```markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of the company's financial performance, position, and cash flows, along with detailed accounting policies and notes [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for ADOMANI, Inc. and its subsidiaries, including the balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, and specific financial line items for the period ended September 30, 2019 [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) This table presents the company's assets, liabilities, and stockholders' equity at specific points in time | ASSETS (in thousands) | Sep 30, 2019 | Dec 31, 2018 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $3,068 | $3,759 | | Marketable securities | $4,778 | $3,949 | | Accounts receivable | $3,068 | $997 | | Total current assets | $13,001 | $10,180 | | Total assets | $13,604 | $10,833 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Accounts payable | $3,204 | $342 | | Line of credit | $4,950 | $1,700 | | Total current liabilities | $9,018 | $3,010 | | Total liabilities | $9,184 | $3,229 | | Stockholders' equity | $4,420 | $7,604 | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) This table details the company's revenues, costs, and net loss over specific reporting periods | (in thousands, except per share data) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 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 | | Loss from operations | $(1,218) | $(1,525) | $(4,024) | $(9,996) | | Net loss | $(1,218) | $(1,481) | $(3,961) | $(9,742) | | Net loss per share (Basic and diluted)| $(0.02) | $(0.02) | $(0.05) | $(0.14) | [Unaudited Consolidated Statement of Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statement%20of%20Stockholders%27%20Equity) This table outlines changes in the company's equity, including common stock, paid-in capital, and accumulated deficit | (in thousands, except shares) | Common Shares | Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Stockholders' Equity | | :---------------------------- | :------------ | :----------- | :------------------------- | :------------------ | :------------------- | | Balance, December 31, 2018 | 72,732,292 | $1 | $61,628 | $(54,025) | $7,604 | | Common stock issued for services | 180,664 | — | $25 | — | $25 | | Stock based compensation | — | — | $730 | — | $730 | | Common stock issued for stock options exercised | 71,084 | — | $7 | — | $7 | | Net loss | — | — | — | $(3,961) | $(3,961) | | Balance, September 30, 2019 | 72,984,040 | $1 | $62,405 | $(57,986) | $4,420 | [Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the cash inflows and outflows from operating, investing, and financing activities | (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------- | :----------------------------- | :----------------------------- | | Net loss | $(3,961) | $(9,742) | | Net cash used in operating activities | $(3,069) | $(4,093) | | Net cash provided by (used in) investing activities | $(879) | $229 | | 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 end of period | $3,068 | $7,811 | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1. Organization and Operations](index=8&type=section&id=1.%20Organization%20and%20Operations) This note describes ADOMANI's business, including its products and strategic objectives - ADOMANI, Inc. designs and provides **zero-emission electric drivetrain systems** for new school buses and medium to heavy-duty commercial fleet vehicles, **re-power conversion kits** for combustion vehicles, and new **zero-emission electric vehicles**, aiming to help fleet operators with green technology and regulatory compliance[28](index=28&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are unaudited and prepared in accordance with GAAP, consolidating ADOMANI, Inc. and its subsidiaries. Revenue recognition follows ASC Topic **606**, with an **unexpected adjustment** related to DOE work recognized in **Q3 2019** after the Blue Bird supply agreement and DOE grant participation terminated in **May 2019**[29](index=29&type=chunk)[30](index=30&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - Trade accounts receivable **increased significantly** from **$997k** at Dec **31, 2018**, to **$3.068M** at Sep **30, 2019**, with **no allowance for bad debt** due to the single, credit-worthy customer[39](index=39&type=chunk) - Research and development costs **decreased significantly**, from **$641k** for the nine months ended September **30, 2018**, to **$158k** for the same period in **2019**, primarily due to the timing of expenditures[45](index=45&type=chunk) [3. Property and Equipment, Net](index=11&type=section&id=3.%20Property%20and%20Equipment%2C%20Net) This note details the company's property and equipment, including depreciation and recent transfers | Components (in thousands) | Sep 30, 2019 | Dec 31, 2018 | | :------------------------ | :----------- | :----------- | | Total property and equipment | $237,436 | $217,868 | | Less accumulated depreciation | $(103,691) | $(67,777) | | Net property and equipment | $133,745 | $150,091 | - In June **2019**, Ebus, Inc. transferred property **valued at approximately $7,000** to the Company, reducing the **outstanding promissory note balance**[50](index=50&type=chunk)[52](index=52&type=chunk) [4. Notes Receivable](index=11&type=section&id=4.%20Notes%20Receivable) This note describes the company's outstanding notes receivable, including loan details and allowances - A **$500,000** loan to Ebus, Inc. **defaulted** on September **30, 2018**, leading to a **$200,000** allowance for bad debt and the transfer of **$7,000** in vehicles to **reduce the note**[52](index=52&type=chunk) - The Company also has a **$200,000 secured promissory note** (plus an additional **$38,000** loan in **May 2019**) with an energy storage technology company, **convertible into preferred stock** of the borrower[53](index=53&type=chunk) [5. Debt](index=12&type=section&id=5.