Company Quick10K Filing
Quick10K
Adomani
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.06 73 $4
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
8-K 2019-09-16 Officers, Exhibits
8-K 2019-08-13 Exhibits
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-05-08 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-05-02 Earnings, Exhibits
8-K 2019-03-28 Other Events
8-K 2019-02-13 Earnings, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-08-16
8-K 2018-08-02 Earnings, Exhibits
8-K 2018-06-07 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-06-04 Other Events
8-K 2018-05-16
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-03-06
8-K 2018-02-26 Earnings, Exhibits
8-K 2018-01-09 Other Events, Exhibits
8-K 2018-01-05 Enter Agreement, Other Events, Exhibits
LEA Lear 6,629
BWA BorgWarner 6,595
ALV Autoliv 5,602
VC Visteon 2,072
DAN Dana 1,767
MTOR Meritor 1,417
APOG Apogee Enterprises 978
SRI Stoneridge 894
TEN Tenneco 662
MPAA Motorcar Parts America 270
ADOM 2019-09-30
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_114.htm
EX-31.1 adom-ex311_7.htm
EX-31.2 adom-ex312_6.htm
EX-32.1 adom-ex321_8.htm
EX-32.2 adom-ex322_9.htm

Adomani Earnings 2019-09-30

ADOM 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 adom-10q_20190930.htm 10-Q adom-10q_20190930.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 SEPTEMBER 30, 2019

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 October 22, 2019 was 73,040,220.  

 

 

 


ADOMANI, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

 

 

 

PAGE

 

 

 

Part I. FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements:

1

 

 

 

 

Unaudited Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

1

 

 

 

 

Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

2

 

 

 

 

Unaudited Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2019

3

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

4

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

5

 

 

 

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

13

 

 

 

Item 3. Quantitative and Qualitative Disclosure about Market Risk

21

 

 

 

Item 4. Controls and Procedures

21

 

 

 

Part II. OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings

22

 

 

 

Item 1A. Risk Factors

24

 

 

 

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

24

 

 

 

Item 3. Defaults Upon Senior Securities

24

 

 

 

Item 4. Mine Safety Disclosures

24

 

 

 

Item 5. Other Information

24

 

 

 

Item 6. Exhibits

25

 

 

 

Signatures

26

 

 

 


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

Our dependence upon external sources for the financing of our operations;

Our ability to effectively execute our business plan;

Our ability and our suppliers’ ability to scale our zero-emission drivetrain system manufacturing, 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 drivetrain technology; and

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

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,068

 

 

$

3,759

 

Marketable securities

 

 

4,778

 

 

 

3,949

 

Accounts receivable

 

 

3,068

 

 

 

997

 

Notes receivable, net

 

 

338

 

 

 

300

 

Other current assets

 

 

1,749

 

 

 

1,175

 

Total current assets

 

 

13,001

 

 

 

10,180

 

Property and equipment, net

 

 

134

 

 

 

150

 

Other non-current assets

 

 

469

 

 

 

503

 

Total assets

 

$

13,604

 

 

$

10,833

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,204

 

 

$

342

 

Accrued liabilities

 

 

864

 

 

 

968

 

Line of credit

 

 

4,950

 

 

 

1,700

 

Total current liabilities

 

 

9,018

 

 

 

3,010

 

Long-term liabilities

 

 

 

 

 

 

 

 

Other non-current liabilities

 

 

166

 

 

 

219

 

Total liabilities

 

 

9,184

 

 

 

3,229

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   outstanding as of September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, 350,000,000 authorized $0.00001 par value, 72,984,040 and

   72,732,292 issued and outstanding as of September 30, 2019

   and December 31, 2018, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

62,405

 

 

 

61,628

 

Accumulated deficit

 

 

(57,986

)

 

 

(54,025

)

Total stockholders' equity

 

 

4,420

 

 

 

7,604

 

Total liabilities and stockholders' equity

 

$

13,604

 

 

$

10,833

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

1


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

 

September 30,

2019

 

 

September 30,

2018

 

Sales

 

$

5,743

 

 

$

2,619

 

 

$

10,551

 

