Envirotech Vehicles, Inc.

Good day, ladies and gentlemen, and welcome to Envirotech Vehicles, Inc.' 's first quarter 2022 earnings call. All lines have been placed in a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you would like to enter the queue to ask a question at any time, you may press star 1 on your telephone keypad to enter the queue. Should you wish to remove yourself from queue, you may press star 2. At this time, it is my pleasure to turn the floor over to Jen Belladeau of IMS Investor Relations. Jen, the floor is yours.

Thank you, Tom. And once again, good day and welcome to EnviroTech's first quarter 2022 earnings call. With me on the call are Philip Oldridge, Chief Executive Officer, and Christian Rodich, Chief Financial Officer. I'd like to begin the call by reading the Safe Harbor Statement. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although Envirotech believes that the expectations reflected in such forward-looking statements are reasonable on the basis of current expectations, Envirotech can make no assurances that such expectations will prove to be correct. Also, these forward-looking statements are subject to a number of risks, uncertainties, assumptions, and other factors that could cause actual results to differ considerably from Envirotech's current expectations due to changes in operating performance technical and economic factors, and other risks and uncertainties disclosed in EnviroTech's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by EnviroTech from time to time with the Securities and Exchange Commission. Any forward-looking statements including in this earnings call are made only as of the date of this call. EnviroTech does not undertake any obligation to update or supplement any forward-looking statements to reflect new information, subsequent events, or circumstances, except as required by law. EnviroTech cannot assure you that projected results or events will be achieved. With that out of the way, I will turn the call over to Phil Oldridge, Chief Executive Officer. Please go ahead, Phil.

Thank you so much and welcome, everybody. While I gave you some color around our continued progress in the first quarter on our year-end call just a few weeks ago, I wanted to take this time to provide a brief update now that we've officially closed out Q1 2022. We've achieved several milestones throughout the first quarter, including increased revenues and new partnership agreements and progress with our new U.S.-based manufacturing facility. First quarter revenues improved significantly to slightly more than $1.1 million, with an increase reflecting the sale of 12 vehicles during the quarter, generated and closed internally. We are also seeing higher or sightseeing heightened activity with our voucher approvals from state incentive programs like the New Jersey Zero Emissions Program and the New Jersey Zip. As I mentioned before, our FAR network and our status with the FAR network is approved and we are receiving the vendor incentive programs through the New Jersey Zip. Part of our business and our continued business has been a major driver of our considerable growth in sales both in sales numbers both sequentially and year-over-year. The favorable legislative incentives related to EV adoption at the federal, state, and local levels are providing us with ample opportunities, and we're focused on driving sales growth in this favorable environment. To meet this growing demand for our vehicles, in the first quarter, we've placed an additional order for 100 Class V cab and chassis trucks and an additional 100 Class IV vans. We expect deliveries of these vehicles to begin in late Q2 and early Q3 and continuing monthly throughout the year-end with final assembly to take pace at our 580,000-square-foot manufacturing facility in Osceola, Arkansas. This order is especially exciting for us as we've been focused on offering Class 5 trucks to our customers, and they are currently in very high demand. While we expect delivery of these vehicles to begin in late Q2 and continue through the end of the year, supply chain issues remain a factor across the entire industry. With that being said, we are enthusiastic about the high demand that we are seeing for our vehicles, and we look forward to adding these Class 5 trucks and additional vans into our inventory. Shifting to our manufacturing facility in Osceola, I'm happy to report that we've successfully completed the first phase of our renovations within the office facility. and we're moving forward within the next phase of construction. This facility represents a tremendous step forward in the growth of our company and positions us to be one of the only EV companies with a manufacturing facility in the United States. Osceola is well situated close to a major interstate and the Mississippi River, which provides us with a variety of options to efficiently transport vehicles to our customers. The area also provides us with a robust business climate and highly capable workforce as we look forward to staffing the facility with close to 800 employees over the next few years. This is an exciting time for both our company and the EV industry, and we're intent on capitalizing on the opportunities we're seeing as a premier provider of zero-emission electric trucks and vans. As we move through 2022, we're optimistic about our prospects and energized by what's on the horizon for EnviroTech vehicles. At this point, I'd like to turn the floor over to our CFO, Christian Rodick, who will briefly walk you through the first quarter financials.

