S-1 1 fs12022_evtransportation.htm REGISTRATION STATEMENT

As filed with the Securities and Exchange Commission on September 16, 2022

Registration No. 333-        

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington
, DC 20549

__________________________________________

Form S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

__________________________________________

ev Transportation Services, Inc.
(Exact name of registrant as specified in its charter)

__________________________________________

Delaware

 

3711

 

814109808

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification Number)

__________________________________________

ev Transportation Services, Inc.
1309 Beacon Street — Suite 300
Brookline, MA 02446
Tel: (202) 347
-3359
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

__________________________________________

David Solomont
President & Chief Executive Officer

ev Transportation Services, Inc.
1309 Beacon Street — Suite 300
Brookline, MA 02446
Tel: (617) 800
-0212
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Edwin L. Miller Jr.
Sullivan & Worcester LLP
One Post Office Square
Boston, MA 02109
Tel: (617) 338
-2400

 

Alexander R. McClean
Margaret K. Rhoda
Harter Secrest & Emery LLP
1600 Bausch & Lomb Place
Rochester, NY 14604
Tel: (585) 232
-6500

__________________________________________

Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date hereof.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

 

Accelerated filer 

Non-accelerated filer 

 

Smaller reporting company 

   

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 16, 2022

ev Transportation Services, Inc.

[•] Shares

Common Stock

This is the initial public offering of ev Transportation Services, Inc. No public market currently exists for our common stock. We are offering, on a firm commitment basis, [•] shares of our common stock and anticipate the initial public offering price will be between $[•] and $[•] per share.

We intend to list the common stock on the NASDAQ Capital Market, or NASDAQ, under the symbol “EVTS.” No assurance can be given that our application will be approved. If our application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on NASDAQ, we will not complete this offering.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced reporting requirements for this prospectus and future filings. See “Prospectus Summary — Emerging Growth Company Status.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Investing in our securities is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 5 of this prospectus before purchasing shares of our common stock.

 

Per Share

 

Total

Public Offering Price

 

$

   

$

 

Underwriting Discounts and Commissions(1)

 

$

   

$

 

Proceeds to us, before expenses

 

$

   

$

 

____________

(1)      Does not include warrants that are issuable by us to the representative of the underwriters for 6% of the shares of common stock sold in the offering at a price per share equal to 125% of the initial public offering price or certain out-of-pocket expenses of the underwriters that are reimbursable by us. See “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the representative of the underwriters a 45-day option to purchase from us, up to an additional [•] shares of common stock at the public offering price of $            per share, less the underwriting discounts and commissions, to cover over-allotments, if any. If the representative of the underwriters exercises the option in full, the total underwriting discounts and commissions payable will be $            , and the total proceeds to us, before expenses, will be $            . Delivery of the shares is expected to be made on or about            , 2022.

Sole Book-Running Manager

Maxim Group LLC

The date of this prospectus is            , 2022.

 

Table of Contents

 

Table of Contents

 

Table of Contents

TABLE OF CONTENTS

 

Page

Prospectus Summary

 

1

Risk Factors

 

5

Cautionary Note Regarding Forward-Looking Statements and Industry Data

 

21

Use of Proceeds

 

23

Dividend Policy

 

24

Capitalization

 

25

Dilution

 

27

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

Business

 

41

Management

 

56

Executive Compensation

 

61

Transactions with Related Persons

 

67

Principal Stockholders

 

69

Description of Capital Stock

 

70

Shares Eligible for Future Sale

 

74

Underwriting

 

76

Legal Matters

 

80

Experts

 

80

Where You Can Find More Information

 

80

Index to Financial Statements

 

F-1

Neither we nor the underwriters have authorized anyone to provide you with any information other than that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States:    We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the® and symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes thereto and the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless the context otherwise requires, we use the terms “Company,” “we,” “us” and “our” in this prospectus to refer to ev Transportation Services, Inc.

We are an early stage manufacturer of all-electric, lightweight commercial utility vehicles. Our first vehicle is the “FireFly”, which is used in the essential services and on-demand “last mile” urban e-delivery markets. We have completed the design of the vehicle, have assembled a core team, and have begun to manufacture it in limited quantities. With the proceeds of this offering, we plan to significantly scale operations.

Our vehicles provide an application-flexible platform. Our vehicles are easily configurable for a wide variety of applications, including parking management, security and perimeter patrol, parks and sidewalk maintenance, utility meter reading, property and building management, university and corporate campuses, as well as last mile urban small package and food delivery. Our Connected Vehicle Solution, evTS Connect™ is a cloud-connected electronics and software package that can be used for vehicle performance monitoring and remote diagnostics, vehicle and fleet management, and vehicle tracking and routing. In addition, the FireFly use a lithium iron phosphate battery with enhanced safety features, not a lithium ion battery. According to the U.S. Government (GAO and GSA) and Company research and interviews, the size of the replacement market for utility vehicles for public fleets (federal/state/municipal) is $2.4 billion. According to publicly available data on existing fleet size (by company) and publicly announced commitments for new vehicle purchases within the delivery industry, the size of the “Last Mile Delivery Market” (small to medium-size packages), which is growing quickly, is $4.4 billion for replacement and new sales to private delivery fleets.

We are currently focused on the essential services and “last mile” urban e-delivery markets. According to a Bureau of Transportation Statistics study dated April 21, 2021, the market share of electric light duty vehicles has increased year by year since 2011. Accordingly, we believe that businesses using pickup trucks or gasoline-powered light passenger vehicles in dense urban environments for specific applications are increasingly purchasing all-electric vehicles, such as the FireFly, that are designed with functionality for these applications. Our vehicles:

   Operate within 100+ mile range on a full charge

   Travel from site to site at speeds exceeding 50 mph

   Carry up to 1,100 lbs. payload

   Are light weight, agile and maneuverable in dense urban environments

   Have superior stability and handling

 

   Seat one or two passengers with multiple driver position options

   Have real-time two-way vehicle communications with remote performance monitoring, diagnostics, and tracking and routing capabilities

   Use lithium iron phosphate battery, not lithium ion battery

The original FireFly® vehicle was designed between January 2009 and December 2015 by Fort Worth, Texas-based eFleets Corporation with total estimated development costs of nearly $14,000,000. eFleets began shipping vehicles in 2012. As of August 31, 2022, the FireFly vehicle has been delivered to a total of 24 different cities. We estimate that the 73 vehicles delivered since inception have amassed in excess of 500,000 user miles. We acquired the intellectual property and assets of eFleets Corporation in August of 2020. From our formation until the present, we have recruited our management team, set up operations in three locations, developed our evTS Connect offering, established our initial distributor network and completed design and development of our 2023 model year FireFly.

Corporate Information

We were organized under the laws of the State of Delaware on May 8, 2015. Our principal executive offices are located at 1309 Beacon Street, Suite 300, Brookline, MA 02446, and our telephone number is (202) 347-3359. Our website address is www.evts.com. The information contained on our website is not, and should not be interpreted to be, incorporated into this prospectus.

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Listing on the Nasdaq Capital Market

There is currently no public trading market for our shares of common stock. In connection with this offering, we have applied to list our common stock on the NASDAQ Capital Market under the symbol “EVTS.” If our listing application is approved, we expect to list our common stock on NASDAQ upon consummation of the offering. No assurance can be given that our listing application will be approved. This offering will occur only if NASDAQ approves the listing of our common stock.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. As a result, we may take advantage of reduced reporting requirements that are otherwise applicable to public companies, including delaying auditor attestation of internal control over financial reporting, providing only two years of audited financial statements and related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus and reduced executive compensation disclosures.

We may remain an emerging growth company for up to five years from the date of the first sale in this offering. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion, or we issue more than $1 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. As a result, the information that we provide to our stockholders may be different than what you might receive from other public reporting companies in which you hold equity interests. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we can adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company.

Finally, we are a “smaller reporting company” (and may continue to qualify as such even after we no longer qualify as an emerging growth company) and accordingly may provide less public disclosure than larger public companies, including the inclusion of only two years of audited financial statements and only two years of management’s discussion and analysis of financial condition and results of operations disclosure. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

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THE OFFERING

Common stock offered by us

 

[•] shares

Option to purchase additional shares

 

We have granted the underwriters an option for a period of 45 days from the closing of this offering to purchase up to [•] additional shares of our common stock.

Common stock to be outstanding immediately following this offering

 

[•] shares ([•] shares if the underwriters exercise their option to purchase additional shares of our common stock in full). See Note 1.

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $[•] million, or approximately $[•] million if the underwriters exercise in full their option to purchase up to [•] additional shares of our common stock, based on an assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

   

We intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to continue the commercialization of our business. See “Use of Proceeds.”

Proposed NASDAQ trading symbol

 

We have applied to list our common stock on the NASDAQ Capital Market under the symbol “EVTS.” We will not proceed with this offering in the event our common stock is not approved for listing on NASDAQ.

Lock-up

 

We and our directors, officers and holders of 1% or more of our outstanding shares of common stock as of the effective date of the registration statement related to this offering (including all holders of securities exercisable for or convertible into shares of common stock) shall enter into customary “lock-up” agreements pursuant to which such persons and entities shall agree not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of 180 days after the effective date of this registration statement.

Risk factors

 

The securities offered by this prospectus are speculative and involve a high degree of risk. Investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 5.