 

$

3,827

 

Cost of sales

 

 

5,320

 

 

 

2,528

 

 

 

9,774

 

 

 

3,729

 

Gross profit

 

 

423

 

 

 

91

 

 

 

777

 

 

 

98

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

1,565

 

 

 

1,533

 

 

 

4,423

 

 

 

9,320

 

Consulting

 

 

66

 

 

 

38

 

 

 

220

 

 

 

133

 

Research and development

 

 

10

 

 

 

45

 

 

 

158

 

 

 

641

 

Total operating expenses, net

 

 

1,641

 

 

 

1,616

 

 

 

4,801

 

 

 

10,094

 

Loss from operations

 

 

(1,218

)

 

 

(1,525

)

 

 

(4,024

)

 

 

(9,996

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

23

 

 

 

43

 

 

 

51

 

 

 

148

 

Other income (expense)

 

 

(23

)

 

 

1

 

 

 

12

 

 

 

109

 

Total other income

 

 

 

 

 

44

 

 

 

63

 

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(1,218

)

 

 

(1,481

)

 

 

(3,961

)

 

 

(9,739

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

(3

)

Net loss

 

$

(1,218

)

 

$

(1,481

)

 

$

(3,961

)

 

$

(9,742

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.02

)

 

$

(0.02

)

 

$

(0.05

)

 

$

(0.14

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted shares used in the computation of net loss per

   share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

72,930,108

 

 

 

72,607,881

 

 

 

72,863,320

 

 

 

72,000,787

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

2


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except shares and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2017

 

 

68,070,930

 

 

$

1

 

 

$

45,316

 

 

$

(42,977

)

 

$

2,340

 

Common stock issued for cash

 

 

3,666,667

 

 

 

 

 

 

11,000

 

 

 

 

 

 

11,000

 

Offering costs netted against proceeds

   from common stock issued for cash

 

 

 

 

 

 

 

 

(1,197

)

 

 

 

 

 

(1,197

)

Stock based compensation

 

 

 

 

 

 

 

 

2,964

 

 

 

 

 

 

2,964

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,077

)

 

 

(4,077

)

Balance, March 31, 2018

 

 

71,737,597

 

 

$

1

 

 

$

58,083

 

 

$

(47,054

)

 

$

11,030

 

Stock based compensation

 

 

 

 

 

 

 

 

2,780

 

 

 

 

 

 

2,780

 

Common stock issued for stock options

   exercised

 

 

765,779

 

 

 

 

 

 

77

 

 

 

 

 

 

77

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(4,184

)

 

 

(4,184

)

Balance, June 30, 2018

 

 

72,503,376

 

 

$

1

 

 

$

60,940

 

 

$

(51,238

)

 

$

9,703

 

Stock based compensation

 

 

 

 

 

 

 

 

317

 

 

 

 

 

 

317

 

Common stock issued for stock options

   exercised

 

 

228,916

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

(1,481

)

 

 

(1,481

)

Balance, September 30, 2018

 

 

72,732,292

 

 

$

1

 

 

$

61,279

 

 

$

(52,719

)

 

$

8,561

 

Stock based compensation

 

 

 

 

 

 

 

 

349

 

 

 

 

 

 

349

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(1,306

)

 

 

(1,306

)

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

 

 

See Accompanying Notes to Unaudited Consolidated Financial Statements.

3


ADOMANI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

September 30,

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,961

)

 

$

(9,742

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

36

 

 

 

28

 

Provision for bad debt

 

 

 

 

 

200

 

Stock based compensation expense

 

 

730

 

 

 

6,061

 

Common stock issued for services

 

 

40

 

 

 

 

Loss on write-down of property and equipment

 

 

 

 

 

385

 

Write-down of inventory

 

 

 

 

 

15

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

 

 

 

210

 

Accounts receivable

 

 

(2,072

)

 

 

(1,573

)

Other current assets

 

 

(580

)

 

 

(843

)

Other non-current assets

 

 

34

 

 

 

53

 

Accounts payable

 

 

2,862

 

 

 

975

 

Accrued liabilities

 

 

(105

)

 

 