%20Debt) This note provides information on the company's debt obligations, specifically its line of credit - As of September **30, 2019**, the Company had **approximately $5 million principal outstanding** on its variable-interest line of credit with Morgan Stanley, secured by cash and cash equivalents, with **approximately $2 million** in **undrawn borrowing availability**[55](index=55&type=chunk) [6. Common Stock](index=12&type=section&id=6.%20Common%20Stock) This note details the company's common stock activities, including public offerings and shares issued - In January **2018**, the Company completed a public offering of **3,666,667 units**, generating **approximately $9.8 million** in **net proceeds**[56](index=56&type=chunk) - As of September **30, 2019**, **180,664 shares** of common stock were **issued to a consultant** as part of their monthly compensation[58](index=58&type=chunk) [7. Stock Warrants](index=12&type=section&id=7.%20Stock%20Warrants) This note provides information on outstanding stock warrants, including exercise prices and contractual lives | Stock Warrants | Number of Shares | Average Exercise Price | Average Remaining Contractual Life (years) | | :------------- | :--------------- | :--------------------- | :----------------------------------------- | | Outstanding at Sep 30, 2019 | 7,556,323 | $4.45 | 3.0 | | Exercisable at Sep 30, 2019 | 7,556,323 | $4.45 | 3.0 | - As of September **30, 2019**, all **outstanding warrants** had **no intrinsic value**[59](index=59&type=chunk) [8. Stock-Based Compensation](index=13&type=section&id=8.%20Stock-Based%20Compensation) This note explains the company's stock-based compensation plans and related expenses - **Stock-based compensation expense decreased significantly** from **$6.1 million** for the nine months ended September **30, 2018**, to **$730,192** for the same period in **2019**[65](index=65&type=chunk) - Options to purchase **1,095,000 shares** of common stock were granted to employees and directors in **April 2019**, with an exercise price of **$0.45** per share and a fair market value of **$205,118**[64](index=64&type=chunk) - As of September **30, 2019**, **outstanding options** to purchase **14,297,902 shares** of common stock attributable to the former CTO, Edward R. Monfort, **remained suspended and unexercisable**[62](index=62&type=chunk) [9. Commitments](index=13&type=section&id=9.%20Commitments) This note outlines the company's contractual obligations, including operating leases and employment contracts | Contractual Commitments (as of Sep 30, 2019) | Total | Less than one year | 1 - 3 years | 4 - 5 years | | :------------------------------------------- | :------------ | :----------------- | :------------ | :------------ | | Operating lease obligations | $413,643 | $117,771 | $243,072 | $52,800 | | Employment contracts | $1,984,000 | $512,000 | $874,000 | $598,000 | | **Total** | **$2,397,643**| **$629,771** | **$1,117,072**| **$650,800** | - The Company renewed its CEO's employment agreement for **five years** with an **annual base salary of $294,000**, **effective September 16, 2019**[73](index=73&type=chunk) - A month-to-month facility-sharing arrangement with Ebus in Downey, California, requires monthly reimbursements of **approximately $10,600** for R&D, assembly, and storage[71](index=71&type=chunk) [10. Contingencies](index=14&type=section&id=10.%20Contingencies) This note describes potential liabilities arising from legal proceedings and other uncertain events - The Company is **vigorously defending** a lawsuit filed by former CTO Edward R. Monfort alleging breach of contract, fraud, and equity ownership disputes, with a **motion for summary judgment** scheduled for October **31, 2019**[74](index=74&type=chunk) - A **purported class action lawsuit** alleging materially false and misleading statements in the **2017** Regulation A offering is proceeding to **preliminary discovery** after the court overruled defendants' joint demurrer to the third amended complaint[76](index=76&type=chunk) - An investor, Alan Brooks, filed a lawsuit **seeking $13.5 million in damages**, **alleging breach of contract, fraud, and other violations** related to the **non-release of common stock shares**[77](index=77&type=chunk) [11. Subsequent Events](index=15&type=section&id=11.%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period but before financial statement issuance - On October **4, 2019**, **$680,000** was **transferred to reduce the principal balance** on the Morgan Stanley line of credit, resulting in a **new balance of $4.3 million** and **$6.65 million in maximum available borrowing**[78](index=78&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=16&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the Company's business, discusses key factors influencing its performance, details the components of its financial results, and analyzes its liquidity and capital resources - As of September **30, 2019**, the Company had **$3.1 million** in cash and cash equivalents and **$4.8 million** in marketable securities, which management believes will be **sufficient to fund operations** for the next **12 months**, though additional capital may be needed if the business plan is not successfully executed[107](index=107&type=chunk) - The Company has a **backlog** of **three zero-emission electric school buses**, **eight drivetrain systems**, **four zero-emission cargo vans**, **10 zero-emission Class 4 trucks**, and **10 e-trikes**[107](index=107&type=chunk) - The Company's line of credit with Morgan Stanley had a **principal outstanding of approximately $5 million** and **undrawn availability of approximately $2 million** as of September **30, 2019**, which was subsequently reduced to **approximately $4.3 million** outstanding with **approximately $6.65 million** available after a **$680,000** transfer on October **4, 2019**[114](index=114&type=chunk)[78](index=78&type=chunk) [Overview](index=16&type=section&id=Overview) This section provides a high-level summary of ADOMANI's business model, products, and financial performance trends - ADOMANI designs **zero-emission electric drivetrain systems** and **re-power conversion kits** for