_________________

Note 1. The number of shares of our common stock to be outstanding immediately following this offering is based on 13,720,000 shares of our common stock issued and outstanding as of August 31, 2022. This includes shares of our common stock issuable upon the mandatory conversion of all outstanding shares of our preferred stock into common stock on a one-for-one basis. Separately, the principal and accrued interest, as of July 31, 2022, on substantially all of our outstanding convertible notes ($8,425,503) will be automatically converted into shares of our common stock at a conversion price of $[•]. At the closing of the offering, the number of shares of common stock will increase to reflect the interest accrued from August 31, 2022 through the closing based on the conversion price of $[•].

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The number of shares of our common stock to be outstanding immediately following this offering excludes 3,500,000 shares of our common stock that will become available for future issuance under our 2022 Stock Incentive Plan, which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus is a part.

Unless otherwise indicated, all information in this prospectus reflects and assumes the following:

        no exercise by the underwriters of their option to purchase additional shares of our common stock;

        the automatic conversion of all outstanding shares of our preferred stock and the conversion of substantially all of our convertible notes into an aggregate of [•] shares of our common stock upon the closing of this offering; and

        the filing and effectiveness of our restated certificate of incorporation and the adoption of our amended and restated bylaws each upon the closing of this offering.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this prospectus, including our financial statements and the related notes appearing elsewhere in this prospectus, before deciding to invest in our common stock. The risks described below are not the only risks we face. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, results of operations and financial condition to suffer materially. In such event, the trading price of our common stock could decline, and you might lose all or part of your investment.

Risks Related to Our Business, Financial Condition and Industry

We are an early stage manufacturer of electric utility vehicles with limited operations to date and a history of losses, and we expect to incur significant expenses and continuing losses for an indefinite period.

We were organized in May 2015 and have had only limited operations. Since inception, we have incurred an accumulated deficit of approximately $16.1 million through June 30, 2022. We believe that we will continue to incur operating and net losses each quarter until at least the time that we have established large scale manufacturing and sales efforts and begin wider scale deliveries of our EVs, which are not expected to begin for several years, and may occur later or not at all. In addition, as an early stage company with a limited operating history, our business is subject to all of the risks inherent in a new business enterprise, including (i) a product without a significant history in the market, (ii) reliance on one product, (iii) limited experience with manufacturing and (iv) a lack of established distribution channels.

We expect the rate at which we will incur losses to be significantly higher in future periods as we:

        continue to design, develop, manufacture and market our EVs;

        continue to utilize our third-party suppliers of component parts;

        expand our production capabilities, including costs associated with the manufacture and assembly of our EVs;

        build up inventories of parts and components for our EVs;

        create an inventory of our EVs;

        expand our design, development, and servicing capabilities;

        increase our sales and marketing activities and develop our distribution infrastructure; and

        increase our general and administrative functions to support our growing operations.

We have not achieved positive operating cash flow and our ability to generate positive cash flow is uncertain.

We have manufactured only a small number of vehicles. We have had negative cash flow from operating activities of approximately $1.3 million during the year ended December 31, 2020, $3.9 million during the year ended December 31, 2021, and $3.1 million during the six months ended June 30, 2022. We may have negative cash flow for at least several years from operating and investing activities because we expect to incur research and development, sales and marketing, and general and administrative expenses and make capital expenditures in our efforts to increase sales, engage in development work and ramp up operations. If negative cash flow from operations extends indefinitely, an inability to generate positive cash flow may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our viability. There can be no assurance that we will achieve positive cash flow. Because of the numerous risks and uncertainties associated with vehicle development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our product development efforts, diversify our pipeline of product offerings or even continue our operations.

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If our vehicles do not gain market acceptance, prospects for our sales revenue and profit will be unfavorable.

To date we have received a limited number of sales orders for our 2022 model year FireFly ESV vehicles. In order to generate market demand, we have delivered a limited number of pre-production 2022 model year FireFly ESV vehicles for use as demonstration vehicles to certain dealers and key customer accounts during the first quarter of 2022. As a “sight unseen” new model year, potential customers for our vehicles may be reluctant to immediately place large orders for our vehicles until they are released and in the marketplace in significant volumes. Obstacles to widespread adoption of our vehicles also include inability to achieve market penetration due to sales of currently available competitive vehicles, budget cycle purchasing windows of potential customers and our ability to supply an adequate number of FireFly ESVs to meet demand. For more information related to this risk, see the section titled “Competitive Position” under “Business” below.

Our future operating results are unpredictable and are likely to fluctuate.

As a result of our limited operating history, we are unable to forecast our revenues to a degree of relative certainty. To date, our gross revenue has been inconsistent due to fluctuations in vehicle sales, and we have been unable to achieve positive operating cash flow. In the future, we may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues in relation to our planned expenditures will have an adverse effect on our business, prospects, financial condition and results of operations. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our future capital needs will likely require us to sell additional equity or debt securities that will dilute our stockholders’ ownership interest or introduce covenants that may restrict our operations.

We have historically relied on borrowings and equity financing to conduct our business and may need to seek equity or debt financing to finance a portion of our capital expenditures and operations. Such financing might not be available to us in a timely manner, on terms that are acceptable, or at all.

Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business model. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as expected, both of which could mean we would be forced to curtail or discontinue our operations.

In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities would dilute the ownership interest of our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.

We are dependent on third-party suppliers to provide parts for our EVs.

We rely on third-party suppliers to provide us the parts and sub-assembly necessary for producing our EVs. As of the date of this prospectus, we do not have agreements in place with any suppliers. All of our parts are ordered on a just-in-time basis through purchase orders. Our ability to timely assemble and deliver vehicles to our customers will be compromised if:

        these companies terminate our purchase orders without adequate notice,

        these companies fail to accept our purchase orders,

        our suppliers fail to provide the required capacity and quality of sub-assembly parts on a timely basis,

        our suppliers fail to support our scale of growth,

        our suppliers experience supply shortages, long lead times, or supply changes,

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        our suppliers become economically distressed or go bankrupt, or

        the parts are delayed in route to us or we face other logistical problems.

If our vendor manufacturers fail to meet our requirements for quality, quantity, price and timeliness, our business growth will be harmed.

As of the date of this prospectus, we do not have agreements in place with any suppliers. All of our parts are ordered on a just-in-time basis through purchase orders. If these companies fail to accept or terminate our purchase orders without adequate notice, or if they fail to provide the required capacity and quality of sub-assembly parts on a timely basis, our ability to timely assemble and deliver vehicles to our customers will be compromised.

Our success will depend on our ability to economically assemble our EVs at scale to meet our customers’ needs, and our ability to develop and assemble EVs of sufficient quality and appeal to customers on schedule and at scale is unproven.

Our future business depends in large part on our ability to execute our plans to develop, assemble, market and sell our EVs at sufficient capacity to meet the transportation demands of our business customers. Our continued development of our EVs is and will be subject to risks, including with respect to:

        our ability to secure necessary funding;

        the equipment we plan to use being able to accurately manufacture the vehicles within specified design tolerances;

        compliance with environmental, workplace safety and similar regulations;

        securing necessary components on acceptable terms and in a timely manner;

        delays in delivery of final component designs to our suppliers;

        our ability to attract, recruit, hire and train skilled employees;

        quality controls, particularly as we plan to increase manufacturing;

        delays or disruptions in our supply chain; and

        other delays and cost overruns.

We have no experience to date in high volume assembly of our EVs. We do not know whether we will be able to develop efficient, automated, low-cost assembly capabilities and processes, and reliable sources of parts and sub-assembly supply, that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market our EVs. Even if we are successful in developing our high volume assembly capability and processes and reliably source our parts supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond our control such as problems with suppliers and vendors, or in time to meet our vehicle commercialization schedules or to satisfy the requirements of customers. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines could have a material adverse effect on our business, prospects, operating results and financial condition.

Our vehicles could contain defects, certain parts may malfunction, or they may be operated incorrectly, which could reduce sales of those vehicles due to adverse publicity and reputational harm or result in significant litigation against us.

Our vehicles may have or develop defects. As a result, our customers could lose confidence in our vehicles and in us if they unexpectedly use defective vehicles or tend to use our vehicles improperly. This could result in loss of revenue, loss of profit margin, and loss of market share in addition to reputational harm and potentially significant litigation being brought against us. Further, electric vehicles have a number of distinguishing characteristics from traditional, internal combustion vehicles, including the relatively reduced noise produced by the operation of an electric vehicle. There have been reports of electric vehicle incidents resulting from operators or pedestrians being

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unable to hear an approaching vehicle. If we were found responsible for major defects or other incidents resulting from the operation of our vehicles, it could cause us to incur liability which could interrupt or even cause us to terminate some or all of our operations. A product could be found to have a material defect causing a recall of that vehicle which as a result could negatively impact our operations, financial condition, and ultimately our continued operations.

Our success depends, in part, on establishing and maintaining good relationships with our network of distributors.

Our success depends, in part, on our establishing and maintaining satisfactory relationships with our distribution partners. We currently have a network of four vehicle distributors and, as of the date of this prospectus, we are in active negotiation with an additional four. If we are not successful in establishing an adequate distributor network, our results of operations, financial condition and continued operations will be negatively impacted.

