equipment qualify for capitalization if the purchase price exceeds $2,000. Major repairs and replacements, which extend the useful lives of equipment, are capitalized and depreciated over the estimated useful lives of the property. All other maintenance and repairs are expensed as incurred.

Leases—The Company accounts for leases as required by ASC Topic 842. The guidance requires companies to recognize leased assets and liabilities on the balance sheet and to disclose key information regarding leasing arrangements.

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

8


3. Property and Equipment, Net

On February 3, 2020, the Company purchased substantially all of the assets of Ebus, Inc. (“Ebus”) at a foreclosure sale via a credit bid (see Note 4). In March 2020, the Company obtained possession of certain of these assets, with an estimated fair-market value of approximately $22,440. These assets have been recorded as “Machinery & equipment” on the schedule below.

Components of property and equipment, net, consist of the following as of June 30, 2020 and December 31, 2019:

 

 

 

June 30

 

 

December 31,

 

 

 

2020

 

 

2019

 

Furniture and fixtures

 

$

41,799

 

 

$

41,799

 

Leasehold improvements

 

 

35,042

 

 

 

23,338

 

Computers

 

 

59,668

 

 

 

59,667

 

Machinery & equipment

 

 

22,440

 

 

 

 

Vehicles

 

 

72,299

 

 

 

72,299

 

Test/Demo vehicles

 

 

15,784

 

 

 

15,784

 

Total property and equipment

 

$

247,032

 

 

$

212,887

 

Less accumulated depreciation

 

 

(124,734

)

 

 

(101,044

)

Net property and equipment

 

$

122,298

 

 

$

111,843

 

 

Depreciation expense was $12,174 and $11,678 for the three months ended June 30, 2020 and 2019, respectively, and $23,690 and $23,354 for the six months ended June 30, 2020 and 2019, respectively.

4. Notes Receivable

On February 3, 2020, the Company acquired substantially all of the assets of Ebus in a foreclosure sale through a credit bid in the amount of $582,000, representing the amount then owed by Ebus to the Company on its note receivable. Following the Company’s successful credit bid at the foreclosure sale, Ebus’s obligations under the note were extinguished and the Company was entitled to take possession of substantially all of the assets of Ebus. In March 2020, the Company obtained possession of certain of the assets with an estimated fair market value of approximately $22,440 (see Note 3). However, the Company has not been able to take possession of the rest of the assets. On April 13, 2020, the Company commenced an action in Los Angeles Superior Court against Ebus and certain of its insiders and affiliates seeking to recover the remainder of the assets and related damages (see Note 10). On April 13, 2020, the Company commenced an action in Los Angeles Superior Court against Ebus and certain of its insiders and affiliates seeking to recover the remainder of the assets and related damages (see Note 10). In June 2020, the Company recorded an additional $100,000 allowance as bad debt expense against the amount receivable based on a revised assessment of recoverability from the assets obtained. The Company continues to evaluate several paths to obtaining the remaining assets that were purchased from Ebus at the foreclosure sale.

The Company loaned $200,000 pursuant to a secured promissory note to an unaffiliated third party in the energy storage technology industry in September 2018. The stated interest rate under the note is 9% per annum and any unpaid interest will become part of the principal balance after one year and will compound accordingly. The amount outstanding under the note will automatically convert into preferred stock of the borrower in connection with a financing that results in aggregate gross proceeds to the borrower of at least $500,000. Additionally, the Company may optionally convert into preferred stock of the borrower any or all of the amount outstanding under the note at any time. The note is secured by substantially all of the assets of the borrower and is scheduled to mature on December 31, 2020 unless conversion of the note occurs prior to that date. In May 2019, the Company loaned an additional $38,000 pursuant to a secured promissory note to the same unaffiliated third party. The note carries the same terms and conditions as the initial note, but is scheduled to mature on March 31, 2020. The total unpaid principal and accrued interest, as of December 31, 2019, was $39,995. During September through December 2019, accrued interest totaling $23,496 on the original $200,000 note, that had accrued between September 2018 and December 2019, was reclassified to principal. In December 2019, the Company recorded a $100,000 allowance as bad debt expense against the original $200,000 note based on a preliminary assessment of collectability. Although the original note matures on December 31, 2020, due to the uncertain timing of collection, the principal and unpaid interest of $223,496 remain classified as a non-current asset on the consolidated balance sheet as of December 31, 2019. The additional $38,000, which was scheduled to mature on March 31, 2020, was unpaid as of that date. The Company originally agreed to provide the third party until June 30, 2020 for the note to be repaid, as the third party had contracted financing to be funded by that date, which would, in part, be used to repay the note. However, while a term sheet between the third party and their lender was signed prior to June 30, 2020, the third party revealed to the Company that loan funding will not occur until sometime in Q3 2020 and, as such, repayment of the note will

9


occur at that time. Between March 31, 2020 and the date of repayment of the note, interest will accrue at the stated rate of 9% plus the default rate of 4%, as prescribed in the note. Though the Company feels comfortable that the principal and accrued, but unpaid, interest will be repaid during Q3 2020, as a conservative measure, existing amounts have been reclassified as a non-current asset, and no additional allowance has been recorded. The total principal and unpaid interest of both of these notes was $275,988 and $263,491 as of June 30, 2020 and December 31, 2019, respectively.