Christian? Thank you, Phil. Good afternoon, everyone. Sales were $1,108,500 for the three months ended March 31, 2022, compared to $470,793 for the three months ended March 31, 2021, an increase of 235%. The sales increase was primarily related to the sales of 12 vehicles here in the first quarter of 2022 versus five vehicles in 2021 over the same period. Total net operating expenses for the first quarter of 2022 increased by approximately $2.4 million compared to the first quarter of 2021, which increase included approximately $1.6 million of non-cash charges related to stock-based compensation expense and depreciation expense. Net losses in the first quarter of 2022 were approximately $2.5 million compared to a net loss of approximately $659,000 in the first quarter of 2021. As of March 31st, 2022, the company had cash, cash equivalents, restricted cash, and marketable securities of approximately $9.1 million. total liabilities of approximately 961,000 as compared to 12.9 million of cash, cash equivalents and restricted cash and marketable securities, and liabilities of approximately 1.6 million as of December 31st, 2021. Working capital at the end of the quarter, March 31, 2022, was approximately $21 million as compared to working capital of approximately 21.5 million at the end of last year, December 31st, 2021. That concludes my remarks for today. We can now open the call up for questions.

Thank you very much. Ladies and gentlemen, the floor is now open for questions. If you would like to enter the queue to ask a question at this time, you may press star 1 on your telephone keypad to enter the queue. If listening on speakerphone today, we ask to please pick up your handset while asking your question to provide optimal sound quality. Once again, ladies and gentlemen, if you would like to enter the queue to ask a question at this time, please press star 1 on your telephone keypad at this time. Please hold a moment while we poll for questions. And the first question today is coming from Frank Jones from Barlow Capital. Frank, go ahead.

Thanks, guys. So first of all, congrats on the progress. My first question is, could you provide a little more color as to who the end customers are for the vehicles that you sold during the quarter?

Sure. This is Philip. I think we can do that. Actually, I think probably Sue Emery, our vice president, would probably be best for that. Sue, can you just shed a little color on that?

Absolutely. Okay. So the first quarter sales deliveries, one went to a municipal airport authority here in the state of Arkansas. We had several go to a California-based company that does upholstery, as well as several vehicles went to a solar, national solar company located in Utah. And then we had some go as well to a local New Jersey public library.

A few of them. Awesome. Just a second question. Obviously, fuel prices have been very high recently. Has the increased prices impacted interest in your vehicles? Are you seeing more opportunities in your pipeline?

Sure. Absolutely. This is Philip. That's a great question. The answer to that question is yes. More and more people I think now that that they see, and especially as we've got a lot more vehicles out and they see the reliability of them, more and more people are now coming with that question. And in many cases, we're finding that the price difference and the variation in price between a diesel-powered vehicle, which would run in the mid to upper 60s fully loaded, compared to an electric vehicle, which would run in the 90,000 range, The operating cost of that diesel vehicle, if it's averaging 100 to 150 miles a day, burning between 10 and 15 gallons of fuel, it actually, the fuel burn alone more than covers the price difference. So we're really starting to see a lot of calls about that and a lot of turn that way. And of course, now that we're manufacturing a lot more vehicles and our numbers are coming down, we're expecting a substantial drop in our pricing of $10,000 plus before the end of the year. So, yeah, I think we're going to see a lot of customers going that way.

Great. All right. That's helpful. Thank you. That's it for me. Congrats on the quarter, guys. Thanks. Thank you.

Thank you. And your next question is coming from Dave Hammond. Dave, your line is live. Please go ahead.

Thanks very much. Hi, Phil and team. Congrats on all the progress directionally. I think it looks good. We always want more, but directionally, you're moving in the right direction, so that's good. I've got like three or four questions, and I'm hoping we can just kind of zip through them. The first topic for me is the litigation. The disclosure, particularly in the annual, I thought was really good and helpful, but I'm always looking for more. It's the dispute with GPV that, for me, is of greatest concern, I think, frankly, for both sides. It's an overhang. And I don't think investors like it. I think potential customers probably have concern. I think strategics or even a net right acquirer would look at it on either side and have issue. So I think it needs to be put to bed. And so my question is, is there anything you can share with us? You know, maybe it's subsequent or something current that helps us understand what's the likelihood or willingness that we see this resolved in either arbitration or somehow concluded altogether?

Great question. So Green Power did reach out to us earlier this year with an attempt to settle the agreements. And albeit that I can't get into all the ins and outs of it, we did agree to settle with them. And then in the 11th hour, they came back with what we would consider to be non-negotiables on our side. It was never part of the agreement to begin with. And then in the 11th hour, they've tried to add those back, which we had told them that we weren't going to do. So we did file our defense in the case that they had filed against us, which is actually the case they filed against us down here in the U.S., which is just an exact mirrored image of the one they already filed in Canada three years ago. So Um, I don't think that's really going anywhere for them. So, um, you know, we're hopeful at the end of the day that we would be able to, uh, you know, to come to some terms and, you know, you know, some form of settlement, but, um, you know, it needs to be exactly that, right. It needs to be, um, you know, a blend of, of both sides of the fence. And, uh, in right now, in our opinion, um, we, we thought we had that. And then, like I said, in the 11th hour, um, it, it turned. So, um, So yeah, let's put it this way. Both sides are talking. And in terms of the other legal disputes that were hung over from Otomani from the previous ones, those have all been settled and pretty much put to bed. So really, the only one that's outstanding is sort of the GP one. And yeah, I think that we're confident that it doesn't serve anybody at the end of the day. So I think that ultimately it will be settled. So I think there's just a little bit of ego attached to it right now. So I hope that answers your question.