school buses and commercial fleet vehicles, and provides new **zero-emission electric vehicles**, with plans to expand product offerings and international sales through OEM partners[81](index=81&type=chunk)[83](index=83&type=chunk) | Net Loss (in millions) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Loss | $(1.2) | $(1.5) | $(4.0) | $(9.7) | [Factors Affecting Our Performance](index=16&type=section&id=Factors%20Affecting%20Our%20Performance) This section discusses the critical internal and external elements that influence the company's operational and financial outcomes - Key performance factors include the ability to attract new customers amidst competition, overcome financing barriers and inadequate electrical infrastructure, and manage increased operating expenses from investments in R&D, manufacturing, sales, and marketing[85](index=85&type=chunk)[86](index=86&type=chunk) - The Company's success depends on establishing a robust dealer and service network with appropriately trained technicians for **zero-emission electric drivetrain systems**, as well as the continued availability of government subsidies for electric vehicle purchases[88](index=88&type=chunk)[89](index=89&type=chunk) - Future growth is anticipated from expanding product offerings through OEM partnerships and entering additional geographic markets, particularly internationally in regions like China, Malaysia, and the Philippines[90](index=90&type=chunk)[91](index=91&type=chunk) [Components of Results of Operations](index=17&type=section&id=Components%20of%20Results%20of%20Operations) This section breaks down the key revenue and expense categories that constitute the company's financial results - Sales are recognized from **zero-emission electric drivetrain systems**, new electric vehicles, **re-power conversion kits**, and engineering services, in accordance with ASC Topic **606**[92](index=92&type=chunk) - Cost of sales includes material, freight, labor, and other costs related to product development, manufacturing, distribution, and inventory valuation adjustments[93](index=93&type=chunk) - General and administrative expenses encompass corporate, personnel, stock-based compensation, investor relations, warranty, and marketing costs[94](index=94&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance over specific periods, highlighting sales, costs, and expenses | Financial Metric (in millions) | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 | | :----------------------------- | :------ | :------ | :------ | :------ | | Sales | $5.7 | $2.6 | $10.6 | $3.8 | | Cost of Sales | $5.3 | $2.5 | $9.8 | $3.7 | | General and Administrative Expenses | $1.6 | $1.5 | $4.4 | $9.3 | | Consulting Expenses | $0.066 | $0.038 | $0.220 | $0.133 | | Research and Development Expenses | $0.010 | $0.045 | $0.158 | $0.641 | - Sales for both the three and nine months ended September **30, 2019**, primarily consisted of products and services sold to Blue Bird Corporation, with an **unexpected adjustment** related to DOE work recognized in **Q3 2019**[99](index=99&type=chunk) - General and administrative expenses for the nine months ended September **30, 2019**, **decreased by $4.9 million**, primarily due to a **$5.3 million decrease** in non-cash stock-based compensation expense compared to the prior year[103](index=103&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, fund operations, and meet its financial obligations [Cash Flows](index=20&type=section&id=Cash%20Flows) This section details the sources and uses of cash from operating, investing, and financing activities | Cash Flow Activity (in millions) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3.961) | $(9.742) | | Net cash used in operating activities | $(3.1) | $(4.1) | | Net cash provided by (used in) investing activities | $(0.9) | $0.2 | | Net cash provided by financing activities | $3.3 | $9.2 | | Net change in cash and cash equivalents | $(0.7) | $5.4 | - Net cash used in operating activities **decreased by approximately $1 million**, from **$4.1 million** in **2018** to **$3.1 million** in **2019**, **primarily due to reduced operating losses and changes in working capital**[120](index=120&type=chunk)[121](index=121&type=chunk) - Net cash provided by financing activities **decreased by approximately $6 million**, from **$9.2 million** in **2018** (**driven by a public offering**) to **$3.2 million** in **2019** (**primarily from the line of credit**)[124](index=124&type=chunk)[125](index=125&type=chunk) [Contractual Obligations](index=22&type=section&id=Contractual%20Obligations) This section outlines the company's future payment commitments under various agreements - There were **no material changes** to contractual obligations from the prior Annual Report on Form **10-K**, and Blue Bird Corporation **assumed all warranty liabilities** for drivetrain systems sold prior to the termination of their supply agreement on **May 31, 2019**[127](index=127&type=chunk)[128](index=128&type=chunk) [Off-Balance Sheet Arrangements](index=22&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any financial arrangements that are not recognized on the company's balance sheet - The Company did not have any **off-balance sheet arrangements** during the periods presented and does not currently have any[129](index=129&type=chunk) [Contingencies](index=22&type=section&id=Contingencies) This section addresses potential future liabilities arising from uncertain events, such as legal disputes - Management assesses contingent liabilities related to legal proceedings, **accruing estimated liabilities when probable and estimable**, and **disclosing reasonably possible losses**[130](index=130&type=chunk) [Stock-Based Compensation](index=22&type=section&id=Stock-Based%20Compensation) This section explains the accounting treatment and impact of equity awards on the company's financial statements - The cost of services received for equity instrument awards is **measured at fair value on the grant date** and **recognized over the vesting period**[131](index=131&type=chunk) [Fair