5. Debt

As of December 31, 2019, the principal amount outstanding under the Morgan Stanley line of credit was approximately $5.8 million, and the undrawn borrowing availability was $820,948. On February 3, 2020, the Company sold marketable securities and paid off the balance, including accrued interest, of the line of credit.

On May 6, 2020, the Company received $261,244 in loan funding from the Paycheck Protection Program (the “PPP”) established pursuant to the recently enacted Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”) and administered by the U.S. Small Business Administration (“SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company, dated May 3, 2020 (the “Note”) in the principal amount of $261,244 with Wells Fargo Bank, N.A. (the “Bank”), the lender. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks, or, if elected by the Company, twenty-four weeks, in either case, as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week or twenty-four week period, as applicable. Under the terms of the Note and the PPP, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the Note is two years, though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company will be obligated to make equal monthly payments of principal and interest beginning on November 1, 2020 through the maturity date of May 3, 2022. The Company intends to file its forgiveness application during August 2020, and it is the Company’s belief that, at that time, they will have satisfied all requirements for full forgiveness of the loan. The Company anticipates the net amount forgiven will be $251,244, which is the principal amount of $261,244, less $10,000 that was advanced as part of the Company’s application for the EIDL loan (see below). Any EIDL advance must be repaid as part of the PPP loan forgiveness process. As of June 30, 2020, the principal and accrued interest on this note is $261,680, of which $115,331 and $146,349 is reflected on the consolidated unaudited balance sheets as current and long-term liabilities, respectively.

On May 20, 2020, the Company received $150,000 in loan funding from the U.S. SBA under the Economic Injury Disaster Loan (“EIDL”) program administered by the SBA, which program was expanded pursuant to the recently enacted CARES Act. The EIDL is evidenced by a promissory note, dated May 17, 2020 (the “Note”) in the original principal amount of $150,000 with the SBA, the lender. Under the terms of the Note, interest accrues on the outstanding principal at the rate of 3.75% per annum. The term of the Note is thirty years, though it may be payable sooner upon an event of default under the Note. Under the Note, the Company will be obligated to make equal monthly payments of principal and interest beginning on May 17, 2021 through the maturity date of May 17, 2051. The Note may be prepaid in part or in full, at any time, without penalty. As of June 30, 2020, the principal and accrued interest on this note is $150,939, of which $0 and $150,939 is reflected on the consolidated unaudited balance sheets as current and long-term liabilities, respectively.

10


6. Common Stock 

Effective January 1, 2020, the Company renewed its agreement with a consultant to provide sales and marketing expertise. The consultant is to be paid $8,200 per month, consisting of $3,200 in cash and $5,000 of common stock. The number of shares of common stock to be issued is determined by the Company’s closing stock price on the last market day of the respective preceding month. For the six months ended June 30, 2020 and 2019, the Company issued 266,420 and 72,810 shares of common stock to the consultant, respectively. As of June 30, 2020, the Company has issued a total of 588,582 shares of common stock to the consultant. On July 1, 2020 and August 1, 2020, the Company issued 21,844 and 19,739 shares of common stock to the consultant, respectively, and, as of August 1, 2020, the Company has issued a total of 630,165 shares of common stock to the consultant (see Note 12).

Effective March 31, 2020, the Company hired a consultant with expertise in the public funding process for the State of California. The consultant is to be paid $5,000 per month in common stock, and is entitled to a $9,000 bonus should the Company receive public funding appropriate to it completing $2 million in transactions as of June 30, 2020. The number of shares of common stock to be issued is determined by the Company’s closing stock price on the last market day of the respective preceding month. Additionally, the consultant is entitled to 1% of the non-publicly funded portion of transactions completed during the term of the agreement and for the six months following. The agreement expired on June 30, 2020. On July 1, 2020, the Company issued 21,844 shares of common stock, and, as of that date, the Company has issued a total of 129,677 shares of common stock to the consultant.