Okay. Yeah, it's a sensitive subject. So I respect, I appreciate your commenting on it as much as you did. All right, my second question has to do with the financing. And obviously, I recognize and respect that you may not be able to disclose or say much. But we're staring at like up to $50 million raise. We're staring at a 27 cent quote, sub 100 million market cap. um, you know, amidst this financing, whatever you can, can you give us any sense of your view and the board's philosophy on, on dilution? Cause it's a bit spooky, obviously, right? Up to 50 million relative to your market cap. And then tied to that is, are you considering other, is there debt financing on the table? Are you looking at possible strategics or other ways to basically finance this, this exciting, but, but, but aggressive build out?

Yeah. So great question. Um, obviously there's a reverse split coming. So, um, you know, we need to tighten the stock. You know, in terms of the debt financing, we have been offered debt financing. Right now, we've received approval for up to $250 million in an industrial bond for our expansion, which is very exciting. And then, you know, after we do the reverse split, and we're not sure what that's going to look like just yet because we're still pricing that. And so, and there'll be a concurrent financing that will come with that. You know, when we say up to $50 million, I mean, you know, it doesn't necessarily mean that that's what we would take. For those of you that have been around me for many, many years, I'm not one of those guys that likes to raise money for the sake of raising money. And I think if you look at our financials and you look at our current cash position today, you know, what we raised, you know, almost two years ago and what we're sitting with today, what we have in inventory and stuff, our burn rates are very low and we're very, very conservative in the way we do things. So on, on the flip side of that, you know, you know, we've all seen some things that have been, you know, with the Lordstown things that are going on and, you know, the most recent announcements from canoe and some of the others, you know, I'm very, very, very grateful. And, and I think we all are as a company here that, you know, that we're not, we're not a company that has a skateboard, you know, we are, probably one of the only companies that is fully homologated. We're through USDOT, we're through NHTSA, we're through FMVSS, and we have EPA certification and approval, and we have our own VIN number. So we're a far cry from, you know, when you hear many of these other guys touting their stories about they're right around the corner and, you know, we all know, especially us as a company, we know that If you had your vehicle ready tomorrow and you were ready to go, it would take you two years if you knew what you were doing to get through homologation and get certified. We're very grateful. We actually have wheels on the ground, vehicles on the road. We most recently completed homologation of our right-hand drive vehicle. I think we're very excited. I think we have a lot of opportunity here for not only to raise debt rather than having dilution through our stock, but I think that you know, with the reverse split, you know, our stock will become tighter and a lot more value. And, um, so we're excited about that and we're starting to see some, some strong deliveries now. Um, finally we got through the last of this Omnicron stuff or praise God, let's, let's hope that that's the case. And, and we're starting to get back into, into the delivery side of things. We've got great vehicles and inventory. We have another 200 in production that are, that are coming, you know, that we have sales for. So yeah, we're, we're very excited. And, um, So I wish I could shed a little more light for you there, Dave, but I know I just, I can't at this exact moment. But, you know, we have a lot of interest. We're being, we have a lot of people that want to fund. They're looking forward to the up list. So, you know, we just have to kind of put a pin in what it is we want to do. So.

Okay. You actually touched on a couple of my other questions. I didn't have to even ask. I mean, I just got you talking. So that's very helpful. On the reverse split subject, I was going to ask you, what are we waiting for? So did I understand that correctly, that in conjunction with this deal, you're basically going to put that to bed to achieve the uplift? That is correct. Okay. All right. Which, by the way, hands down is a positive. Opening the door to institutional and ultra-high net worth investing community on NASDAQ is materially – better, obviously, then hands down, it's the right call. So that's good. You also touched on the right hand side, the right side drive vehicles. One of my other, my question was going to be, what can you share that gives us kind of a bit of a real time snapshot on what the potential game, like to take this to the next level, the singles are great, but you're going to, we all know you need that game changing headline, you know, some kind of, on the last call you mentioned the post office and the 10 units that they've either bought or tested, I'm not sure, but can you give us any sense of what you've got either in the pipeline or the prospects you're working on that will give us that game-changing hurrah moment, okay, this is real?