In the past, we have identified conditions and events that raise substantial doubt about our ability to continue as a going concern and it is possible that conditions and events in the future may negatively impact our ability to continue as a going concern.

Our report from our independent registered public accounting firm for the years ended December 31, 2020 and 2021 includes an explanatory paragraph stating that our recurring losses from operations and cash outflows from operating activities raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. Although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business. If we are unable to continue as a going concern, it is likely that investors would lose a substantial part or all of their investment.

Targeted customers may be reluctant to acquire a vehicle from a new and unproven manufacturer.

Municipal customers and fleet owners value safety and reliability as important factors in choosing a vehicle and may be reluctant to acquire a vehicle from a new and unproven manufacturer. In addition, our novel technology and design may not align with current target market preferences. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.

From time to time, our EVs may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare us unfavorably to competitors could adversely affect targeted customer perception about our EVs. We may have fewer resources than our competitors to effectively market our EVs compared to such competitors’ EVs, which may lead to an increase in unfavorable reviews of us compared to competitors or reduce the likelihood that we are able to attract new customers.

We will need to be successful with respect to a number of areas that will be necessary to expand our business, and may be unable to do so.

We expect our future expansion to include:

        expanding our management team;

        hiring and training new personnel;

        forecasting production and revenue;

        controlling expenses and investments in anticipation of expanded operations;

        establishing or expanding design, production, sales and service facilities;

        implementing and enhancing administrative infrastructure, systems and processes; and

        expanding into new markets.

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We intend to hire a significant number of additional personnel, including software engineers, design and production personnel and service technicians for our EVs. Because our EVs are based on a different technology platform than traditional four-wheeled vehicles equipped with internal combustion engines, individuals with sufficient training in alternative fuel and EVs may not be available to hire, and as a result, we will need to expend significant time and expense training any newly hired employees. Competition for individuals with experience designing, producing and servicing EVs and their software is intense and increasing, particularly in the current labor market. We may not be able to attract, integrate, train, motivate or retain additional highly qualified personnel, particularly with respect to software engineers in the Fort Worth, Texas, or Boston, Massachusetts, areas. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business, prospects, financial condition and operating results.

Additionally, the availability and prices for materials needed for our EVs will fluctuate, which may impact our business, prospects, financial condition, and operating results.

The electric vehicle market is relatively new, and the availability of the personnel and components required to compete in this market is uncertain.

We and our suppliers use various materials in our businesses and products, including for example steel, and the availability and prices for these materials will fluctuate. Supply chain disruptions and access to materials have impacted our suppliers’ ability to delivery materials to us in a timely manner. If we are unable to timely obtain materials or if there are fluctuations in prices, it could adversely affect our operating results.

In addition, engineers and other personnel with experience in the electric vehicle industry are in demand, and we may be unable to compete successfully in attracting these personnel. If we are not successful in hiring and retaining highly qualified employees with experience in the electric vehicle industry, we may not be able to extend or maintain our industry expertise, and our future product development efforts could be adversely affected. The loss of members of our senior management could significantly delay or prevent the achievement of our strategic objectives, which could adversely affect our operating results.

Developments in alternative technology improvements in the internal combustion engine may adversely affect the demand for our EVs.

Significant developments in alternative technologies, such as advanced diesel, ethanol, hydrogen cells, or compressed natural gas or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Other fuels or sources of energy may emerge as customers’ preferred alternative to our EVs. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced alternative fuel and electric vehicles, which could result in the loss of competitiveness of our EVs, decreased revenue and a loss of market share to competitors. Our research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology.

We have no significant experience servicing our EVs. If we are unable to address the service requirements of our customers, our business will be materially and adversely affected.

We have no significant experience servicing or repairing our vehicles. Servicing alternative fuel and electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques. We may decide to partner with a third party to perform some or all of the maintenance on our EVs, and there can be no assurance that we will be able to enter into an acceptable arrangement with any such third-party provider. If we are unable to successfully address the service requirements of our customers, our business and prospects will be materially and adversely affected.

In addition, the motor vehicle industry laws in many states require that service facilities be available to service vehicles physically sold from locations in the state. While we anticipate developing a service program that would satisfy regulators in these circumstances, the specifics of our service program are still in development, and at some point may need to be restructured to comply with state law, which may impact our business, financial condition, operating results and prospects.

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Our workforce may undertake efforts to unionize, which may increase our operating costs and adversely affect the results of our operations.

While we believe our relations with our employees are good, we may see union organization campaigns by our workforce. We respect our workforce’s right to unionize or not to unionize; however, the unionization of a significant portion of our workforce could increase our overall operating costs and adversely affect our ability to run our business in the most efficient manner to remain competitive and could adversely affect our results of operations by increasing our labor costs or otherwise restricting our ability to maximize the efficiency of our operations.

If we lose key personnel or are unable to attract and retain personnel on a cost-effective basis, our business could be adversely affected.

Our performance is substantially dependent on the continued services and performance of our senior management and the rest of our employees. Key team members include President & Chief Executive Officer (“CEO”), David Solomont and Chief Technology Officer (“CTO”) Greg Horne, in particular. If we are not successful in hiring and retaining highly qualified employees, we may not be able to extend or maintain our industry expertise, and our future product development efforts could be adversely affected. The loss of members of our senior management could significantly delay or prevent the achievement of our strategic objectives, which could adversely affect our operating results.

In addition, engineers and other personnel with experience in the electric vehicle industry are in demand, and we may be unable to compete successfully in attracting these personnel.

We may have conflicts of interest with our affiliates and related parties, and in the past we have engaged in transactions and entered into agreements with affiliates that were not negotiated at arms’ length.

We have engaged, and may in the future engage, in transactions with affiliates and other related parties. These transactions may not have been, and may not be, on terms as favorable to us as they could have been if obtained from non-affiliated persons. While an effort has been made and will continue to be made to obtain services from affiliated persons and other related parties at rates and on terms as favorable as would be charged by others, there will always be an inherent conflict of interest between our interests and those of our affiliates and related parties. To date, our operations have been funded in part through advances from Nine Associates, LLC, an entity owned by an affiliate of our Chief Executive Officer. Mr. Solomont may economically benefit from our arrangements with related parties. If we engage in related party transactions on unfavorable terms, our operating results will be negatively impacted.

We may need to defend against intellectual property infringement claims or misappropriation claims, which may be time-consuming and expensive and, if adversely determined, could limit our ability to commercialize our EVs.

Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that could prevent or limit our ability to make, use, develop or deploy our EVs. Although we have not in the past been subject to claims that any of our products infringe any patents or other proprietary rights of third parties, we could be subject to such claims in the future. There can be no assurance that claims that may arise in the future can be amicably disposed of, and it is possible that litigation could ensue. We do not know whether we will prevail in these proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation.

Claims that our products or services infringe third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management. If any pending or future proceedings result in an adverse outcome, we could be required to:

        cease the manufacture, use or sale of the infringing products, services or technology;

        pay substantial damages for infringement;

        expend significant resources to develop non-infringing products, services or technology;

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        license from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; or

        pay substantial damages to discontinue use of or to replace infringing intellectual property sold by us with non-infringing intellectual property.

Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

We depend on our ability to protect our proprietary technology. The Company does not have any issued patents, but has filed several patent applications and plans to file several additional patent applications.

We rely on trademarks, trade secrets and intellectual property laws and confidentiality agreements with employees and third parties, all of which offer only limited protection. In addition, some of our trademarks are not currently registered with the United States Patent and Trademark Office and we have yet to file trademark applications for certain of these marks, which may make protecting these unregistered trademarks more difficult. Despite our efforts, the steps we have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, and our ability to police such misappropriation or infringement is uncertain, particularly in countries outside of the United States. Protecting against the unauthorized use of our products, trademarks, and other proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property.

Data is communicated electronically between our vehicles and our fleet management system, and may be subject to data breaches or data insecurity.

The data communicated between our vehicles and fleet management system is encrypted and transmitted wirelessly via a virtual private network (“VPN”), but subject to security risks associated with data communications such as data breaches, hacking, or other data security issues. If any of these were to occur, we may suffer financial and reputational harm that could materially and adversely affect our business and operations.

To date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material impact to our operations or financial condition. However, hackers may attempt to gain unauthorized access to modify, alter and use such networks, EVs and systems to gain control of or to change our EVs’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by the EV. Future vulnerabilities could be identified and our efforts to remediate such vulnerabilities may not be successful. Any unauthorized access to or control of our EVs or their systems, or any loss of customer data, could result in legal claims or proceedings. In addition, regardless of their veracity, reports of unauthorized access to our EVs, systems or data, as well as other factors that may result in the perception that our EVs, systems or data are capable of being “hacked,” could negatively affect our brand and harm our business, prospects, financial condition and operating results.

Interruption or failure of our information technology and communications systems could impact our ability to effectively provide our services.

We plan to outfit our EVs with in-vehicle services and functionality that utilize data connectivity to monitor performance and timely capture opportunities for cost-saving preventative maintenance. The availability and effectiveness of our services depend on the continued operation of information technology and communications systems. Our systems will be vulnerable to damage or interruption from, among others, fire, terrorist attacks, natural

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disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. Data centers we use could also be subject to break-ins, sabotage and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant, and our disaster recovery planning cannot account for all eventualities. Any problems at data centers we use could result in lengthy interruptions in our service. In addition, our EVs are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in our business or the failure of our systems.