Value Measurement](index=22&type=section&id=Fair%20Value%20Measurement) This section describes how the company measures the fair value of its financial instruments - The **carrying values of short-term financial instruments** like cash, notes receivable, and accounts payable **approximate their fair value**, and the Company does **not have assets or liabilities measured at fair value on a recurring basis**[132](index=132&type=chunk)[133](index=133&type=chunk) [Jumpstart Our Business Startups Act of 2012 ("JOBS Act")](index=23&type=section&id=Jumpstart%20Our%20Business%20Startups%20Act%20of%202012%20%28%22JOBS%20Act%22%29) This section explains the company's status as an emerging growth company and its election regarding accounting standards - As an "**emerging growth company**" under the JOBS Act, ADOMANI has **elected not to use the extended transition period** for new accounting standards but **relies on other exemptions**, such as **reduced reporting requirements**[135](index=135&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section addresses the Company's exposure to market risks, specifically interest rate risk and foreign currency exchange rate risk, concluding that it does not currently face material market risks - The Company is exposed to interest rate risk on its **variable-rate line of credit**; a **hypothetical 10% adverse movement** in **30-day LIBOR** would **increase annual interest expense** by **approximately $8,700** based on the October **4, 2019** outstanding balance[138](index=138&type=chunk) - While **most expenses are USD-denominated**, **future international commercialization efforts** may **expose the Company to foreign currency exchange rate risk**, particularly with the Chinese Yuan, though anticipated matching of foreign sales and costs may **mitigate this**[140](index=140&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness, and reports no material changes in internal control over financial reporting during the period - Management, with CEO and CFO participation, **concluded that the Company's disclosure controls and procedures were effective** as of September **30, 2019**, **ensuring timely and accurate reporting**[141](index=141&type=chunk) - There were **no changes in internal control over financial reporting** during the nine months ended September **30, 2019**, that **materially affected** or are **reasonably likely to materially affect** the Company's internal control over financial reporting[142](index=142&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section details legal proceedings, updated risk factors, and other required disclosures for the reporting period [ITEM 1. LEGAL PROCEEDINGS](index=25&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines the material legal proceedings against the Company, including lawsuits from a former CTO, a purported class action, and an investor, all of which the Company believes are without merit and intends to vigorously defend - The Company is defending against a lawsuit by former CTO Edward R. Monfort, alleging breach of contract and fraud, and has **filed counterclaims**[147](index=147&type=chunk) - A **class action lawsuit**, M.D. Ariful Mollik v. ADOMANI, Inc. et al., alleging false and misleading statements in a **2017** offering, is proceeding to **preliminary discovery**[148](index=148&type=chunk) - Investor Alan Brooks filed a complaint **seeking $13.5 million in damages**, **alleging breach of contract, fraud, and other violations** related to the **non-release of common stock shares**[150](index=150&type=chunk) [ITEM 1A. RISK FACTORS](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, primarily focusing on the recent delisting of the Company's common stock from NASDAQ and its transition to trading on the OTCQB Venture Market, and the potential adverse consequences for stockholders - ADOMANI's common stock was **delisted from NASDAQ** on August **22, 2019**, due to **failure to comply with the minimum bid price requirement**, and now **trades on the OTCQB Venture Market** under the symbol 'ADOM'[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - **Trading on the OTC Markets could lead to significant adverse consequences** for stockholders, including **limited market quotations**, **reduced liquidity**, and a **decreased ability** for the Company to **issue additional securities or obtain future financing**[156](index=156&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - **None**[156](index=156&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities during the reporting period - **None**[157](index=157&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - **Not applicable**[158](index=158&type=chunk) [ITEM 5. OTHER INFORMATION](index=27&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - **None**[159](index=159&type=chunk) [ITEM 6. EXHIBITS](index=28&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including employment agreements, certifications, and XBRL documents - **Exhibits include** the **Employment Agreement with James L. Reynolds**, Rule **13a-14(a)/15d-14(a) Certifications of the CEO and CFO**, **18 U.S.C. Section 1350 Certifications**, and various **XBRL Taxonomy Extension Documents**[161](index=161&type=chunk) [SIGNATURES](index=29&type=section&id=Signatures) This section contains the official certifications and signatures of the company's principal executive and financial officers - The report was **duly signed** on October **24, 2019**, by James L. Reynolds, President and Chief Executive Officer, and Michael K. Menerey, Chief Financial Officer[169](index=169&type=chunk)[170](index=170&type=chunk) ```

ADOMANI, Inc. (ADOM) Q3 2019 Results Conference Call October 23, 2019 4:30 PM ET Company Participants Jim Reynolds - President and Chief Executive Officer Mike Menerey - Chief Financial Officer Conference Call Participants Amit Dayal - H.C. Wainwright Ed Woo - Ascendiant Capital Operator Good day, ladies and gentlemen. And welcome to ADOMANI's Third Quarter 2019 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 presentat ...