191

 

Other non-current liabilities

 

 

(53

)

 

 

(53

)

Net cash used in operating activities

 

 

(3,069

)

 

 

(4,093

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment, net

 

 

(12

)

 

 

(71

)

Investment in note receivable, net

 

 

(38

)

 

 

(200

)

Proceeds from repayment of note receivable

 

 

 

 

 

500

 

Investment in marketable securities, net

 

 

(829

)

 

 

 

Net cash provided by (used in) investing activities

 

 

(879

)

 

 

229

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

 

 

 

11,000

 

Principal repayments of debt

 

 

 

 

 

(2,149

)

Advances on line of credit

 

 

4,300

 

 

 

2,200

 

Principal repayments on line of credit

 

 

(1,050

)

 

 

(800

)

Proceeds from exercise of stock options

 

 

7

 

 

 

99

 

Payments for deferred offering costs

 

 

 

 

 

(1,121

)

Net cash provided by financing activities

 

 

3,257

 

 

 

9,229

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(691

)

 

 

5,365

 

Cash and cash equivalents at the beginning of the period

 

 

3,759

 

 

 

2,446

 

Cash and cash equivalents at the end of the period

 

$

3,068

 

 

$

7,811

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$

99

 

 

$

26

 

Cash paid for income taxes

 

$

 

 

$

 

Non-cash transactions:

 

 

 

 

 

 

 

 

Equipment transferred against note receivable

 

$

7

 

 

$

 

Deferred offering costs reclassified to equity

 

$

 

 

$

76

 

 

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”) designs and causes to be designed advanced zero-emission electric drivetrain systems for integration in new school buses and medium to heavy-duty commercial fleet vehicles. The Company also designs and causes to be designed re-power conversion kits to replace conventional drivetrain systems for combustion powered vehicles with zero-emission electric drivetrain systems. The Company is also a provider of new zero-emission electric vehicles focused on total cost of ownership. The Company’s drivetrain systems and vehicles 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 September 30, 2019 and for the fiscal periods ended September 30, 2019 and 2018 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, 2018 and 2017 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. The results of operations for the fiscal periods ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year.

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., ADOMAN ZEV Sales, Inc., formerly known as School Bus Sales of California, Inc., and Zero Emission Truck and Bus Sales of Arizona, 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.

5


Revenue Recognition—The Company recognizes revenue from the sales of advanced zero-emission electric drivetrain systems for fleet vehicles and from contracting to provide related engineering services. In May 2014, the FASB issued new accounting guidance, ASC Topic 606, “Revenue from Contracts with Customers”, to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP. The amendments in this guidance state that an entity should 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. This new guidance requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.

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. Contracts under the Blue Bird supply agreement, which was terminated effective as of May 31, 2019, and work performed for Blue Bird Corporation under a U.S. Department of Energy (“DOE”) grant awarded to Blue Bird Corporation, were single-performance obligations and, therefore, required no allocation of the transaction price. The Company’s active participation in the DOE grant ended on May 31, 2019. Prior to such termination, the Company recognized revenue when product was shipped or was billed by its third-party supplier for work performed under the DOE grant. Additionally, the Company recorded revenue for these sales at gross, rather than net, as the Company was the principal obligor to Blue Bird Corporation for both the supply agreement and the statement of work for the DOE grant, and, prior to the termination of such agreements, assumed the risk for non-performance, or non-compliance, related to any work performed by its subcontractor. An unexpected adjustment related to DOE work done prior to May 31, 2019 was made by Blue Bird in the quarter ended September 30, 2019, and the additional revenue was recognized in that period.

 

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 $3,068,353 and $996,621 as of September 30, 2019 and December 31, 2018, respectively. As the entire trade accounts receivable balance relates to one customer, which the Company believes to be credit-worthy and, consequently, there is very little chance of default, no allowance has been recorded relative to the trade receivable balance as of September 30, 2019. The Company also had other receivables of $399,639 and $143,734 as of September 30, 2019 and December 31, 2018, respectively. The Company provided an allowance for other receivables of $20,000 and $70,000 as of September 30, 2019 and December 31, 2018, respectively. $50,000 of other receivables was written off against the allowance for the six months ended June 30, 2019, as it was determined to be uncollectable.

