AZIO AI HOLDINGS, INC.

Envirotech Vehicles, Inc. (the “Company”), including its consolidated subsidiaries, is a provider of purpose-builtzero-emission electric vehicles focused on reducing the total cost of vehicle ownership and helping fleet operators unlock the benefits of green technology. The Company serves commercial and last-mile fleets, school districts, public and private transportation service companies, and colleges and universities to meet the increasing demand for light to heavy-duty electric vehicles. The Company’s vehicles address the challenges of traditional fuel price cost instability and local, state, and federal regulatory compliance. During thefirst quarter of2025, the Company increased its business portfolio by addingtwo new business operations: (1) medical supplies and (2) drones.

Basis of Presentation—The consolidated financial statements and related disclosures include the consolidated balance sheet accounts as of* March 31, 2025* and the consolidated results of operations for thethree months ended* March 31, 2025* of Envirotech Vehicles, Inc. and subsidiaries. These consolidated financial statements are unaudited, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States ("U.S.") generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the Company’s opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with the Company's audited financial statements for the years ended* December 31, 2024* and2023 included in the Company’s Annual Report on Form10-K filed with the SEC on* April**15,* 2025. The results of operations for thethree months ended* March 31, 2025* arenot necessarily indicative of the results to be expected for the full year.

Principles of Consolidation—The accompanying financial statements reflect the consolidation of the financial statements of Envirotech Vehicles, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

***Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions ***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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Fair Value of Financial Instruments—The carrying values of the Company’s financial instruments, including cash, accounts receivable and*** accounts payable approximate their fair value due to the short-term nature of these financial instruments. Accounting Standards Codification ("ASC")820, Fair Value Measurements ("ASC820") defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes athree*-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level1: Observable inputs such as quoted prices in active markets;

Level2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level3: Unobservable inputs that are supported by little orno market data and that require the reporting entity to develop its own assumptions.

The Company doesnot have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis other than the options liability and convertible note disclosed in Note6 - Debt, in which the Company has elected the fair value option.

Revenue Recognition—The Company recognizes revenue from the sales ofzero-emission electric vehicles and vehicle maintenance and inspection services. The Company recognizes revenue in accordance with ASC606, Revenue from Contracts with Customers ("ASC606"), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. At* March 31, 2025*, the Company did have a concentration of customers; with five customer balances accounting for approximately 95% of the outstanding accounts receivable. The Company recorded gross revenue of $566,800 from the sale of vehicles for thethree months ended* March 31, 2025*. Sales return fromone customer totaled $196,500. Net revenue recorded for thethree months ended* March 31, 2025was $373,300. One customer accounted for 79% or $449,840 of the gross revenue for thethree* months ended* March 31, 2025*. The Company had accounts receivable, net of $852,125 and $1,016,666 on* March**31,* 2025 and* December 31, 2024,*respectively.

In applying ASC606, the Company is required to:

Product revenue primarily includes the sale of electric trucks and cargo vans. These sales represent a single performance obligation and revenue is recognized when the vehicle is delivered, the customer has accepted the vehicle and signed the appropriate documentation acknowledging receipt of the vehicle. At this time, the title of the vehicle is transferred to the customer.

During thethree months ended* March 31, 2025,the Company also recorded revenue of $217,267 from the delivery of medical supplies to a related party. This revenue source is related to the Company's Medical Supplies segment. See Note14* - Segment Reporting, for further disclosures.

Cash and Cash Equivalents—The Company considers all highly liquid investments purchased with an original or remaining maturity ofthree*** months or less to be cash equivalents. The recorded value of our restricted cash and cash equivalents approximates their fair value. The Company hadno restricted cash at both March 31, 2025 and December 31, 2024*. See Concentration of Credit Risk below in this Note.