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, 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 juri ...

Financial Data and Key Metrics Changes - Sales revenue for Q2 2019 was approximately $4.4 million, compared to $744,000 in the same period last year, representing a significant increase [8][28] - Year-to-date sales revenue for the first half of 2019 was approximately $4.8 million, compared to $1.2 million in the first half of 2018, indicating strong growth [8][28] - The backlog at June 30, 2019, was $10.7 million, up from $6.3 million in the same period last year [8] Business Line Data and Key Metrics Changes - The company successfully received a purchase order for four electric cargo vans from Santa Clara County, which is included in the backlog [9] - The company showcased its electric trucks and vans at various events, receiving positive feedback and interest from multiple school districts and municipal agencies [11][16] - The company entered into an exclusive two-year sales and service agreement with Pro-Motive EV and JFP Holdings, expanding its distribution capabilities [12] Market Data and Key Metrics Changes - The Bay Area Air Quality Management District released $50 million in funding for zero-emission vehicles, which could benefit the company [19] - An additional $142 million is expected to be added to the California Air Resources Board program, although delays could push funding into early 2020 [20] Company Strategy and Development Direction - The company aims to capitalize on the growing demand for zero-emission vehicles and believes it can achieve profitability in 2020 [17] - The company is focusing on expanding its product line, including trucks, cargo vans, chassis, and neighborhood electric vehicles (NEVs) [26] - The management team is actively working to strengthen the supply chain and explore alliances with manufacturers in China [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting analyst consensus revenue estimates for the full year 2019, supported by the current backlog [25] - The company is optimistic about the potential growth from its diversified product offerings and the positive feedback received from customers [15][16] - Management acknowledged ongoing delivery issues that have impacted revenue recognition but noted improvements from subcontractors [13][14] Other Important Information - The company has cash and cash equivalents of $7.9 million as of June 30, 2019, with outstanding debt of $4.3 million [40] - General and administrative expenses decreased significantly due to a reduction in non-cash stock-based compensation [31][33] Q&A Session Summary Question: Can you provide any color on what was delivered and to whom? - The $4.4 million in revenue was primarily from drivetrain deliveries to Blue Bird [42] Question: Is the $10.7 million backlog adjusted for canceled orders and completed deliveries? - Yes, the backlog was nearly $19 million before cancellations [43] Question: How do you expect the next two quarters to look? - The expectation is to fill the majority of the remaining backlog, indicating flat to higher quarters compared to Q2 [44] Question: What are the supplier chain issues primarily related to? - The issues stem from manufacturing changes at Cummins, which have caused delays in production [45] Question: How will the company balance execution on current orders with increased sales capacity? - Sales activities are focused on new electric vehicle products while operations handle drivetrain orders [50] Question: What are the anticipated expenses associated with the new property in California? - The expense is less than $10,000 a month, and the property will be used for vehicle storage, demonstrations, and R&D [52] Question: How would you characterize your relationship with Blue Bird? - The relationship is good, but Blue Bird has moved to purchase directly from Cummins, which may affect competitiveness [56] Question: What is the competitive landscape like? - There are many competitors in the space, but the company believes it has a unique position with its purpose-built vehicles [58][60]

ADOMANI, Inc. (ADOM) Q1 2019 Earnings Conference Call May 2, 2019 4:30 PM ET Company Participants James Carbonara - Investor Relations James Reynolds - President and Chief Executive Officer Michael Menerey - Chief Financial Officer Conference Call Participants Amit Dayal - H.C. Wainwright Edward Woo - Ascendiant Capital Operator Good day, ladies and gentlemen, and welcome to ADOMANI’s First Quarter 2019 Earnings Call. All lines have been place in a listen-only mode and the floor will be open for your questi ...