We provide a bumper to bumper warranty for up to 3 years or 24,000 miles and a 5-year frame warranty, which may result in us bearing the costs of warranty claims. Additionally, we may be subject to financial and reputational harm due to risks associated with components and materials in our EVs including product recalls, product liability claims, and class action litigation.

Our bumper to bumper warranty for up to 3-years or 24,000 miles and 5-year frame warranty may result in our customers making claims under such warranties for losses or repairs, which amounts may exceed our expectations. As a result, there is a risk that we may not have provided sufficient reserves for warranty repairs.

We may be exposed to product recalls, product liability claims, or class action litigation if any other materials in our EVs fail. Any product recall, product liability claim, or class action claim seeking significant monetary damages could have a material adverse effect on our business and financial condition. A product recall, product liability claim, or class action claim could also generate substantial negative publicity about our EVs and our business.

We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to establish and maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.

In connection with the preparation and audit of our financial statements, material weaknesses were identified in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim financial statements will not be prevented or detected on a timely basis. These material weaknesses are as follows:

        Insufficient control environment

        Lack of adequate accounting policies and procedures

        Lack of sufficient accounting resources

Until we complete this Offering or raise other funds, we are unable to begin to remediate these material weaknesses. As a result of these identified material weaknesses, and until such weaknesses are remediated, there can be no assurances that our financial statements will be free from error, or that we will not need to restate our financial statements in the future.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could harm our business and have a negative effect on the trading price of our stock.

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We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an EGC under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an EGC for up to five years. Our assessment of internal controls and procedures may not detect material weaknesses in our internal control over financial reporting. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation, which could have a negative effect on the trading price of our stock.

Our business could be adversely affected by changes in contract requirements and budgetary priorities of federal, state, and local governments.

We will target municipalities, governmental organizations, and other related entities. Changes in federal, state and local government budgetary priorities could directly affect our financial performance. A significant decline in government expenditures, a shift of expenditures away from programs which call for the types of services that we provide or a change in government contracting policies, could cause federal, state, or local governments to reduce their expenditures under contracts, to exercise their right to terminate contracts at any time without penalty, not to exercise options to renew contracts or to delay or not originate new contracts. Any of those actions could seriously harm our business, prospects, financial condition or operating results.

Additionally, changes in government programs or contract requirements, a decrease in the contracts reserved for small businesses, and changes in fiscal policies could negatively impact our business and our prospects.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon completion of this offering, we will become subject to certain reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.

We may be subject to significant exposure if one of our directors or officers is sued.

If a legal action is commenced against one of our directors or officers, including, but not limited to, an action alleging a violation of securities law, and such action exhausts our insurance coverage, we may incur the legal fees and costs associated with defending against the action under our bylaws or indemnification agreements, which may harm our business. In addition, a potential action could be time-consuming, resource-intensive, expensive, and uncertain.

Our operating results may be negatively impacted by the COVID-19 pandemic.

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant volatility and economic disruption and uncertainty. It has already disrupted global travel and supply chains and adversely impacted global commercial activity. Considerable uncertainty still surrounds COVID-19 and its potential long-term economic effects, as well as the effectiveness of any responses taken by government authorities and businesses. The travel restrictions, limits on hours of operations and/or closures of non-essential businesses, and other efforts to curb the spread of COVID-19 has continued to disrupt business activity globally. New strains and variants of the coronavirus continue to spread around the world.

We anticipate that the inflationary pressure in the United States, United Kingdom, and elsewhere caused by the response to the COVID-19 pandemic and potentially by the Russian invasion of Ukraine would impact our expected costs of producing vehicles. Once we begin full scale commercial operations, which we expect in the near term, our supply chain and, consequently, our operations, may also be adversely materially impacted. We expect to have to pay

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more to purchase supplies necessary for our operations than we would have pre-pandemic because of this inflationary pressure. If we are unable to increase our vehicle prices to adjust to the increase in the costs of raw materials and vehicle part supplies, our margins will likely be reduced.

The ongoing rollout of vaccines around the globe is encouraging, but their long-term impact on the political environment, business environment, and our business is still uncertain.

Risks Related to Other External Factors

Recent downturns in general economic and market conditions, including the economic effects of the COVID-19 pandemic, will materially and adversely affect our business.

A significant number of utility vehicle purchases are related to the budgets of, and purchases by, cities and municipalities. The COVID-19 pandemic has had a significant adverse effect on the resources of these potential buyers. Further, the budgets of these cities and municipalities are subject to the fluctuations of their local economies as well as of the national economy, which is experiencing inflationary pressure last seen in the 1970s. Even post-pandemic, a reduction in budgets and expenditures by cities/airports/ports/colleges/universities will likely cause a reduction in the demand for our vehicles and could adversely impact our business.

We are subject to substantial regulation and unfavorable changes to, or failure by us to comply with, these regulations could substantially harm our business and operating results.

Our EVs, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry are currently evolving. To the extent the laws change, our EVs may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected.

Our operations and products are subject to environmental laws and regulations, including those related to vehicle emissions, that can significantly increase our cost and affect how we do business.

We are affected by environmental regulations that can increase costs related to the production of our vehicles, particularly regulations relating to emissions and other environmental impacts of our operations, including laws relating to the use, handling, storage, disposal and human exposure to hazardous materials. Failing to comply with these regulations is costly, and we anticipate that the number and extent of these environmental regulations may increase in the future. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, suspension of production or a cessation of our operations. These environmental regulations may significantly affect our operations and any failure to comply could have a material adverse effect on our operations and financial condition.

Contamination at properties we will own, use and/or operate, we formerly owned, used and/or operated or to which hazardous substances were sent by us, may result in liability for us under environmental laws and regulations, including, but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, which can impose liability for the full amount of remediation-related costs without regard to fault, for the investigation and cleanup of contaminated soil and ground water, for building contamination and impacts to human health and for damages to natural resources. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our financial condition or operating results.

If critical manufacturing components become unavailable or our vendors delay their production, our business will be negatively impacted. The current supply chain crisis may have a material adverse effect on our business.

Stability of our component and sub-assembly supply chain is crucial to our manufacturing process. As some critical parts and components are supplied by certain third-party manufacturers, we may be unable to acquire necessary amounts of key components at competitive prices. If we are unable to obtain these components at competitive prices,

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or at all, we will be unable to produce our vehicles and may have to discontinue our business. Once we begin full scale commercial operations, which we expect in the near term, our supply chain and, consequently, our operations, may be adversely materially impacted by this crisis. We expect to have to pay more to purchase supplies necessary for our operations than we would have pre-pandemic because of the inflationary pressure created in part due to the supply chain crisis. If we are unable to increase our vehicle prices to adjust to the increase in the costs of raw materials and vehicle part supplies, our margins will likely be reduced.

We have formed a U.K. subsidiary, which will expose us to difficulties and risks presented by international economic, political, legal, accounting, and business factors.

We have formed a UK subsidiary in a collaboration with the Automotive Innovation Group, a UK-based automotive original equipment manufacturer. We may establish partnerships in other Western European countries as well.

Conducting business internationally subjects us to complicated U.S. and foreign governmental trade regulations. Compliance with such regulations is costly and exposes us to penalties for non-compliance. Other laws and regulations that can significantly impact us include anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, laws restricting business with suspected terrorists, and anti-boycott laws. Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways including criminal, civil, and administrative penalties, fines and penalties, and restrictions on certain business activities.

Other risks associated with conducting business internationally include:

        difficulties in managing and staffing international operations and the required infrastructure costs, including legal, tax, accounting, and information technology;

        the imposition of U.S. and/or international sanctions against a country, company, person, or entity with whom we do business with that would restrict or prohibit continued business with the sanctioned country, company, person, or entity;

        adverse currency exchange rate fluctuations;

        national and international conflicts, including foreign policy changes or terrorist acts;

        difficulties in enforcing or defending intellectual property rights; and

        multiple, changing, and often inconsistent enforcement of laws and regulations.

Our failure to effectively manage and mitigate these risks could adversely impact our business.

Risks Related to this Offering, Ownership of Our Common Stock and Our Status as a Public Company

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock was determined through negotiations with the underwriters. Although we have applied to have our common stock approved for listing on NASDAQ, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

The initial public offering price of our common stock is substantially higher than the pro forma as adjusted net tangible book value per share of our common stock after this offering. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma as adjusted net tangible book value per share after this offering. Based on an assumed initial public offering price of $[•] per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, you will experience immediate dilution of $[•] per share, representing the difference between our pro forma as adjusted net tangible book value per share as of June 30, 2022, after giving effect to this offering, and the initial public offering price. To the extent outstanding options are exercised, you will incur further dilution.

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If securities analysts do not publish or cease publishing research or reports or publish misleading, inaccurate or unfavorable research about our business or if they publish negative evaluations of our stock, the price and trading volume of our stock could decline.

The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by industry or financial analysts. If no, or few, analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or publish inaccurate or unfavorable research about our business, or provide more favorable relative recommendations about our competitors, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price and trading volume to decline.