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 $1,018,739 and $882,050 as of September 30, 2019 and December 31, 2018, 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 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.

6


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 September 30, 2019 and December 31, 2018, 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 $10,000 and $45,000 for the three months ended September 30, 2019 and 2018, respectively, and $157,656 and $641,367 for the nine months ended September 30, 2019 and 2018, 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. Additionally, in June 2018 the FASB issued Accounting Standards Update (“ASU”) No. 2018-07, which simplified several aspects of accounting for nonemployee share-based payment transactions by expanding the scope of ASC Topic 718. The guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018. The Company has implemented this change beginning in 2019, although it has minimal impact on its financial statements.

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.

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.

7


3. Property and Equipment, Net

In June 2019, Ebus, Inc., or Ebus, transferred property, with an estimated fair-market value of approximately $7,000, to the Company in exchange for a corresponding reduction of the amounts due and payable under the terms of a promissory note issued to the Company (see Note 4). The property transferred to the Company has been recorded as “Vehicles” on the schedule below.

Components of property and equipment, net, consist of the following as of September 30, 2019 and December 31, 2018:

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Furniture and fixtures

 

$

41,799

 

 

$

41,799

 

Leasehold improvements

 

 

23,338

 

 

 

23,338

 

Computers

 

 

59,668

 

 

 

53,704

 

Vehicles

 

 

74,299

 

 

 

67,299

 

Test/Demo vehicles

 

 

38,332

 

 

 

31,728

 

Total property and equipment

 

$

237,436

 

 

$

217,868

 

Less accumulated depreciation

 

 

(103,691

)

 

 

(67,777

)

Net property and equipment

 

$

133,745

 

 

$

150,091

 

 

Depreciation expense was $12,562 and $11,106 for the three months ended September 30, 2019 and 2018, respectively, and $35,914 and $27,579 for the nine months ended September 30, 2019 and 2018, respectively.

4. Notes Receivable

On June 29, 2017, the Company loaned $500,000 to Ebus, an unaffiliated third party with engineering expertise in the electric bus technology industry, with whom the Company, at that time, expected it might seek an alliance at some future date, in order to provide it with working capital. The stated interest rate is 9% per annum, with interest payments due monthly beginning on July 31, 2017. The note is secured by the assets of the borrower and was scheduled to mature on December 31, 2017. In February 2018, the parties amended the note to extend the maturity date of the note to June 30, 2018, and in June 2018, the parties agreed to further amend the note to extend the maturity date of the note until September 30, 2018. The note, as amended, is subject to an extension fee of $35,000, which was due no later than the September 30, 2018 maturity date.  In addition, per the terms of the note, as amended, the borrower was obligated to make past due interest payments in the aggregate amount of $18,750 on or before July 6, 2018. The Company received such past due interest payments on July 6, 2018. All subsequent interest payments prior to the September 30, 2018 maturity were made. Ebus failed to pay the $500,000 principal balance along with an unpaid extension fee of $35,000, by the September 30, 2018 maturity date, and the Company considers the note to be in default. The Company notified the borrower in writing of such default on October 1, 2018. The Company recorded a $200,000 allowance as bad debt expense against the note based on preliminary determination of recoverability from the assets owned by Ebus. In October 2018, the Company accrued an additional fee of $15,000 and late fees on the extension fee in the amount of $1,750. The Company accrued interest at the default rate, which is the stated rate of interest plus 2%, in accordance with the note, through March 31, 2019. Total interest accrued for the nine months ended September 30, 2019 was $13,749. In May 2019, the Company entered into a facility-sharing agreement with Ebus (see Note 9). In June 2019, Ebus transferred vehicles, with an estimated fair market value of approximately $7,000, to the Company in exchange for a corresponding reduction in the amount due on the note (see Note 3).

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. The note is included as a non-current asset on the consolidated balance sheet as of September 30, 2019. 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. In September 2019, accrued interest of $18,542 on the original $200,000 note, that had accrued since September 2018, was reclassified to principal. The note is reported as a current asset on the consolidated balance sheet as of September 30, 2019.