Financial Performance - Net loss for the three months ended March 31, 2019, was $1,449,000 compared to a net loss of $4,077,000 for the same period in 2018, representing a 64.5% improvement[20] - Sales for the three months ended March 31, 2019, were $464,000, while the cost of sales was $479,000, resulting in a gross loss of $15,000[20] - Operating expenses totaled $4,120,000 for the three months ended March 31, 2019, compared to $4,135,000 for the same period in 2018, indicating a slight decrease[20] - The company reported a net cash used in operating activities of $794,000 for the three months ended March 31, 2019, compared to $1,974,000 for the same period in 2018, a reduction of approximately 59.8%[27] - Stock-based compensation expense for the three months ended March 31, 2019, was $253,000, down from $2,964,000 for the same period in 2018, a decrease of approximately 91.5%[27] - Research and development costs for the three months ended March 31, 2019, were $45,000, a decrease of approximately 71.2% compared to $155,933 for the same period in 2018[47] Assets and Liabilities - Total current assets decreased from $10,180,000 as of December 31, 2018, to $9,595,000 as of March 31, 2019, a decline of approximately 5.73%[16] - The company had total liabilities of $3,801,000 as of March 31, 2019, up from $3,229,000 as of December 31, 2018, reflecting an increase of approximately 17.7%[16] - Cash and cash equivalents decreased from $3,759,000 at the beginning of the period to $2,385,000 at the end of the period, a decline of approximately 36.5%[27] - The company reported trade accounts receivable of $382,732 as of March 31, 2019, down from $996,621 as of December 31, 2018, indicating a significant decrease of approximately 62.7%[41] - Inventory deposits amounted to $872,661 as of March 31, 2019, slightly down from $882,050 as of December 31, 2018[42] - The net property and equipment value was $145,019 as of March 31, 2019, down from $150,091 as of December 31, 2018, reflecting a decrease of about 3.4%[51] Financing and Capital Structure - The company secured a line of credit with a principal amount outstanding of approximately $2.5 million as of March 31, 2019, with undrawn borrowing availability of $4.5 million[55] - The company completed a follow-on offering of 3,666,667 units, raising approximately $11.0 million in gross proceeds, with net proceeds of about $9.8 million after expenses[57] - As of March 31, 2019, the company had issued warrants to purchase a total of 7,556,323 shares of common stock, with a weighted average exercise price of $4.45 and a remaining contractual life of 3.5 years[60] - The company's outstanding options had an intrinsic value of approximately $6.9 million as of March 31, 2019, excluding certain suspended options[66] - The company has future minimum payments under contractual commitments totaling approximately $1,140,209 as of March 31, 2019[72] Accounting and Compliance - The company does not have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis[35] - The company has implemented new accounting guidance effective in 2019, which has minimal impact on its financial statements[48] Other Considerations - A hypothetical 10% adverse movement in 30-day LIBOR would increase the company's annual interest expense by approximately $250,000[131] - The company engaged a consultant for sales and marketing expertise, agreeing to pay $7,500 per month, which includes $5,000 in common stock[59] - The company anticipates that its international selling, marketing, and administrative costs related to foreign sales will largely be denominated in the same foreign currency, potentially mitigating foreign currency exchange risk exposure[133]

PART I [Business](index=4&type=section&id=Item%201.%20Business) ADOMANI, Inc. designs and facilitates the manufacturing of zero-emission electric and hybrid drivetrain systems for commercial fleet vehicles, achieving its first significant revenue of **$5.0 million** in 2018 while continuing to operate at a net loss - The company's core business is designing advanced zero-emission electric and hybrid drivetrain systems for new commercial vehicles and as re-power conversion kits for existing combustion-powered vehicles[18](index=18&type=chunk) Financial Performance Snapshot (2017-2018) | Metric | 2018 | 2017 | | :--- | :--- | :--- | | **Revenue** | $5.0 million | Minimal | | **Net Loss** | $11.0 million | $21.9 million | - As of December 31, 2018, the company has shipped **22 drivetrain systems** and has **34 additional systems** in production for scheduled delivery in 2019[51](index=51&type=chunk) - The company has established key partnerships, including an exclusive supply agreement with Blue Bird for Type C and D school bus drivetrains and a manufacturing agreement with Efficient Drivetrains, Inc. (EDI), a subsidiary of Cummins[83](index=83&type=chunk)[86](index=86&type=chunk) [Market Overview and Drivers](index=4&type=section&id=Market%20Overview%20and%20Drivers) The electric commercial vehicle market is driven by stringent environmental regulations, climate change concerns, volatile fuel prices, and government incentives, with significant growth projected globally - Stricter emissions standards from the EPA, CARB, and international bodies are increasing the costs of traditional diesel power systems and driving adoption of alternative fuels[22](index=22&type=chunk) - The International Energy Agency (IEA) forecasts the global electric vehicle fleet will grow from **3.1 million** in 2017 to **125 million** by 2030, with government policy being a key driver[25](index=25&type=chunk) - Buses represent a promising near-term market for electrification due to public purchasing, lower fuel and maintenance costs, and significant environmental benefits, such as a **78 metric ton** annual reduction in GHG emissions per electric bus compared to diesel[31](index=31&type=chunk)[36](index=36&type=chunk) - The U.S. has **480,000 school buses**, making it a significant potential market for electrification due to short, predictable routes and the health benefits of reducing children's exposure to tailpipe emissions[41](index=41&type=chunk) [Business Strategy and Products](index=9&type=section&id=Business%20Strategy%20and%20Products) ADOMANI's strategy focuses on expanding its sales network, forming manufacturing partnerships, securing government incentive approvals, and developing zero-emission electric drivetrain systems for commercial vehicles - Key strategies include developing