Item 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
During the preparation of its Form 10-K for the year ended December 31, 2022,
management of Envirotech Vehicles, Inc. (the "Company") identified misstatements
with respect to recognition of sales revenue and related cost of sales during
each of the three month periods ended March 31, 2022, June 30, 2022 and
September 30, 2022. Management identified vehicle sales transactions where sales
revenue and related cost of sales were incorrectly recognized at the time of
approval of customer purchase incentives by certain government-sponsored
electric vehicle incentive programs. Management determined that such approval
did not coincide with a transfer of control under Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers, and that revenue
should have been recognized upon delivery of the vehicles to the customer. This
resulted in overstatement in the reported amounts of sales, cost of sales, gross
profit and accounts receivable, and understatement in the reported amounts of
inventory and net loss, for the interim periods ended March 31, 2022, June 30,
2022, and September 30, 2022. To the extent that vehicles were delivered in a
subsequent period, the Company will recognize the revenue in the period of
delivery. Under the restatements, the Company will recognize the same amount of
revenue in later periods for approximately 32 net vehicles that were delivered
later in 2022 or 2023, and will not recognize revenue for 13 vehicles which have
not yet been delivered.
On March 30, 2023, the Company's management and the Audit Committee of the Board
of Directors decided it was necessary to amend Forms 10-Q for the quarterly
periods ended March 31, 2022, June 30, 2022, and September 30, 2022, to correct
the unaudited interim consolidated financial statements for the misstatements
identified above. Accordingly, investors should no longer rely on the Company's
previously released interim unaudited consolidated financial statements for
(1) the three months ended March 31, 2022, (2) the three- and six-month periods
ended June 30, 2022, and (3) the three- and nine-month periods ended
September 30, 2022. The restated financial statements to be included in the
amended Forms 10-Q should be relied on in lieu of the interim unaudited
consolidated financial statements included in the Company's original Forms 10-Q
for the quarterly periods ended March 31, 2022, June 30, 2022, and September 30,
2022. Although the Company cannot yet estimate when it will complete the
restatements and file its amended reports, it is diligently pursuing completion
of the restatements and intends to file the amended reports as soon as
reasonably practicable.
MaloneBailey, LLP ("MaloneBailey"), the Company's independent registered public
accounting firm, concurred with the Company's decision to amend the Forms 10-Q
for the quarterly periods ended March 31, 2022, June 30, 2022, and September 30,
2022. The Company's management and its Audit Committee discussed with
MaloneBailey the matters described in this Form 8-K.
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