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

Our stock price is likely to be volatile. The stock market, in general, and the market for smaller companies, in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

        our success in commercializing our products;

        developments with respect to competitive products or technologies;

        regulatory or legal developments in the United States and other countries;

        developments or disputes concerning patent applications, issued patents or other intellectual property or proprietary rights;

        the recruitment or departure of key personnel;

        actual or anticipated changes in estimates as to financial results, commercialization timelines or recommendations by securities analysts;

        variations in our financial results or the financial results of companies that are perceived to be similar to us;

        sales of common stock by us, our executive officers, directors or principal stockholders or others;

        general economic, industry and market conditions, such as the impact of the COVID-19 pandemic on our industry; the publication of unfavorable research reports and updates thereto by financial analysts; and

        the other factors described in this “Risk Factors” section.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. Any lawsuit to which we are a party, with or without merit, may result in an unfavorable judgment. We also may decide to settle lawsuits on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices.

Such litigation may also cause us to incur other substantial costs to defend such claims and divert management’s attention and resources.

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After this offering, our executive officers, directors, and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval.

Upon the closing of this offering, based on the number of shares outstanding as of August 31, 2022, our executive officers and directors and our stockholders who owned more than 5% of our outstanding common stock before this offering will, in the aggregate, beneficially own shares representing approximately [•] of our common stock (excluding any shares purchased in this offering). As a result, if these stockholders were to choose to act together, they would be able to significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, would significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets.

This concentration of ownership control may:

        delay, defer or prevent a change in control;

        entrench our management and board of directors; or

        delay or prevent a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that does not improve our results of operations or enhance the value of our common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have [•] shares of common stock outstanding, based on the number of shares outstanding as of August 31, 2022 and after giving effect to the automatic conversion of all outstanding shares of our preferred stock and the conversion of substantially all convertible notes. Of the [•] shares to be outstanding immediately after this offering (based, with respect to our convertible notes, on the conversion price of $[•]), the [•] shares sold in this offering (assuming the underwriters do not exercise their option to purchase additional shares) may be resold in the public market immediately without restriction, unless purchased by our affiliates or existing stockholders that have signed lock-up agreements. Of the remaining [•] shares, [•] shares are currently restricted as a result of securities laws or lock-up agreements but will become eligible to be sold at various times after the offering as described in the section of this prospectus titled “Shares Eligible for Future Sale.” The representatives of the underwriters may release some or all of the shares of common stock subject to lock-up agreements at any time and without notice, which would allow for earlier sales of shares in the public market.

Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the “Shares Eligible for Future Sale” section of this prospectus.

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We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

We are an “emerging growth company,” or EGC, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may remain an EGC until the end of the fiscal year in which the fifth anniversary of this offering occurs, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any December 31 before that time or if we have annual gross revenues of $1.07 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1 billion of non-convertible debt over a three-year period. For so long as we remain an EGC, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not EGCs. These exemptions include:

        being permitted to provide only two years of audited financial statements in this prospectus, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

        not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

        not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

        reduced disclosure obligations regarding executive compensation; and

        exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of reduced reporting obligations in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation related information that would be required if we were not an EGC.

In addition, the JOBS Act permits an EGC to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either irrevocably elect to “opt out” of such extended transition period or no longer qualify as an EGC. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we are no longer an EGC, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs, particularly as we hire additional financial and accounting employees to meet public company internal control and financial reporting requirements, and will make some activities more time-consuming and costly. For example, we expect

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that these rules and regulations may make it more difficult and more expensive for us to continue to maintain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, in our second annual report due to be filed with the SEC after becoming a public company, we will be required to furnish a report by our management on our internal control over financial reporting. However, while we remain an EGC, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, including through hiring additional financial and accounting personnel, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we identify one or more material weaknesses in our internal control over financial reporting, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current directors and members of management.

Provisions in our certificate of incorporation and our bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:

        allow the authorized number of our directors to be changed only by resolution of our board of directors;

        limit the manner in which stockholders can remove directors from our board of directors;

        establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

        require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

        limit who may call stockholder meetings;

        authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and

        require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws that will become effective upon the closing of this offering.

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Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our certificate of incorporation that will become effective upon the closing of this offering designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers and employees.

Our certificate of incorporation that will become effective upon the closing of this offering provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

        any derivative action or proceeding brought on our behalf;

        any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to our company or our stockholders;

        any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or

        any action asserting a claim arising pursuant to any provision of our certificate of incorporation or bylaws (in each case, as they may be amended from time to time) or governed by the internal affairs doctrine.

These choice of forum provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation that will become effective upon the closing of this offering provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any claims arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees. If a court were to find either exclusive forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving such action in other jurisdictions, all of which could materially adversely affect our business, financial condition and results of operations.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this prospectus, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “believe,” “may,” “will,” “would,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “outlook,” “plan,” “project,” “seek” and similar expressions are intended to identify forward-looking statements.

The forward-looking statements in this prospectus include, among other things, statements about:

        our ability to continue as a going concern;

        our estimates regarding expenses, future revenue, capital requirements and need for additional financing;

        our plans to develop to further develop the FireFly and DragonFly;

        our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents and proceeds from this offering;

        the potential advantages of our product;

        the rate and degree of market acceptance of the FireFly and DragonFly;

        our estimates regarding the potential market opportunity for our products;

        our commercialization, marketing and manufacturing capabilities and strategy;

        our expectations regarding our ability to obtain and maintain intellectual property protection for our products and product candidates;

        our expectations related to the use of proceeds from this offering;

        the impact of government laws and regulations;

        our competitive position;

        developments relating to our competitors and our industry;

        our ability to maintain and establish collaborations or obtain additional funding;

        our ability to effectively manage or sustain our growth;

        our ability to comply with new or modified laws and regulations that currently apply or become applicable to our business;

        our ability to recruit and retain key employees and management personnel;

        our financial performance and capital requirements following this offering;

        the potential insufficiency of our disclosure controls and procedures to detect errors or acts of fraud;

        the potential lack of liquidity and trading of our securities;

        the lack of an established market for our securities;

        the potential direct or indirect impact of the COVID-19 pandemic on our business, including supply chain disruptions or challenges in the labor market; and

        our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have

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included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions or joint ventures or investments we may make or enter into, none of which are currently contemplated.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this prospectus are made as of the date of this prospectus, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties as well as our own estimates of potential market opportunities. The market data used in this prospectus involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Although we are responsible for the disclosure contained in this prospectus and we believe the information from industry publications and other third-party sources included in this prospectus is reliable, such information is inherently imprecise. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our product candidates include several key assumptions based on our industry knowledge, industry publications, third-party research and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.

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USE OF PROCEEDS

We estimate that the net proceeds to us from our issuance and sale of [•] shares of our common stock in this offering will be approximately $[•] million, or approximately $[•] million if the underwriters exercise in full their option to purchase additional shares of our common stock, assuming an initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $[•] per share would increase (decrease) the net proceeds to us from this offering by approximately $[•] million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of [•] shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $[•] million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We currently estimate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

Sales and marketing, including a staffing increase and incremental infrastructure

 

$

[•] million

Inventory

 

 

[•] million

Service and support for EV fleet

 

 

[•] million

Research and development

 

 

[•] million

Vehicle and charging infrastructure

 

 

[•] million

Working capital and other general corporate purposes

 

 

[•] million

   

$

[•] million

Our expected use of net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. As a result, we cannot predict with any certainty our use of the net proceeds from this offering or the amounts that we will actually spend on each area of use set forth above. While we have no current agreements, commitments or understandings for any specific acquisitions at this time, we may also use a portion of the net proceeds for these purposes.

Based on our current plans, we believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2023. In particular, we expect that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to expand our sales and marketing efforts, as well as vehicle manufacturing. However, we do not expect these funds will be sufficient to reach positive cash flow and profitability. We have based these estimates on assumptions that may prove to be wrong. We could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

Our management will retain broad discretion over the allocation of the net proceeds from this offering. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare and pay dividends will be made at the discretion of our board of directors and will depend on then-existing conditions, including our results of operations, financial condition, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2022:

        on an actual basis;

        on a pro forma basis to give effect, as of June 30, 2022, to the automatic conversion of all outstanding shares of our preferred stock and substantially all of our convertible notes into an aggregate of approximately [•] shares of common stock upon the closing of this offering and the related reduction to $0 of the amount owing on the convertible notes so converted. The proforma basis also reflects the filing and effectiveness of our restated certificate of incorporation in connection with the closing of this offering; and

        on a pro forma as adjusted basis to give further effect to our issuance and sale of [•] shares of common stock in this offering at an assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information together with our financial statements and related notes appearing at the end of this prospectus and the information set forth under the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

As of June 30, 2022

(in thousands, except share and per share data)

 

Actual

 

Pro Forma

 

Pro Forma as Adjusted

Cash and cash equivalents

 

$

4

 

 

$

  

 

$

 

Convertible Notes, Current

 

 

7,315

 

 

 

 

 

 

Current portion of long term note payable

 

 

13

 

 

 

   

 

 

Long term note payable

 

 

73

 

 

 

   

 

 

Convertible preferred stock (Series A and Series B); 7,750,000 shares authorized, 5,271,841 shares issued and outstanding, actual; no shares authorized, issued or outstanding pro forma and pro forma as adjusted

 

 

5

 

 

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

   

 

 

Preferred stock; no shares authorized, issued or outstanding, actual; shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted

 

 

 

 

 

 

 

 

Common stock; 15,000,000 shares authorized, 8,378,159 shares issued and outstanding, actual; 60,000,000 shares authorized, [•] shares issued and outstanding, pro forma; 60,000,000 shares authorized, [•] shares issued and outstanding, pro forma as adjusted

 

 

8

 

 

 

   

 

 

Additional paid-in capital

 

 

9,348

 

 

 

   

 

 

Accumulated deficit

 

 

(16,127

)

 

 

 

 

 

 

Total stockholders’ (deficit) equity

 

 

(6,766

)

 

 

 

 

 

 

Total capitalization

 

$

639

 

 

$

 

 

$

 

Our capitalization following the closing of this offering will depend on the actual initial public offering price and other terms of this offering determined at the pricing of the offering. A $1.00 increase (decrease) in the assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $[•] million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase

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(decrease) of [•] shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $[•] million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above is based on 8,378,159 shares of our common stock outstanding as of June 30, 2022, which excludes 3,500,000 additional shares of our common stock that will become available for future issuance under our 2022 Stock Incentive Plan, which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus is a part.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

Our historical net tangible book value (deficit) as of June 30, 2022 was $(7.0) million, or $(.84) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities. Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the 8,378,159 shares of our common stock outstanding as of June 30, 2022.