Effective May 21, 2020, the Company hired a consultant with expertise in marketing and public relations strategy. The consultant is to be paid $2,500 per month in common stock. The number of shares of common stock to be issued is determined by the average of the Company’s closing stock price for respective preceding month. For the six months ended June 30, 2020 and 2019, the Company issued 8,278 and 0 shares of common stock to the consultant, respectively. As of June 30, 2020, the Company has issued a total of 8,278 shares of common stock to the consultant. On July 1, 2020 and August 1, 2020, the Company issued 16,743, and 8,721 shares of common stock to the consultant, respectively and, as of August 1, 2020, the Company has issued a total of 33,742 shares of common stock to the consultant (see Note 12).

 

 

7. Stock Warrants

As of June 30, 2020, the Company has issued warrants to purchase an aggregate of 7,556,323 shares of common stock. The Company’s warrant activity for the six months ended June 30, 2020 is summarized as follows:

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

Number of

 

 

Exercise

 

 

Remaining

 

 

 

Shares

 

 

Price

 

 

Contractual Life (years)

 

Outstanding at December 31, 2019

 

 

7,556,323

 

 

$

4.45

 

 

 

2.8

 

Granted

 

 

 

 

$

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2020

 

 

7,556,323

 

 

$

4.45

 

 

 

2.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2020

 

 

7,556,323

 

 

$

4.45

 

 

 

2.3

 

 

As of June 30, 2020, the outstanding warrants have no intrinsic value.

8. Stock-Based Compensation

Effective January 2, 2020, the Company entered into consulting agreement with Suneel Sawant under which Mr. Sawant will perform certain services for the Company, including, among other things, services related to the establishment, maintenance, and management of a network for the sale its zero-emission vehicles and related products and services to customers located in India. As full compensation for the services to be provided by Mr. Sawant under the agreement, the Company agreed to grant Mr. Sawant options to purchase up to 2,000,000 shares of the Company’s common stock, all fully vested and exercisable on the grant date. One million of the shares subject to these options have an exercise price of $0.50 per share and will expire if not exercised on or before December 31, 2020, and the remaining 1,000,000 shares subject to the options have an exercise price of $1.00 per share and will

11


expire if not exercised on or before December 31, 2021. The options were valued using the Black-Scholes option-pricing model, resulting in fair market values of $76,299 and $86,099 for the options expiring on December 31, 2020 and 2021, respectively. The assumptions used in the valuation of the options expiring on December 31, 2020 included an expected term of one year, volatility of 172.40%, and a risk-free interest rate of 1.56%. The assumptions used in the valuation of the options expiring on December 31, 2021 included an expected term of two years, volatility of 155%, and a risk-free interest rate of 1.58%.  Because these options were fully vested and exercisable as of the grant date, the combined fair market value of $162,398 was recorded as stock based compensation expense during the period ending March 31, 2020. Should the Company’s agreement with Mr. Sawant be terminated for any reason, any unexercised options shall be forfeited.

On March 6, 2018, Edward R. Monfort ceased serving as the Company’s Chief Technology Officer. Upon Mr. Monfort’s separation from service, the Company’s board of directors suspended Mr. Monfort’s outstanding options. Although such options remained outstanding, they were unexercisable as of December 31, 2019. As of December 31, 2019, outstanding options to purchase an aggregate of 14,297,902 shares of common stock were attributable to Mr. Monfort. Effective as of January 29, 2020, all such options were cancelled by the Company in connection with the settlement of Mr. Monfort’s claims against the Company.

In May 2020, the Company’s board of directors granted to certain employees and directors options to purchase an aggregate of 2,235,000 shares of common stock pursuant to the Company’s 2017 Equity Incentive Plan. The options are for a contractual term of 10 years, vest over a three-year period, with one-third of the options vesting on the one-year anniversary of the grant date and the remainder vesting in equal monthly installments thereafter, subject to a grantee’s continuous service to the Company through each such vesting date. The exercise price for these options is $0.12 per share. The options were valued using the Black-Scholes option-pricing model, resulting in a fair market value of $204,933. The assumptions used in the valuation included an expected term of 5.75 years, volatility of 147.50% and a risk-free interest rate of 0.50%.

 

Stock option activity for the six months ended June 30, 2020 is as follows:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

 

Number of

Shares

 

 

Exercise

Price

 

 

Contractual Life

(years)

 

Outstanding at December 31, 2019

 

 

25,617,338

 

 

$

0.16

 

 

 

1.9

 

Granted

 

 

4,235,000

 

 

$

0.42

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

Canceled/Forfeited

 

 

(15,947,902

)

 

$

0.14

 

 

 

 

 

Outstanding at June 30, 2020

 

 

13,904,436

 

 

$

0.26

 

 

 

3.6