Envirotech Vehicles, Inc. Debt Disclosure

6. Debt

 

Notes Payable

 

On July 15, 2022, the Company entered into an equipment financing agreement with Wells Fargo Bank, N.A. in connection with the purchase of facility grounds equipment. The $25,007 loan is payable over 36 months, beginning in August 2022, with monthly payments of $521. The balance of this note was $4,168 as of December 31, 2025, of which $4,168 is classified as Notes Payable - current on the Company's Consolidated Balance Sheets as of December 31, 2025.

 

On June 15, 2025, the Company entered into a premium financing agreement with AFCO Insurance Premium Finance to finance its directors' and officers' insurance coverages. The $140,400 loan is payable over nine months, beginning in July 2024, and bears interest at 8.24% with monthly payments of $14,576. The balance of this note was $57,315 as of December 31, 2025.

 

On August 20, 2025, the Company entered into a premium financing agreement with AFCO Insurance Premium Finance to finance certain insurance coverages other than its directors' and officers' insurance coverages. The $114,140 loan is payable over eleven months, beginning in September 2025, and bears interest at 8.24% with monthly payments of $7,809 and required an initial down payment of $39,515. The balance of this note, including accrued interest, was $114,762 as of December 31, 2025.

 

Convertible Note

 

On January 18, 2024, the Company entered into a convertible promissory note agreement ("Note") for $1,000,000 with an unrelated third-party investor (the "Holder"). The origination fee of the Note was $99,000 and the maturity date of the Note was September 30, 2024. The Holder was entitled to convert the Note into common stock at the greater of $1.50 per share or at 90% of the share price of the Company's common stock on the maturity date. The Holder also had a security interest in the assets of the Company in the event of non-payment of the Note. In addition, the Holder received options to purchase 80,000 shares of the Company's common stock at $1.50 per share. These options expire two years from the date of the Note. On May 6, 2024, the Note was cancelled and replaced with a short-term note. During the third quarter of 2024, the short-term note was converted into 50,505 shares of common stock.

 

The Company elected to measure the Note and options at fair value. In estimating the fair value of the Note, a Monte Carlo simulation model is applied. The required inputs include the current stock price, the risk-free rate and volatility of the common stock. The Note's fair value is classified as Level 3 under the fair value hierarchy as provided by ASC 820. In estimating the fair value of the options, the Black-Scholes Merton Model is used. The required inputs include the current stock price, the exercise price, the term of the options, the risk-free rate and the volatility of the common stock. The options' fair value is classified as Level 3 under the fair value hierarchy as provided by ASC 820. The fair valuation of the Note and options uses inputs other than quoted prices that are observable either directly or indirectly.

 

The net proceeds of $901,000 received by the Company from the issuance of the Note were bifurcated between the Note and the options. The amount allocated to the options was $431,405 which was the fair value on the issuance date of the Note. The remaining proceeds received are allocated to the Note. Under the fair value election, both the Note and options are remeasured to their respective fair values at the reporting date and are presented as Options liability, at fair value on the Company's Consolidated Balance Sheets. Changes in fair values for the Note and options are recorded as an unrealized gain or loss on convertible note fair value in Other (Expense)/Income in the Company's consolidated statements of operations. As a result of this election, the Company recorded an unrealized loss $556,174 for the year ended December 31, 2024 for the Note. The Company recorded an unrealized gain of $132,412 and $298,993 for the year ended December 31, 2025 and December 31, 2024, respectively for the options.

 

Amended and Restated Standby Equity Purchase Agreement (as Supplemented and Amended, the "A&R SEPA")

 

On October 31, 2024, the Company entered into A&R SEPA with YA II PN, Ltd. (the "Investor"). The A&R SEPA amends and restates in its entirety the standby equity purchase agreement, dated September 23, 2024, by and between the Company and the Investor (the “Original SEPA”).

 

Pursuant to the A&R SEPA, except for so long as there is a balance outstanding under the Promissory Notes (as defined below) and the Additional Promissory Notes (as defined below), the Company has the right, from time to time, until November 1, 2027, to require the Investor to purchase up to $25 million of shares of common stock, subject to certain limitations and conditions set forth in the A&R SEPA, by delivering written notice to the Investor. Pursuant to the A&R SEPA, the Investor advanced to the Company the principal amount of $3 million (the “Pre-Paid Advance”) in exchange for the Company’s issuance to the Investor of convertible promissory notes (the “Promissory Notes”) in two tranches, resulting in net proceeds (net of discounts and fees) to the Company of $2,635,500. The Company received the first tranche of the Pre-Paid Advance in the principal amount of $2 million on October 31, 2024 in exchange for the Promissory Note dated October 31, 2024 (the “EVTV-1 Promissory Note”), and the second tranche of the Pre-Paid Advance in the principal amount of $1 million on December 17, 2024 in exchange for the Promissory Note dated December 17, 2024 (the “EVTV-2 Promissory Note”). The Promissory Notes accrue interest on the outstanding principal balance at an annual rate equal to 0%, which will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Promissory Notes) or a Registration Event (as defined in the Promissory Notes) for so long as such event of default remains uncured. Prior to the Company’s entry into the Supplemental Agreement (as defined below), the Promissory Notes were initially set to mature on November 13, 2025 and were convertible at a conversion price equal to the lower of (i) $21.48 per share or (ii) 93% of the lowest daily volume weighted average price of the Company’s common stock on Nasdaq Stock Market LLC (“Nasdaq”) as reported by Bloomberg L.P. (“VWAP”) during the five consecutive trading days immediately preceding the conversion date (but no lower than the “floor price” then in effect, which was $3.58 per share, subject to adjustment from time to time in accordance with the terms contained in the Promissory Notes). Pursuant to the terms of the Original SEPA, the Company issued 6,410 shares of common stock to the Investor as a commitment fee.