Our pro forma net tangible book value (deficit) as of June 30, 2022 was $[•] million, or $[•] per share of our common stock. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to) the automatic conversion of all outstanding shares of our preferred stock and all of our convertible notes into an aggregate of [•] shares of common stock upon the closing of this offering. Pro forma net tangible book value (deficit) per share represents pro forma net tangible book value (deficit) divided by the total number of shares outstanding as of June 30, 2022, after giving effect to the pro forma adjustments described above.

After giving further effect to our issuance and sale of [•] shares of our common stock in this offering at an assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2022 would have been $[•] million, or $[•] per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of [•] to existing stockholders and an immediate dilution in pro forma as adjusted net tangible book value per share of $[•] to new investors purchasing shares of common stock in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share

   

 

 

$

 

Historical net tangible book value (deficit) per share as of June 30, 2022

 

(.84

)

 

 

 

Increase per share attributable to the pro forma adjustments described above

 

 

 

 

 

 

Pro forma net tangible book value (deficit) per share as of June 30, 2022

   

 

 

 

 

Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares of common stock in this offering

   

 

 

 

 

Pro forma as adjusted net tangible book value per share after this offering

   

 

 

 

 

Dilution per share to new investors purchasing shares of common stock in this offering

   

 

 

$

 

The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $[•] and dilution per share to new investors purchasing shares of common stock in this offering by $[•], assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of [•] shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by $[•] and decrease the dilution per share to new investors purchasing shares of common stock in this offering by $[•], assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease of [•] shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by $[•] and increase the dilution per share to new investors purchasing shares of common stock in this offering by $[•], assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

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If the underwriters exercise in full their option to purchase additional shares of our common stock, our pro forma as adjusted net tangible book value per share after this offering would be $[•] million, representing an immediate increase in pro forma as adjusted net tangible book value per share of $[•] to existing stockholders and immediate dilution in pro forma as adjusted net tangible book value per share of $[•] to new investors purchasing shares of common stock in this offering, assuming an initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus.

The following table summarizes, as of June 30, 2022, giving pro forma effect as of that date to the conversion of approximately $8,425,503 in convertible notes immediately prior to the closing of this offering, the total number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration paid or to be paid and the average price per share paid or to be paid by existing stockholders and by new investors in this offering at an assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing shares of common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.

 

Shares Purchased

 

Total Consideration

 

Average
Price Per
Share

   

Number

 

Percent

 

Amount

 

Percent

 
   

(in thousands, except share and per share amounts)

Existing stockholders

 

14,566,957

   

 

 

$

     

 

 

$

 

Investors participating in this offering

 

 

 

 

 

 

 

 

 

 

 

 

$

 

Total

 

 

 

100.0

%

 

$

  

 

100.0

%

 

$

 

A $1.00 increase (decrease) in the assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $[•] million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by [•] percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by [•] percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. An increase (decrease) of [•] shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $[•] million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by [•] percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by 4.9 percentage points, assuming no change in the assumed initial public offering price.

The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters exercise in full their option to purchase additional shares of our common stock, the number of shares of our common stock held by existing stockholders would be reduced to [•]% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing shares of common stock in this offering would be increased to [•]% of the total number of shares of our common stock outstanding after this offering.

The discussion and tables above are based on 8,378,159 shares of our common stock outstanding as of June 30, 2022, which excludes 3,500,000 additional shares of our common stock that will become available for future issuance under our 2022 Stock Incentive Plan, which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus is a part, as well as any automatic increases in the number of shares of common stock reserved for future issuance under that plan.

To the extent that stock options are exercised, new stock options are issued under our equity incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors purchasing shares of common stock in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing at the end of this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.

Overview

We are an early stage manufacturer of all-electric, lightweight commercial utility vehicles. Our current offering includes the “FireFly”, used in the essential services and on-demand “last mile” urban e-delivery markets. We have completed the design of the vehicle, have assembled a core team, and have begun to manufacture it in limited quantities. With the proceeds of this offering, we plan to significantly scale operations.

Our vehicles provide an application-flexible platform. Our vehicles are easily configurable for a wide variety of applications, including parking management, security and perimeter patrol, parks and sidewalk maintenance, utility meter reading, property and building management, university and corporate campuses, as well as last mile urban small package and food delivery. Our Connected Vehicle Solution, evTS Connect™ is a cloud-connected electronics and software package that can be used for vehicle and fleet management, vehicle tracking, routing, performance monitoring and remote diagnostics.

We are currently focused on the essential services transportation and “last mile” urban e-delivery markets. We believe that businesses using pickup trucks or gasoline-powered light passenger vehicles in dense urban environments for specific applications are increasingly purchasing all-electric vehicles, such as the FireFly, that are designed with functionality for these applications. Our vehicles:

        Have a 100+ mile range on a full charge

        Travel from site to site at speeds exceeding 50 mph

        Have up to 1,100 lbs. payload capacity

        Are lightweight, agile and maneuverable in dense urban environments

        Seat one or two passengers with multiple driver position options

        Have a real-time vehicle management system with performance monitoring, remote diagnostics, alerts and notifications and location tracking with optional fleet management, intelligent routing and dispatch.

The original FireFly® vehicle was designed between January 2009 and December 2015 by Fort Worth, Texas-based eFleets Corporation with total estimated development costs of nearly $14,000,000. eFleets began shipping vehicles in 2012. As of August 31, 2022, the FireFly vehicle has been delivered to a total of 24 different cities. We estimate the current vehicle fleet of 73 vehicles has amassed in excess of 500,000 user miles. We acquired the intellectual property and assets of eFleets Corporation in August of 2020. From our formation until present, we have recruited our management team, set up our operations in three locations, developed our evTS Connect offering, established our distributor channel and completed design and development of our 2023 Model Year FireFly ESV vehicle.

We were formed as a Delaware corporation in 2015. We have not yet commercialized any products or generated significant revenue from product sales. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, securing intellectual property rights, conducting research and development activities, establishing arrangements for the manufacture of FireFly vehicles and longer-term planning for potential commercialization. To date, we have funded our operations primarily with proceeds from the sales of convertible preferred stock and convertible notes and advances from Nine Associates, LLC, an entity owned by an affiliate of our Chief Executive Officer. Through June 30, 2022, we had received net proceeds of $16.4 million from these financing activities. Since inception, we have incurred significant operating losses. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of FireFly vehicles or one or more of our future product offerings. Our net losses were

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$2.5 million for the years ended December 31, 2020, and $4.8 million for the year ended December 31, 2021. Our net loss was $3.4 million for the six months ended June 30, 2022. As of June 30, 2022, we had an accumulated deficit of $16.1 million.

Our total operating expenses were $2.5 million for the years ended December 31, 2020, and $4.6 million for the year ended December 31, 2021. Our total operating expenses were $3.1 million for the six months ended June 30, 2022. We expect to continue to incur significant expenses for the foreseeable future. We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we develop our product offering and dealer network. In addition, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Furthermore, upon the closing of this offering, we expect to incur additional costs associated with operating as a public company.

As a result, we will need to obtain substantial additional funding to support our continuing operations. Until such time, if ever, as we can generate significant revenues from product sales we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing and distribution, including the anticipated net proceeds from this offering. We do not have any committed external source of funds. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development and manufacturing programs or any future commercialization efforts. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our product development and manufacturing efforts.

Because of the numerous risks and uncertainties associated with vehicle development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our product development efforts, diversify our pipeline of product offerings or even continue our operations.

As of June 30, 2022, we had $4,137 in cash, cash equivalents and short-term investments. We have experienced negative cash flows from operations during fiscal 2020 and 2021, and for the first six months of fiscal 2022. We expect to incur operating losses and negative cash flows from operations for the foreseeable future. As a result, there is a significant degree of uncertainty as to how long our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations. These conditions raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date our consolidated financial statements for the year ended December 31, 2021. See Note 9 to our consolidated financial statements appearing at the end of this prospectus for additional information on our assessment of our ability to continue as a going concern.

We believe that the net proceeds from this offering, together with our existing cash, cash equivalents and short-term investments as of June 30, 2022, will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2023. We have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. See “— Liquidity and Capital Resources.”