8


5. Debt

Effective May 2, 2018, the Company secured a line of credit from Morgan Stanley Private Bank, National Association (“Morgan Stanley”). Borrowings under the line of credit bear interest at 30-day LIBOR plus 2.0%. 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 $7.7 million as of September 30, 2019, of which $2.9 million is classified on our balance sheet as cash and cash equivalents, and $4.8 million as marketable securities as of September 30, 2019. Borrowings under the line may not exceed 95% of such cash, cash equivalents, and marketable securities balances, subject to a maximum of $7 million. Such borrowing threshold, however, is subject to change at Morgan Stanley’s discretion and depends upon the holdings in the Company’s accounts, the maturity dates of the securities in the accounts and the credit quality of the underlying insurers. As of September 30, 2019, the principal amount outstanding under this line of credit was approximately $5 million, and the undrawn borrowing availability was approximately $2 million (see Note 11).

6. Common Stock

On January 9, 2018, the Company consummated the closing of a follow-on offering of units, each consisting of one share of common stock and a warrant to purchase 1.5 shares of common stock at an exercise price of $4.50. The Company sold an aggregate of 3,666,667 units for aggregate gross proceeds of approximately $11.0 million. Net proceeds received after deducting commissions, expenses and fees of approximately $1.2 million amounted to approximately $9.8 million. Under the terms of the underwriting agreement executed in connection with the follow-on offering, the Company issued to Boustead Securities, LLC and Roth Capital Partners, LLC warrants to purchase an aggregate of 256,667 shares of common stock. The warrants to purchase 256,667 shares of common stock were valued using the Black-Scholes option-pricing model, resulting in a fair market value of $598,737. The assumptions used in the valuation of the warrants issued to Boustead Securities, LLC and Roth Capital Partners, LLC included the term of five years, the exercise price of $3.75 per share, volatility of 92.20% and a risk-free interest rate of 2.13%. The fair value of these warrants was recorded as offering costs and netted against additional paid-in capital during the three months ended March 31, 2018.

During January and February 2019, certain non-employees exercised options to purchase an aggregate of 71,084 shares of common stock, for which the Company received aggregate gross proceeds of $7,108 (see Note 8). 

Effective February 1, 2019, the Company hired a consultant to provide sales and marketing expertise. The consultant is to be paid $7,500 per month, consisting of $2,500 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. As of September 30, 2019, the Company had issued 180,664  shares of common stock to the consultant.

 

 

7. Stock Warrants

As of September 30, 2019, the Company has issued warrants to purchase an aggregate of 7,556,323 shares of common stock. The Company’s stock warrant activity for the nine months ended September 30, 2019 is summarized as follows:

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

Number of

 

 

Exercise

 

 

Remaining

 

 

 

Shares

 

 

Price

 

 

Contractual Life (years)

 

Outstanding at December 31, 2018

 

 

7,556,323

 

 

$

4.45

 

 

 

3.8

 

Granted

 

 

 

 

 

$

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2019

 

 

7,556,323

 

 

$

4.45

 

 

 

3.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2019

 

 

7,556,323

 

 

$

4.45

 

 

 

3.0

 

 

As of September 30, 2019, the outstanding warrants have no intrinsic value.

9


8. Stock-Based Compensation

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 remain outstanding, they were unexercisable as of September 30, 2019 and through the date of this Quarterly Report. As of September 30, 2019, outstanding options to purchase an aggregate of 14,297,902 shares of common stock are attributable to Mr. Monfort.

During January and February 2019, certain non-employees exercised options to purchase an aggregate of 71,084 shares of common stock, for which the Company received aggregate gross proceeds of $7,108 (see Note 6).    

 

In April 2019, the Company’s board of directors granted to certain employees and directors options to purchase an aggregate of 1,095,000 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 $0.45 per share. The options were valued using the Black-Scholes option-pricing model, resulting in a fair market value of $205,118. The assumptions used in the valuation included an expected term of 5.75 years, volatility of 58.68% and a risk-free interest rate of 2.41%.

