Envirotech Vehicles, Inc. Leases Disclosure
13. Leases
Operating leases
The Company has active operating lease arrangements for office space and warehouse facilities. The Company is typically required to make fixed minimum rent payments relating to its right to use the underlying leased assets. Although these leases have terms that are either month-to-month or terms that are one year or less (with renewal options), the Company concluded that the term renewal options are reasonably certain to be exercised, and the Company classified such leases as operating leases in accordance with the provisions of ASC 842.
On April 1, 2025, the Company entered into a -year sub-lease arrangement with Maddox Defense (with renewal options), an entity of which Jason Maddox, the President and Interim Chief Financial Officer of the Company, is the sole stockholder, to lease a facility in Houston, Texas for its medical supplies operations. This lease is treated as an operating lease in accordance with the provisions of ASC 842. Therefore, the Company recognized operating lease liabilities with corresponding ROU assets based on the present value of the minimum rental payments of such leases.
On March 28, 2023, the Company entered into the Berthaphil Sublease to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines. The term of the Berthaphil Sublease was years and two months with a turnover date of July 1, 2023 (the "turnover date") and a rental commencement of September 1, 2023. However, the warehouse building was not available for use to the Company until the early part of the fourth quarter of 2023. Therefore, the commencement date was deferred until the fourth quarter of 2023, which is when the Company was given access to use the warehouse building. There was a grace period of two months for rental payments starting from the turnover date. The monthly rent for the first year is $15,000, escalating to $15,750 for the second year and $16,530 for the remaining term. In addition to the monthly rent, the Company is required to pay an additional 5% of the monthly rent as common area maintenance costs. The Berthaphil Sublease may be renewed for an additional period that is mutually agreed upon subject to certain terms and conditions. The Company intended to use the leased space as a production facility as it sought to expand its business presence in the region. The Company accounted for this lease as an operating lease under ASC 842 and recorded an operating lease liability and a corresponding ROU asset for this lease. However, the Company decided not to use this facility for its original intended purpose and recorded a full impairment on its ROU asset in December 2024. The Company maintains the remaining obligation on the Berthaphil Sublease as a contingency should the lessor demand payment.
On July 1, 2024, the Company entered into a month-to-month lease contract to lease a residence in Osceola, Arkansas for the purpose of housing certain of the Company's employees. The monthly lease cost is $3,000. This lease is treated as a short-term lease.
On August 26, 2024, the Company entered into a one-year lease contract to lease a location in Manalapan, New Jersey with the purpose of servicing the Company's New Jersey customers. The monthly lease cost is $2,900 and at the end of the one-year lease term, the lease converted into a month-to-month arrangement. This lease is treated as a short-term lease.
The Company's lease agreements do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate incremental borrowing rate. The Company benchmarked itself against other companies of similar credit ratings and comparable credit quality and derived an incremental borrowing rate to discount each of its lease liabilities based on the remaining lease terms.
ROU assets at December 31, 2025 and December 31, 2024 were $485,482 and $108,508, respectively. Short-term operating lease liabilities were $229,899 and $235,625 at December 31, 2025 and December 31, 2024, respectively. Long-term operating lease liabilities were $306,904 and $0 at December 31, 2025 and December 31, 2024, respectively.
Quantitative information regarding the Company’s leases is as follows:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Lease expenses | ||||||||
| Operating lease expenses | $ | 299,590 | $ | 486,133 | ||||
| Short-term lease expenses | $ | 161,920 | $ | 103,482 | ||||
| Total lease cost | $ | 461,510 | $ | 589,615 | ||||
| Other information | ||||||||
| Cash paid for the amounts included in the measurement of lease liabilities for operating leases: | ||||||||
| Operating cash flows | $ | 292,207 | $ | 346,972 | ||||
| Weighted-average remaining lease term (in years): | ||||||||
| Operating leases | 2.25 | 0.75 | ||||||
| Weighted-average discount rate: | ||||||||
| Operating leases | 14 | % | 14 | % | ||||
As of December 31, 2025, future minimum lease payments required under operating leases are as follows:
| 2026 | $ | 243,454 | ||
| 2027 | $ | 253,192 | ||
| 2028 | $ | 85,217 | ||
| Total payments | $ | 581,863 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 13, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Sep 25, 2023 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.