For years, the push towards electric vehicles was hindered by the carrying capacity and durability of electric engines. Their limited capabilities have kept medium to heavy-duty commercial vehicle fleets reliant on gasoline engines, but this is starting to change as more electric vehicle manufacturers tackle the problem. One such innovator is Envirotech Vehicles Inc. (OTCQB: ADOM) – a provider and manufacturer of purpose-built electric vehicles and zero-emission drive trains. Specializing in “last mile” solutions, Envirotech – formerly known as Adomani Inc. – specifically markets to the transport industry such as school districts, institutions of higher learning, as well as public and private transportation service companies.
Given President Biden’s goal of making half of all vehicles sold in the US emissions-free by 2030, heavy-duty transportation fleets will be under mounting pressure to convert their vehicles in the next nine years. Already, California’s outgoing Governor has mandated that all in-state sales of new passenger cars and passenger trucks be zero-emission by 2035. This outright ban will benefit Envirotech – located in Corona, California – as it is indicative of trends that will soon reach Envirotech’s niche with companies’ Class 3, 4, 5, and 6 vehicle fleets.
With over 30 years of industry experience, ADOM is the result of Adomani Incorporated’s recent acquisition of Envirotech Drive Systems on March 15, 2021. The agreement was motivated in part by EVTVDS’ exclusive 50-year distribution agreement with its Canadian counterpart, Envirotech Electric Vehicles, Inc. which Adomani obtained in the merger. This gives the resulting entity – Envirotech Vehicles Inc. – the right to promote sales and obtain orders for its product although it is forbidden from independently appointing additional distributors. Therefore, the US supply of these vehicles is controlled by ADOM.
Before the merger, Adomani Inc. was a provider of “zero-emission electric vehicles focused on total cost of ownership” manufactured by OEM partners in China, Malaysia, and the Philippines. But in October 2020, the company was given a $500,000 loan from Envirotech Drive Systems Inc. and entered into a merger agreement soon after. Now, Envirotech Vehicles Inc. is overseen by CEO Phillip Oldridge who was the former founder and CEO of GreenPower Motor Company, Inc. Affiliated with various bus and coach companies, the company’s CEO clearly has a vision for ADOM’s future.
Similarly, CTO David Oldridge is also President of EVT Motors, Inc. – Envirotech Drive System Inc.’s parent company – and was the co-founder and CTO of GreenPower Motor Company, Inc. The close ties and shared vision of ADOM’s leadership suggests there may be burgeoning plans for this company. This speculation is supported by the 208,442 total shares purchased by two of the company’s Board Members and its CFO in June.
After a stockholders’ meeting on August 3rd, ADOM’s stockholders approved a reverse stock split of outstanding common stock shares for the purpose of uplisting to the NASDAQ. While the exact ratio has yet to be determined by its Board of Directors, it will be a ratio between 1:4 and 1:20. It’s important to note that there is no guarantee ADOM’s application will be approved, but the company will disclose the date for its reverse split in conjunction with its application to meet the market’s minimum trading price requirement.
In 2019 and 2020, ADOM operated at net losses of $957,446 million and $1.2 million for the three months ending September 30, 2020 and 2019 respectively, and $3.3 million and $4 million for the nine months ending September 30, 2020 and 2019, respectively.
The company had cash and cash equivalents totaling $223,712 at the end of September but its latest 10-K explains this will not be enough to sustain operations unless certain subsidy program problems are resolved. Subsidies factor heavily into the company’s strategy, and ADOM has been negatively affected by the California Air Resources Board’s Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (HVIP) backlog.
According to their filing, this delay has impeded the business’ and its customers’ efforts to access HVIP funds, but they are taking steps to rectify the situation and have hired a lobbyist to advocate on their behalf. In the case that it is not resolved, the company must grapple with the anti-dilution rights included in the warrants issued and sold in its 2018 public offering.
Given these upcoming catalysts and the favorable market for EV’s in the US, it is likely ADOM won’t be trading at its current value of $.2700 for long. With a market capitalization of 81.8 million, the stock has a current volume of 7.27 thousand compared to its average of roughly 1.047 million. It also has a notably low float with authorized shares set at 350 million and outstanding shares of approximately 294 million. Of course this will be further reduced with the reverse split. As news of the potential uplisting spreads, ADOM could quickly return to its 52 week high of $.80 and surpass it with more news from the company’s leadership.
As promising as ADOM’s EV model appears, the company’s current financial concerns present significant risk to investors. While the company’s cash flow may improve after resolving subsidy delays with the HVIP, its plans to uplist to the NASDAQ are not likely to materialize any time soon considering the market’s listing minimum of $4 PPS. At the moment, it appears the ADOM is unable to dilute its shares but the company’s future performance is contingent on it securing a sustainable cash flow.
On the other hand, ADOM is in the electric vehicle sector which is quickly heating up, giving it the potential to surpass the pennies mark soon. The stock is notably volatile – as illustrated by its roughly $.0567 drop on August 3rd – but has an approximate support of $.2665 and a resistance of around $.3400. If it passes its long-term resistance level of $.4732 then ADOM likely has the potential for further gains. But book your profits on the way up as long term gains are guaranteed.
Please visit and read our disclaimer here.
Don’t forget we have a Youtube Channel with at least biweekly releases on the latest and greatest runners!