an experienced sales staff, building dealership networks, seeking manufacturing partners, and obtaining approvals for incentive programs like the California HVIP[59](index=59&type=chunk) - The company's target customers are public and private fleet operators, including K-12 schools, universities, transit agencies, and package delivery companies[61](index=61&type=chunk) - Core products include zero-emission electric drivetrain systems for new vehicles and re-powering existing vehicles, as well as purpose-built zero-emission vehicles manufactured by OEM partners[62](index=62&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) [Partnerships and Competition](index=15&type=section&id=Partnerships%20and%20Competition) The company relies on strategic partnerships, including an exclusive agreement with Blue Bird, but faces the potential termination of a key manufacturing agreement with EDI and intense competition from established automotive and specialized EV manufacturers - ADOMANI has a three-year exclusive agreement to provide Blue Bird with zero-emission electric drivetrain systems for its Type C and D school buses[83](index=83&type=chunk) - The manufacturing agreement with Efficient Drivetrains, Inc. (EDI) is set to be terminated by its parent company, Cummins, effective May 30, 2019, with ADOMANI in discussions regarding future manufacturing[86](index=86&type=chunk) - The company faces competition from established automotive giants (Ford, GM, Mercedes-Benz) and specialized electric vehicle manufacturers (Proterra, Lion Electric, BYD, Motiv)[93](index=93&type=chunk) [Governmental Programs and Regulation](index=18&type=section&id=Governmental%20Programs%20and%20Regulation) Government subsidies and incentives are crucial for customer purchasing decisions, with ADOMANI targeting programs like California's HVIP, while its products must comply with extensive environmental and safety regulations - The company's growth depends significantly on the availability of government subsidies and incentives, which are crucial for customers[98](index=98&type=chunk) - Key incentive programs include the California HVIP, offering vouchers up to **$220,000** per new school bus, and the NYT-VIP, offering up to **$150,000** per vehicle[100](index=100&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk) - The company's products are subject to extensive government regulation, including EPA and NHTSA emission and fuel economy standards, the National Traffic and Motor Vehicle Safety Act, and battery safety testing protocols[118](index=118&type=chunk)[119](index=119&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of net losses, dependence on market acceptance of electric vehicles, intense competition, reliance on third-party suppliers, and potential delisting from Nasdaq due to low stock price - The company has a history of losses, incurring net losses of **$11.0 million** in 2018 and **$21.9 million** in 2017, and may not achieve or sustain profitability[130](index=130&type=chunk) - Growth is highly dependent on market demand for zero-emission vehicles, which can be affected by perceptions of quality, cost, range limitations, and the availability of charging infrastructure[138](index=138&type=chunk)[139](index=139&type=chunk) - The company faces intense competition from established manufacturers like Ford, Nissan, and Freightliner, who have substantially greater financial and operational resources[145](index=145&type=chunk) - Dependence on third-party suppliers for components creates risks of supply chain disruption, highlighted by the intended termination of the manufacturing agreement by Cummins/EDI effective May 30, 2019[165](index=165&type=chunk)[168](index=168&type=chunk) - The company's common stock is at risk of being delisted from The NASDAQ Capital Market for failing to meet the minimum **$1.00** per share bid price requirement, with an extension granted until August 12, 2019, to regain compliance[249](index=249&type=chunk) [Unresolved Staff Comments](index=46&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) This section is not applicable as the company has no unresolved staff comments - Not applicable[260](index=260&type=chunk) [Properties](index=46&type=section&id=Item%202.%20Properties) The company's principal office is located in Corona, California, supplemented by additional leased office and storage spaces across several other California locations - The company's principal office is in Corona, California, with additional leased spaces in Los Altos, Pomona, Santa Ana, San Francisco, and Stockton, California[261](index=261&type=chunk) [Legal Proceedings](index=46&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in two significant legal proceedings: a lawsuit from its former CTO regarding equity ownership and a purported class action lawsuit alleging misleading statements in its 2017 Regulation A offering - The company is defending a lawsuit from its former CTO, Edward R. Monfort, concerning breach of contract and fraud related to equity, and has filed counterclaims[263](index=263&type=chunk) - A purported class action lawsuit has been filed against the company, alleging materially false and misleading statements in its June 2017 Regulation A offering documents[265](index=265&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[266](index=266&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=48&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ADOMANI's common stock trades on the Nasdaq Capital Market, with approximately **122** record holders as of February 7, 2019, and the company has never paid dividends, intending to retain earnings for growth - The company's common stock trades on Nasdaq under the symbol "ADOM"[267](index=267&type=chunk) - The company has never declared or paid dividends and does not plan to in the foreseeable future, retaining earnings for growth[269](index=269&type=chunk) [Selected Financial Data](index=48&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not applicable - Not applicable[272](index=272&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2018, ADOMANI generated **$5.0 million** in revenue, a significant increase from 2017, and reduced its net loss to **$11.0 million** due to lower stock-based compensation, with **$7.7 million** in cash and marketable securities supporting operations for the next eighteen months [Results of Operations](index=51&type=section&id=Results%20of%20Operations) For the year ended December 31, 2018, sales dramatically increased to **$5.0 million** from **$425,000** in 2017, primarily driven by sales to Blue Bird, leading to a reduced net loss of **$11.0 million** due to lower non-cash stock-based compensation expense Comparison of Operations (2018 vs. 2017) | In thousands | 2018 | 2017 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Sales** | $5,011 | $425 | $4,586 | 1,079.1% | | **Cost of goods sold** | $4,878 | $479 | $4,399 | 918.4% | | **Gross profit (loss)** | $133 | $(54) | - | - | | **Total operating expenses** | $11,508 | $21,544 | $(10,036) | -46.6% | | **Net loss** | $(11,048) | $(21,903) | $10,855 | -49.6% | - The decrease in operating expenses was primarily due to an **$8.6 million** reduction in non-cash stock-based compensation expense, which fell from **$15.0 million** in 2017 to **$6.4 million** in 2018[298](index=298&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2018, the company held **$3.8 million** in cash and **$3.9 million** in marketable securities, bolstered by **$9.8 million** in net proceeds from a January 2018 public offering, which management believes is sufficient to fund operations for the next eighteen months Cash Flow Summary (in thousands) | Activity | 2018 | 2017 | | :--- | :--- | :--- | | **Cash used in operating activities** | $(4,511) | $(5,578) | | **Cash used in investing activities** | $(3,705) | $(614) | | **Cash provided by financing activities** | $9,529 | $7,700 | - In January 2018, a follow-on public offering of units raised gross proceeds of **$11.0 million**, resulting in net proceeds of approximately **$9.8 million**[320](index=320&type=chunk) - The company repaid the remaining **$2.1 million** balance of its 9% secured notes in January 2018 using proceeds from the follow-on offering[302](index=302&type=chunk)[321](index=321&type=chunk) - As of December 31, 2018, the company had cash and cash equivalents of **$3.8 million** and short-term liquid marketable securities of **$3.9 million**[315](index=315&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company currently faces minimal market risks from interest rate fluctuations or foreign currency exchange, though future international expansion could introduce foreign currency exposure - The company does not currently face material market risks from interest rate fluctuations or foreign currency exchange[343](index=343&type=chunk) - Future international commercialization efforts, especially in China, may expose the company to foreign currency exchange rate risks[344](index=344&type=chunk) [Financial Statements and Supplementary Data](index=60&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2018 and 2017, including balance sheets, statements of operations, stockholders' equity, and cash flows, with an unqualified opinion from MaloneBailey, LLP Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | **Total Current Assets** | $10,180 | $4,449 | | **Total Assets** | $10,833 | $5,322 | | **Total Current Liabilities** | $3,010 | $2,693 | | **Total Liabilities** | $3,229 | $2,982 | | **Total Stockholders' Equity** | $7,604 | $2,340 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2018 | 2017 | | :--- | :--- | :--- | | **Sales** | $5,011 | $425 | | **Gross Profit (Loss)** | $133 | $(54) | | **Loss from Operations** | $(11,375) | $(21,598) | | **Net Loss** | $(11,048) | $(21,903) | | **Net Loss Per Share** | $(0.15) | $(0.33) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=80&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure during the period - None[456](index=456&type=chunk) [Controls and Procedures](index=80&type=section&id=Item%209A.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that disclosure controls and procedures were effective, and management also deemed internal control over financial reporting effective, with no material changes reported in Q4 2018 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[459](index=459&type=chunk) - Management concluded that the company's internal control over financial reporting was effective[460](index=460&type=chunk) [Other Information](index=80&type=section&id=Item%209B.%20Other%20Information) There is no other information to report in this section - None[463](index=463&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=81&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's definitive proxy statement or an amendment to this Form 10-K, to be filed within **120 days** of December 31, 2018 - Information is incorporated by reference from a future proxy statement filing[465](index=465&type=chunk) [Executive Compensation](index=81&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the company's definitive proxy statement or an amendment to this Form 10-K, to be filed within **120 days** of December 31, 2018 - Information is incorporated by reference from a future proxy statement filing[466](index=466&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=81&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item is incorporated by reference from the company's definitive proxy statement or an amendment to this Form 10-K, to be filed within **120 days** of December 31, 2018 - Information is incorporated by reference from a future proxy statement filing[467](index=467&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=81&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the company's definitive proxy statement or an amendment to this Form 10-K, to be filed within **120 days** of December 31, 2018 - Information is incorporated by reference from a future proxy statement filing[468](index=468&type=chunk) [Principal Accounting Fees and Services](index=81&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information for this item is incorporated by reference from the company's definitive proxy statement or an amendment to this Form 10-K, to be filed within **120 days** of December 31, 2018 - Information is incorporated by reference from a future proxy statement filing[469](index=469&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=82&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements indexed under Item 8 and provides a detailed index of exhibits filed with the Annual Report, including corporate governance documents and material contracts - This section contains the index of financial statements and a list of all exhibits filed with the Form 10-K[471](index=471&type=chunk)[472](index=472&type=chunk) [Form 10-K Summary](index=85&type=section&id=Item%2016.%20Form%2010-K%20Summary) There is no Form 10-K summary provided - None[479](index=479&type=chunk)