Collaborations and Strategic Alliances

Distributors

In the United States, we are currently selling our vehicles exclusively through a select network of distributors on a regional basis. Distributors conduct “on-site demonstrations” for prospective customers at their own facilities which prior experience has shown to be best practice for introducing the FireFly’s benefits. Distributors typically purchase our vehicles at a discount to the MSRP and resell the vehicles at the MSRP or whatever price they choose. Initially, we have chosen distributors in key markets with high profile customers to maximize sales, reputational impact and to ensure responsive customer technical and warranty support. As of June 30, 2022, we have four distributors located in key major markets — the Pacific Northwest, California, the New York/Tri-States Region and Boston/New England. Distributors in additional markets are being selected based on experience, current product offering, technical resources, type of customers served and customer satisfaction. We expect to add four to eight additional distributors by the end of 2022, as well as launch a national accounts program selling directly to major courier and on-demand delivery companies.

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        Technology Collaborators

We are pursuing several opportunities, which support and extend our overall vision for our core EV business. Leveraging Integration partnerships with companies involved in battery and charging technologies, motor and control software design, autonomous vehicle and delivery solutions, AI based routing and dispatch software and other mission critical technologies will enable us to maintain our focus on what we do best, while taking advantage of best in class developments brought to bear by teams focused on specific technologies, which we believe will keep us at the forefront of the market for lightweight commercial utility vehicles.

        Batteries

We use lithium iron phosphate (LFP) battery technology. We are now incorporating second generation cell technology that is smaller, lighter and has higher energy capacity into the 2022 model year vehicle. In addition, our proprietary LFP battery management system (BMS) maintains, conditions and monitors the vehicle’s traction battery for improved performance, charging and range compared to our direct competition. Longer term, we anticipate forming collaborations directed at alternative battery chemistries with increased power density, employing non-combustible solid-state technology. These advanced non-lithium battery chemistries use readily available materials rather than expensive rare-earth metals, are expected to be safer and substantially lower in cost.

        Accessory and Bed Sourcing

In order to complement and maximize market opportunities for the FireFly, we have entered into several vendor and strategic informal collaborations with industry leaders in specialties such as parking and municipal fleet consulting, automatic license plate recognition (“ALPR”) systems (Genetec), electrical vehicle charging equipment (“EVSE”) providers (ChargePoint, Blink), specialty electronics, routing and delivery software (Wise) and rear bed accessory manufacturers and upfitters (The Shyft Group and J.B.Poindexter). Other collaborators include BroyHill, Kimtek Research and Dataspeed). We believe that this third-party sourcing strategy allows us to differentiate ourselves from our competitors by taking advantage of market exclusivity, proprietary technology, favorable pricing and economies of scale and additional margin opportunities.

Financial Operations Overview

Revenue

To date, we have not generated significant revenue from product sales and do not expect to generate significant revenue until product development and testing is completed and more robust production and distribution of vehicles commences.

Research and Development Expenses

Research and development expenses primarily consist of costs incurred in connection with the development of our lead product, the Firefly. This includes salaries and related benefits, vehicle engineering, and fleet management software utilized to provide real-time vehicle performance data, remote diagnostics, and optional tracking, routing and dispatching functionality.

We expense research and development costs as incurred. These expenses include:

        fees and expenses incurred in connection with the development of software technology and vehicle diagnostics capabilities;

        expenses incurred under agreements with third parties, including contract engineering resources, and other third parties that assist in product development on our behalf as well as third parties that manufacture accessories for use in our product rollout;

        manufacturing scale-up expenses and the cost of acquiring and manufacturing vehicle materials, including test part assemblies;

        employee-related expenses, including salaries, related benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

        costs related to compliance with regulatory requirements; and

        facilities costs, which include depreciation costs of equipment and allocated expenses for rent, utilities and other operating costs.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries, related benefits, and travel expenses for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting, tax and audit services, and information technology infrastructure costs. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued development of our product offerings. We also anticipate that we will incur increased costs associated with being a public company, including costs of accounting, audit, legal, regulatory, compliance and tax-related services related to maintaining compliance with requirements of Nasdaq and the Securities and Exchange Commission, or SEC; director and officer insurance costs; and investor and public relations costs. We anticipate the additional costs for these services will substantially increase our general and administrative expenses. Additionally, we may experience an increase in payroll and expense as a result of our preparation for potential commercial operations, especially as it relates to sales and marketing costs.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries, related benefits, and travel for personnel in sales and marketing functions. Sales and marketing expenses also include fees for development of marketing materials, outbound press, and software development and implementation, as well as identification and engagement of the distributor network. We anticipate that our sales and marketing expenses will increase in the future as we increase our headcount to support sales and marketing efforts and advertising related to market outreach.

Service Expenses

Service expenses consist primarily of salaries and related benefits for personnel in the service function, as well as parts and labor associated with fleet repair and management. We anticipate that our service expenses will increase in the future as we increase our distribution of FireFly vehicles in the market with warranty repair costs becoming more significant.

Stock Based Compensation

In order to attract qualified employees to fill positions of need the Company may offer common stock grants, which creates expenses related to the value of stock grants at the time of issuance. This value is recognized as an expense on evTS’ records in accordance with generally accepted accounting principles. We anticipate that our stock-based compensation will increase in the future as we continue to increase our headcount to meet needs across Company functions.

Interest Income

Interest income consists of income from bank deposits and short-term investments.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this prospectus, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

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Determination of Fair Value of Common Stock

As a private company with no active public market for our common stock, our board of directors has historically determined the fair value of our common stock on each date of each grant, based on good faith effort with input from management.

The Board of Directors has determined valuations as of December 31, 2019, December 31, 2020, and December 31, 2021, which resulted in valuations of our common stock of $0.30, $0.30, and $0.30 per share, respectively. In conducting each valuation, they considered all objective and subjective factors that were believed to be relevant, including best estimates of our business condition, prospects and operating performance at each valuation date. Within the valuations performed, a range of factors, assumptions and methodologies were used. The significant factors included:

        the lack of an active public market for our common stock and convertible preferred stock;

        the prices at which we sold shares of our convertible preferred stock in arm’s length transactions and the superior rights, preferences and privileges of the convertible preferred stock relative to our common stock, including the liquidation preferences of our convertible preferred stock;

        our results of operations and financial condition, including cash on hand;

        the material risks related to our business;

        our stage of product development and business strategy;

        the composition of, and changes to, our management team and board of directors;

        the market performance of publicly traded companies in the electric vehicle and automotive sector, as well as recently completed initial public offerings, or IPOs, of companies in the electric vehicle and automotive sectors; and

        the likelihood of achieving a liquidity event such as an IPO given prevailing market conditions.

There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates are management’s best estimates and include assumptions regarding our future operating performance, the time to completing this offering or other liquidity event, the related company valuations associated with such events and the determinations of the appropriate valuation methods. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per common share could have been different.

Results of Operations

Comparison of the Three and Six Months ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three and six months ended June 30, 2022 and 2021 (in thousands):

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

   

2022

 

2021

 

2022

 

2021

Revenues

 

$

8

 

 

$

 

 

$

8

 

 

$

 

Costs of Sales

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

8

 

 

 

 

 

 

8

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and Administrative

 

 

416

 

 

 

391

 

 

 

895

 

 

 

671

 

Sales and Marketing

 

 

351

 

 

 

292

 

 

 

727

 

 

 

549

 

Research and Development

 

 

685

 

 

 

254

 

 

 

1,419

 

 

 

432

 

Service

 

 

55

 

 

 

32

 

 

 

100

 

 

 

73

 

Share Based Compensation

 

 

 

 

 

30

 

 

 

 

 

 

182

 

Total Operating Expenses

 

 

1,507

 

 

 

999

 

 

 

3,141

 

 

 

1,907

 

Net Loss From Operations

 

 

(1,499

)

 

 

(999

)

 

 

(3,133

)

 

 

(1,907

)

Other Income (Expense)

 

 

(175

)

 

 

(42

)

 

 

(293

)

 

 

(41

)

Loss Before Income Taxes

 

 

(1,674

)

 

 

(1,041

)

 

 

(3,426

)

 

 

(1,948

)

Income Tax Expense

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$

(1,674

)

 

$

(1,041

)

 

$

(3,426

)

 

$

(1,948

)

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Revenues

We had negligible Revenue and Cost of Sales during the three and six months ended June 30, 2022 and June 30, 2021, consisting primarily of lease income and sales of product parts, not related to vehicle sales.

General and Administrative Expense

General and administrative expense was comparable at $0.4 million to $0.4 million for the three months ended June 30, 2022 and the three months ended June 30, 2021.

General and administrative expense increased by $0.2 million to $0.9 million for the six months ended June 30, 2022 from $0.7 million for the six months ended June 2021. The increase in general and administrative expense was primarily attributable to an increase in our employee compensation and benefits related to an increase in the number of general administrative employees, an increase in legal fees related to patents and new contracts, and generally higher fees in areas such as audit and facility costs to support our growth. We expect that our general and administrative expense will increase in future periods as we expand our operations and incur additional costs in connection with being a public company.