Sure. Well, the post office is a good example. We all know that the post office handed out a $1.7 billion contract to a company that was providing them left-hand drive vehicle and gas-powered vehicles and was going to try to attempt to make at least 20% of those electric over the next two years. And if you've been following the news, several states have filed lawsuits against the United States Postal Service in conjunction with that award. And so we feel very confident. We look in the market and we look around the market and and I can tell you right now there is nobody in North America that has a right-hand drive vehicle that is homologated and with a VIN number and through EPA and on the road except for us so we're very excited about that and you know we're just starting to get that out into the marketplace now you know like I said in the past you know we're changing our ways well we've done a great job and building, you know, a good cross-section of vehicles, and we've done a lousy job of letting people know who we are. So, you know, I truly believe that we're the most undervalued EV company in the space today, and my reasons for that is because we're one of the very few that actually has vehicles that are licensed and certified and homologated and on the road. And so, and we are the only company in North America that That can now manufacture in right-hand drive and is homologated in right-hand drive. So we're very, very excited about that. So, yeah. And then not just on the United States Postal Service, but we are now receiving some inquiries. Everybody knows, and I think it's fair to say that, you know, that the toughest build in the world is USDOT and to be California compliant. is that's it if you are if you're compliant with usdot and you meet all the requirements of california that's the toughest build in the world so to have a vehicle that is a right-hand drive vehicle that is not only you know usd like through usdot but it's also california compliant it opens the doors to numerous countries in europe and we're already starting to see a little bit of sales activity now where people have found out that we actually have a right-hand drive vehicle And we're able to, you know, to build it in that capacity. So that was a huge milestone for us. It took us a while to get there, but we did pull it off. And we paid for its entire, you know, all the engineering, everything out of our operating capital over the last 18 months. And so we're very excited. So I think not just will it, you know, will it provide us an opportunity to be competitive in the U.S. Postal Services bids, but it opens the doors to us now into the European markets.

Okay. Thank you. Thank you, Phil. My last question is regarding progreens. I guess my question is simply what's going on and are there any other potential entities that for whatever reason are being considered to either share or utilize the plant? And I'll just thank you for taking my questions. Again, Grant, congrats on all the progress. I'll step back and then listen to your answer. Thanks so much, guys.

Yeah. You know, another great question, Dave, and I guess that, you know, it's a question that's been asked by a number of people that are paying attention to the market, and I think that for someone like yourself, you're looking at sort of what we're doing as a company, and so I guess I can answer your question this way. We are underway with progreens, and, you know, we will not – make any further advancements on that until such time as we do the reverse split and we're up listed to the NASDAQ but it is our intention to start manufacturing batteries here in the Osceola plant. We have in our sites another company that is in the solar business and we're in discussions with them right now and where we would also manufacture solar panels within this facility on site and people say, wow, what's that all about? Well, quite simply put, if you look at everybody in the space and, you know, all of their quote-unquote thousand vans sold to Amazon and a thousand vehicles here and a thousand vehicles there, I mean, we hear the stories everywhere. The simple fact is, you know, first of all, we all know that that's not true. And second of all, we know that not only is it not true, but it's not even possible to And the reason for that is because, I mean, if somebody came to us tomorrow and said, hey, you know, we want to buy 1,000 vehicles from you, great, but how are we going to charge them? Where's the infrastructure to make that happen? And that infrastructure simply doesn't exist. And so we are working very diligently and very hard right now with a number of different states to get that infrastructure in the ground with ESS, electric storage systems in the ground, charging infrastructure across the state. And then, you know, in addition to that, you know, a further EV platform that would allow for renewable energies from the solar side. And getting that infrastructure in the ground, ESS, you know, we all know that the most stable power source in the world is a battery. And if you need to charge 50 or 100 vehicles at a time, you know, pulling that off the grid all at one time just doesn't work. So we've got a very robust program, to say the least. that will go around our future sales, if not just our commercial vehicles. But later this fall, and I'm going to share with everybody now, we are unveiling our school bus. We have a school bus that's built already. We're very excited about that. And so rather than running around trying to sell one-off here and there, we're going to be attacking the fleet markets. And when we attack those fleet markets with the school bus, we're going to be not just showing up with a school bus platform, but with a charging platform, a renewable platform, and some ESS that goes in the ground. So we could literally, as a company, we are looking to become a one-stop shop for the entire infrastructure and what it takes to power up commercial vehicles like that. And I can say with the utmost confidence that nobody, and I mean nobody, is looking at the market that way right now.

All right. Thanks very much, Phil. Your IR team I heard is on the phone, on the call at the beginning there. Can you guys update the – like I assume you're out marketing with a deck in hand on this financing. Can you update the site with like the latest and greatest? It's from August, right? There's a ton of progress. It would be nice to see the whole sort of thing in one big package.

Yeah, I think we can do that, and we'll have the guys work on that. We'll have IMS get that updated, and we'll get it out there for everybody.

All right. Thanks so much on all the progress, guys. Thank you.

That's great. Well, thanks, Dave. Ladies and gentlemen, if there is no more other questions at all, if there's nothing else pending, I'd like to thank everybody for joining us and let you know that I look forward to speaking to you next quarter. And God bless all of you. Thank you.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.