Note 4 - Debt

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Debt Disclosure [Text Block]

4. Debt

Notes Payable

On July 15, 2022, the Company entered into an equipment financing agreement with Wells Fargo Bank, N.A. in connection with the purchase of facility grounds equipment. The $25,007 loan is payable over 36 months, beginning in August 2022, with monthly payments of $521. The balance of this note is $11,983 of which $6,252 is classified as Notes Payable - current and $5,731 is classified as Notes Payable - long term on the Company's consolidated balance sheets on September 30, 2024.

Effective August 20, 2023, the Company entered into a premium financing agreement with First Insurance Funding to finance insurance coverages other than its directors' and officers' insurance coverages. The $467,074 loan is payable over nine months, beginning in September 2023, and bears interest at 8.2% with monthly payments of $53,675. The balance of this note, including accrued interest, is $0 on September 30, 2024.

Effective June 15, 2024, the Company entered into a premium financing agreement with First Insurance Funding to finance its directors' and officers' insurance coverages. The $232,067 loan is payable over nine months, beginning in July 2024, and bears interest at 8.25% with monthly payments of $24,093. The balance of this note, including accrued interest, is $164,108 on September 30, 2024.

Effective August 20, 2024, the Company entered into a premium financing agreement with AFCO Insurance Premium Finance to finance insurance coverages other than its directors' and officers' insurance coverages. The $417,051 loan is payable over eleven months, beginning in September 2024, and bears interest at 8.24% with monthly payments of $39,493. The balance of this note, including accrued interest, is $419,913 on September 30, 2024.

Convertible Note

On January 18, 2024, the Company entered into a convertible promissory note agreement ("Note") for $1,000,000 with an unrelated third-party investor ("Investor"). The origination fee of the Note was $99,000 and the maturity date of the Note was  September 30, 2024. The Investor was entitled to convert the Note into common stock at the greater of $1.50 per share or at 90% of the share price of the Company's common stock on the maturity date. The Investor also had a security interest in the assets of the Company in the event of non-payment of the Note. In addition, the Investor received options to purchase 800,000 share of the Company's common stock at $1.50 per share. These options expire two years from the date of the Note. On May 6, 2024, the Note was cancelled and replaced with a short-term note. During the third quarter of 2024, the short-term note was converted into 505,051 shares of common stock.

The Company has elected to measure the Note and options at fair value. In estimating the fair value of the Note, a Monte Carlo simulation model is applied. The required inputs include the current stock price, the risk-free rate and volatility of the common stock. The Note's fair value is classified as Level 2 under the fair value hierarchy as provided by ASC 820. In estimating the fair value of the options, the Black-Scholes Merton Model is used. The required inputs include the current stock price, the exercise price, the term of the options, the risk-free rate and the volatility of the common stock. The options' fair value is classified a Level 2 under the air value hierarchy as provided by ASC 820. The fair valuation of the Note and options uses inputs other than quoted prices that are observable either directly or indirectly.

The net proceeds of $901,000 are bifurcated between the Note and the options. The amount allocated to the options is $431,405 which is the fair value on the date of the Note. The remaining proceeds received are allocated to the Note. Under the fair valuation election, both the Note and options are remeasured to their respective fair values at the reporting date. Changes in fair values for the Note and options are recorded as an unrealized gain or loss on convertible note fair value in Other (Expense)/Income in the Company's consolidated statements of operations for the three and nine months ended September 30, 2024. As a result of this election, the Company recorded an unrealized gain of $0 and an unrealized loss $556,174 for the three and nine months ended September 30, 2024 for the Note, respectively, and an unrealized gain of $403,625 and an unrealized loss of $39,609 for the three and nine months ended September 30, 2024 for the Options, respectively.

Related Party Loan

On August 13, 2024, the Company entered into a long-term loan arrangement (the "Oldridge Loan") with Phillip W. Oldridge ("Mr. Oldridge") whereby Mr. Oldridge loaned $300,000 to EVTV. The loan carries an interest rate of 8% and matures on January 1, 2026. The balance of this loan, including accrued interest at September 30, 2024 is $303,000.

	Amount
2024	$	231,816
2025		379,079
2026		307,168
Total Payments	$	918,063