Stock option activity for the nine months ended September 30, 2019 is as follows:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

 

Number of

Shares

 

 

Exercise

Price

 

 

Contractual Life

(years)

 

Outstanding at December 31, 2018

 

 

24,728,422

 

 

$

0.15

 

 

 

2.6

 

Granted

 

 

1,095,000

 

 

$

0.45

 

 

 

 

 

Exercised

 

 

(71,084

)

 

$

0.10

 

 

 

 

 

Canceled/Forfeited

 

 

(135,000

)

 

$

1.31

 

 

 

 

 

Outstanding at September 30, 2019

 

 

25,617,338

 

 

$

0.16

 

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at September 30, 2019

 

 

9,952,708

 

 

$

0.13

 

 

 

2.4

 

 

Stock-based compensation expense was approximately $202,650 and $317,222 for the three months ended September 30, 2019 and 2018 respectively, and approximately $730,192 and $6.1 million for the nine months ended September 30, 2019 and 2018, respectively, and is included in general and administrative expense in the accompanying unaudited consolidated statements of operations. As of September 30, 2019, the Company expects to recognize approximately $298,673 of stock-based compensation expense for the non-vested portion of outstanding options over a weighted-average period of 2.1 years.

As of September 30, 2019, outstanding options have no intrinsic value.   

9. Commitments

Operating Leases In 2016, the Company signed a lease for office space in Los Altos, California, to serve as office space for its Northern California operations. The lease expired on February 28, 2018 and the Company executed a new 10-month lease in March 2018. The total amount due under the lease was $4,730 and the lease period was from March 1, 2018 through December 31, 2018. The Company has signed a one-year lease renewal, expiring on December 31, 2019. The total amount due under the renewal is $5,676.

In February 2017, the Company signed a lease for storage space in Stockton, California to serve as a location to store vehicles and other equipment utilized for marketing and trade-show purposes. The lease is on a month-to-month basis and can be terminated by either party with 30-days’ notice. The total amount due monthly is $1,000.

10


In October 2017, the Company signed a non-cancellable lease for its corporate office space in Corona, California, to serve as its corporate headquarters. The lease is for a period of 65 months, terminating February 28, 2023. The base rent for the term of the lease is $568,912. The total amount due monthly is $7,600 at commencement and will escalate to $10,560 by its conclusion. Additionally, the lease includes five months in which no rent payment is due.

In May 2019, the Company entered into a facility-sharing arrangement with Ebus for its premises in Downey, California. The agreement requires the Company to reimburse Ebus monthly facility costs of approximately $10,600 in exchange for shared use of the site. The additional space will be used to conduct research and development activity, stage materials, assemble and/or manufacture vehicles, perform pre-delivery inspections, test demo vehicles, and securely store vehicles, equipment and finished inventory. The agreement is on a month-to-month basis and is cancelable by either party with 10-days’ notice.

Other Agreements In 2015, the Company entered into a contract with THINKP3 to provide services with the goal of securing federal grant assistance for development of the Company’s zero-emission and hybrid transportation solutions for school bus, commercial, government and utility fleets. The initial term of this contract was December 1, 2015 through November 30, 2016. On November 21, 2016, the parties renewed the agreement through November 30, 2017. On November 7, 2017, the Company renewed the agreement through November 30, 2018. On November 30, 2018, the Company renewed the agreement through November 30, 2019. Fees for these services are $8,000 per month. The contract can be terminated by either party with 30-days’ advance notice.

Effective September 16, 2019, the Company renewed its employment agreement with its Chief Executive Officer.  The term of the renewed employment agreement is five years, with an annual base salary of $294,000.

The following table summarizes the Company’s future minimum payments under contractual commitments, excluding debt, as of September 30, 2019:

 

 

 

Payments due by period

 

 

 

Total

 

 

Less than

one year

 

 

1 - 3 years

 

 

4 - 5 years

 

 

More than 5

years

 

Operating lease obligations

 

$

413,643

 

 

$

117,771

 

 

$

243,072

 

 

$

52,800

 

 

$

 

Employment contracts

 

 

1,984,000