Sales and Marketing Expense

Sales and marketing expense increased by $0.1 million to $0.4 million for the three months ended June 30, 2022 from $0.3 million for the three months ended June 30, 2021. The increase in sales and marketing expense was primarily attributable to an increase in our employee compensation and benefits related to an increase in the number of sales and marketing employees, an increase in marketing materials, marketing services, and market outreach.

Sales and marketing expense increased by $0.2 million to $0.7 million from $0.5 million for the six months ended June 30, 2022 from $0.5 million for the six months ended June 30, 2021. The increase in sales and marketing expense was attributable to an increase in employee compensation, marketing materials, marketing services and market outreach.

We expect that our sales and marketing expense will increase in future periods as we expand our operations and incur additional costs in connection with sales efforts, advertising and investor relations.

Research and Development Expense

Research and development expense increased by $0.4 million to $0.7 million for the three months ended June 30, 2022 from $0.3 million for the three months ended June 30, 2021. The increase in research and development expense was primarily attributable to an increase in compensation and related benefits as employment was increased to facilitate product engineering and development and an increase in outside engineering costs and facility expense.

Research and development expense increased by $1.0 million to $1.4 million for the six months ended June 30, 2022 from $0.4 million for the six months ended June 30, 2021. The increase in research and development expense was primarily attributable to an increase in compensation and related benefits as employment was increased to facilitate product engineering and development and an increase in outside engineering costs and facility expense.

We expect that our research and development costs will continue to increase for the foreseeable future as we further scale our manufacturing processes and advance development of FireFly vehicles and fleet management software and hardware.

Service Expense

Service expense increased by $23 thousand to $55 thousand for the three months ended June 30, 2022 from $32 thousand for the three months ended June 30, 2021. There was minimal change in service expense between the two periods attributed to parts and transportation expense as our workflow was generally constant.

Service expense increased by $27 thousand to $100 thousand for the six months ended June 30, 2022 from $73 thousand for the six months ended June 30, 2021. This increase was attributed to increased transportation and parts expense during the period.

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We expect that our service expense will increase in future periods as we expand our product development and vehicle testing.

Share Based Compensation

Share Based Compensation expense decreased by $30 thousand to $0 for the three months ended June 30, 2022 from $30 thousand for the three months ended June 30, 2021. The decrease in Share Based Compensation expense was primarily attributable to an increase in employment of qualified individuals and the granting of stock to eligible employees during 2021.

Share Based Compensation expense decreased by $182 thousand to $0 for the six months ended June 30, 2022 from $182 thousand for the six months ended June 30, 2021. The decrease in Share Based Compensation expense was primarily attributable to an increase in employment of qualified individuals and the granting of stock to eligible employees during 2021.

We expect that our Stock Based Compensation expense will increase in future periods as we expand hiring and granting of stock options to qualified employees.

Other Income (Expense)

Other Expense was $175 thousand for the three months ended June 30, 2022 as compared to $42 thousand for the three months ended June 30, 2021. This expense consisted of interest expense accrued on issued Convertible Notes Payable during the period, partially offset by negligible other income from interest earned during the period.

Other Expense was $293 thousand for the six months ended June 30, 2022 as compared to $41 thousand Other Expense for the six months ended June 30, 2022. This expense consisted of interest expense accrued on issued Convertible Notes Payable during the period, partially offset by negligible other income from interest earned during the period.

Comparison of the Year ended December 31, 2021 and 2020

The following table summarizes our results of operations for the year ended December 31, 2021 and 2020 (in thousands):

 

Year Ended
December 31,

   

2021

 

2020

Revenues

 

$

1

 

 

$

9

 

Costs of Sales

 

 

 

 

 

8

 

Gross Profit

 

 

1

 

 

 

1

 

Operating Expenses

 

 

 

 

 

 

 

 

General and Administrative

 

 

1,442

 

 

 

530

 

Sales and Marketing

 

 

1,243

 

 

 

470

 

Research and Development

 

 

1,404

 

 

 

423

 

Service

 

 

188

 

 

 

66

 

Share Based Compensation

 

 

306

 

 

 

1,042

 

Total Operating Expenses

 

 

4,583

 

 

 

2,531

 

Net Loss From Operations

 

 

(4,582

)

 

 

(2,530

)

Other Income (Expense)

 

 

(180

)

 

 

 

Loss Before Income Taxes

 

 

(4,762

)

 

 

(2,530

)

Income Tax Expense

 

 

 

 

 

 

Net Loss

 

$

(4,762

)

 

$

(2,530

)

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Revenues

We had negligible Revenue and Cost of Sales during the years ended December 31, 2021 and December 31, 2020, consisting primarily of sales of product parts, not related to vehicle sales.

General and Administrative Expense

General and administrative expense increased by $0.9 million to $1.4 million for the year ended December 31, 2021 from $0.5 million for the year ended December 31, 2020. The increase in general and administrative expense was primarily attributable to an increase in our employee compensation and benefits related to an increase in the number of general administrative employees, an increase in legal fees related to patents and new contracts, and generally higher fees in areas such as audit and facility costs to support our growth. We expect that our general and administrative expense will increase in future periods as we expand our operations and incur additional costs in connection with being a public company.

Sales and Marketing Expense

Sales and marketing expense increased by $0.7 million to $1.2 million for the year ended December 31, 2021 from $0.5 million for the year ended December 31, 2020. The increase in sales and marketing expense was primarily attributable to an increase in our employee compensation and benefits related to an increase in the number of sales and marketing employees, an increase in marketing materials, marketing services, and market outreach. We expect that our sales and marketing expense will increase in future periods as we expand our operations and incur additional costs in connection with sales efforts, advertising and investor relations.

Research and Development Expense

Research and development expense increased by $1.0 million to $1.4 million for the year ended December 31, 2021 from $0.4 million for the year ended December 31, 2020. The increase in research and development expense was primarily attributable to an increase of $0.8 million due to increases in compensation and related benefits as employment was increased to facilitate product engineering and development and an increase of $0.1 million in outside engineering costs and facility expense.

We expect that our research and development costs will continue to increase for the foreseeable future as we further scale our manufacturing processes and advance development of FireFly vehicles and fleet management software and hardware.

Service Expense

Service expense increased by $122 thousand to $188 thousand for the year ended December 31, 2021 from $66 thousand for the year ended December 31, 2020. The increase in services expense was primarily attributable to an increase in previously manufactured vehicles obtained by the Company for use in product development. We expect that our service expense will increase in future periods as we expand our product development and vehicle testing.

Share Based Compensation

Share Based Compensation expense decreased by $736 thousand to $306 thousand for the year ended December 31, 2021 from $1.0 million for the year ended December 31, 2020. The decrease in Share Based Compensation expense was primarily attributable to an increase in employment of qualified individuals and the granting of stock to eligible employees during 2020 and less share based awards being granted during 2021.

We expect that our Share Based Compensation expense will increase in future periods as we expand hiring and granting of stock options to qualified employees.

Other Income (Expense)

Other Expense was $180 thousand for the year ended December 31, 2021 and $0.0 million for the year ended December 31, 2021. This 2021 expense consisted of interest expense accrued on issued Convertible Notes Payable that were issued during the period.

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Liquidity and Capital Resources

Going Concern Considerations

We have incurred significant losses since our inception. We have experienced net losses of approximately $2.5 million, and $4.8 million for the years ended December 31, 2020 and 2021, respectively, and $3.4 million for the six months ended June 30, 2022. We expect our capital expenses and operational expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs and, therefore, our operating losses will continue or even increase.

Our financial statements have been prepared on a “going concern” basis, which implies we may not continue to meet our obligations and continue our operations for the next twelve months. The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. Although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business.

There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity or equity-linked securities by us would result in significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business as planned and as a result may be required to scale back or cease operations, which could cause our stockholders to lose some or all of their investment in us. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Sources of Liquidity

Since our inception, we have not generated meaningful revenue and have incurred significant operating losses and negative cash flows from our operations. To date, we have funded our operations primarily with proceeds from the sales of convertible preferred stock and convertible notes and advances from Nine Associates, LLC, an entity owned by an affiliate of our Chief Executive Officer. Through June 30, 2022, we had received net cash proceeds of $9.3 million from sales of our convertible preferred stock and $7.1 million in sales of convertible notes.

Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation. The following table provides information regarding our total cash, cash equivalents and short-term investments on December 31, 2020, December 31, 2021, and June 30, 2022 (in thousands):

 

December 31,

 

June 30,
2022

2020

 

2021

 

Cash and cash equivalents

 

$

144

 

$

2

 

$

4

Short-term investments

 

 

0

 

 

0

 

 

0

Total cash, cash equivalents and short-term investments

 

$

144

 

$

2

 

$

4

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Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2020 and 2021, and for the six months ended June 30, 2021 and 2022 (in thousands):

 

Years Ended
December 31,

 

Six Months Ended
June 30,

   

2020

 

2021

 

2021

 

2022

Net cash used in operating activities

 

$

(1,322

)

 

$

(3,916

)

 

$

(1,596

)

 

$

(3,123

)

Net cash used in investing activities

 

 

(124

)

 

 

(801

)

 

 

(106

)

 

 

(555

)

Net cash provided by financing activities

 

 

1,590

 

 

 

4,575

 

 

 

3,612

 

 

 

3,680

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

$

144

 

 

$

(142

)

 

$

1,910

 

 

$

2

 

Net Cash Used in Operating Activities

The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.