 

During 2025, the obligation under the EVTV-1 Promissory Note was partially satisfied through the conversion of the EVTV-1 Promissory Note into shares of the Company's common stock. As a result of this conversion, 1,416,116 shares of the Company's common stock were issued at a weighted average price of $1.06. The remaining principal balance of the EVTV-1 Promissory Note at  December 31, 2025, was $285,000. As a result of these conversions, a realized gain of $339,855 was recognized for the EVTV-1 Promissory Note for the year ended December 31, 2025.

 

During the first quarter of 2025, the obligation under the EVTV-2 Promissory Note in the principal amount of $1 million was fully satisfied through the conversion of the EVTV-2 Promissory Note into shares of the Company's common stock. As a result of this conversion, 174,348 shares of the Company's common stock were issued at a weighted average price of $6.95 and a realized loss of $135,976 was recognized for the EVTV-2 Promissory Note for the year ended December 31, 2025. The principal balance of the EVTV-2 Promissory Note was zero at  December 31, 2025.

 

The Company has elected to measure the Promissory Notes at fair value. In estimating the fair value of the Promissory Notes, a lattice model is applied. The required inputs include the current stock price, the term, the conversion price, the risk-free rate and volatility of the common stock. The Promissory Notes' fair values are classified as Level 3 under the fair value hierarchy as provided by ASC 820.

 

Supplemental Agreement to A&R SEPA

 

On February 24, 2025, the Company entered into a supplemental agreement, dated February 24, 2025 (the “Supplemental Agreement”), with the Investor, which amends and supplements the A&R SEPA to: (i) provide for the advancement by the Investor to the Company, subject to the satisfaction of certain conditions as set forth in the Supplemental Agreement, of $5 million under the A&R SEPA (the “Additional Pre-Paid Advance”), to be evidenced by convertible promissory notes (the “Additional Promissory Notes”) in two tranches, (ii) amend the maturity date for the EVTV-1 Promissory Note to March 9, 2026, and (iii) amend the floor price for the EVTV-1 Promissory Note to $0.7130 per share.

 

The Additional Promissory Notes accrue interest on the outstanding principal balance at an annual rate equal to 5%, which will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Additional Promissory Notes) or a Registration Event (as defined in the Additional Promissory Notes) for so long as such event remains uncured. The Additional Promissory Notes will mature on March 9, 2026, which may be extended at the option of the Investor. The Additional Promissory Notes are convertible at a conversion price equal to the lower of (i) $10.00 per share or (ii) 93% of the lowest daily VWAP during the five consecutive trading days immediately preceding the conversion date (but no lower than the “floor price” then in effect, which is $0.7130 per share, subject to adjustment from time to time in accordance with the terms contained in the Additional Promissory Notes).

 

The first tranche of the Additional Pre-Paid Advance was disbursed on February 25, 2025 in the principal amount of $3 million (with net proceeds to the Company of approximately $2.7 million after deducting discounts and fees) as evidenced by an Additional Promissory Note issued by the Company to the Investor on February 24, 2025 (the “EVTV-3 Additional Promissory Note”). During 2025, the obligation under the EVTV-3 Additional Promissory Note in the principal amount of $3 million was partially satisfied through the conversion of the EVTV-3 Additional Promissory Note into shares of the Company's common stock. As a result of this conversion, 2,134,613 shares of the Company's common stock were issued at a weighted average price of $1.51. The remaining principal balance of the EVTV-3 Additional Promissory Note on December 31, 2025, was $50,000. A realized loss of $7,284 was recognized as a result of this conversion during the year ended December 31, 2025.

 

The second tranche of the Additional Pre-Paid Advance in the principal amount of $2 million (with net proceeds of approximately $1.8 million after deducting discounts and fees) was disbursed to the Company on May 7, 2025 (the "EVTV-4 Additional Promissory Note"). During 2025, the obligation under the EVTV-4 Additional Promissory Note in the principal amount of $2 million was fully satisfied through the conversion of the EVTV-4 Additional Promissory Note into shares of the Company's common stock. As a result of this conversion, 1,163,731 shares of the Company's common stock were issued at a weighted average price of $1.96. A realized loss of $112,809 was recognized as a result of this conversion during the year ended December 31, 2025.

 

The Company has elected to measure the Additional Promissory Notes at fair value. In estimating the fair value of the Additional Promissory Notes, a lattice model is applied. The required inputs include the current stock price, the term, the conversion price, the risk-free rate and volatility of the Company's common stock. The Additional Promissory Notes' fair values are classified as Level 3 under the fair value hierarchy as provided by ASC 820.

 

The following table depicts the future annual minimum payments of the Company's outstanding debt as of December 31, 2025:

 

		Amount
2026		$	485,773
Total payments		$	485,773