Marketable Securities—The Company invests in short-term, highly liquid, marketable securities, such as U.S. Treasury notes, U.S. Treasury*** bonds, and other government-backed securities. The Company classifies these marketable securities as held-to-maturity, as the intent isnot to liquidate them prior to the respective stated maturity date. The Company hadno* marketable securities at both* March**31,* 2025 and* December 31, 2024.*

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Accounts Receivable and Allowance for Doubtful Accounts— The accounts receivable balance relates to the Company's electric vehicles segment. The Company establishes an allowance for bad debts through a review of several*** factors, including historical collection experience, current aging status of the customer accounts, and financial condition of its customers. The Company doesnot generally require collateral for its accounts receivable. The Company had trade accounts receivable of $865,721 as of March 31, 2025* and a recorded allowance for doubtful accounts of $13,596, resulting in a net trade accounts receivable balance of $852,125. The Company had trade accounts receivable of $1,031,972 as of* December 31, 2024* and an allowance for doubtful accounts of $15,306, resulting in a net trade receivable balance of $1,016,666. A significant portion of the Company’selectric vehicle sales are made to customers who qualify for state-sponsored grant programs which can cover a significant portion, up to all of a vehicle’s purchase price. Grant monies are paid directly to vehicle dealers like the Company after the customer and the dealer meet state requirements related to the transaction; reimbursements to the Company* maytaketwo* tonine months from the date of request before being received. The Company doesnot provide an allowance for doubtful accounts related to electric vehicle sales made utilizing state grant funds, as those funds are guaranteed by the state(s) once awarded. The trade accounts receivable balance at* March 31, 2025* is primarily from credit-worthy customers, many of whom are fully or partially funded through state government sponsored programs.

Receivable from Related Party and Allowance for Doubtful Accounts—The receivable from related party relates to the Company's medical supplies segment. The allowance for doubtful accounts is established by reviewing several factors, including historical collection experience, current aging of the customer account and financial condition of its customer. The Company had receivable from related party of $1,217,267 and a recorded allowance of $21,304, resulting in a net receivable from related party of $1,195,963.

Miscellaneous Receivable—During the end of thefirst quarter of2025, the Company discovered that an external party had perpetrated fraud toward the Company, resulting in an unexplained withdrawal of $2,249,515 from the Company's checking account. Subsequently in* April 2025,*after thorough investigation by respective parties, the funds were deposited back to the Company's checking account.

Inventory and Inventory Valuation Allowance—The Company records inventory at the lower of cost or market, and uses a First In, First Out accounting valuation methodology and establishes an inventory valuation allowance for vehicles that it doesnot intend to sell in the future. The Company had finished goods inventory on hand of $6,261,697 as of* March 31, 2025and recorded an inventory valuation allowance of $12,429 related tothree* vehicles that the Company doesnot intend to sell in the future, resulting in a net inventory balance of $6,249,268 at* March 31, 2025*. The Company had finished goods inventory on hand and a related inventory valuation allowance of $6,428,806 and $12,429, respectively, as of* December 31, 2024*, resulting in a net inventory balance of $6,416,377.

Inventory Deposits—Certain of our vendors require the Company to pay upfront deposits before they commence manufacturing our vehicles and then require progress deposits through the production cycle and before the finished vehicles are shipped. These deposits are classified as inventory deposits in the consolidated balance sheets. Upon completion of production acceptance by the Company, and passage of title to the Company, deposits are reclassified to inventory. The Company had inventory deposits of $8,711,812 and $6,036,809 as of* March 31, 2025* and* December 31, 2024*, respectively. Deposits paid toone vendor accounted for100% of the deposits outstanding at* March 31, 2025*.

Income Taxes—The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax*** ***consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes.

Accounting for Uncertainty in Income Taxes—The Company evaluates its uncertain tax positions and will recognize a loss contingency when it*** is probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. At March 31, 2025 and December 31, 2024*, respectively, management didnot identify any uncertain tax positions.

Net Loss Per Share—Basic net loss per share is calculated by dividing the Company’s net loss applicable to*** ***common stockholders by the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares of common stock outstanding is the basic weighted number of shares of common stock adjusted for any potentially dilutive debt or equity securities. As of* March 31, 2025*,9,672,482 shares of the Company’s common stock were subject to issuance upon the exercise of stock options then outstanding and 1,470,381 shares of the Company’s common stock were subject to issuance upon the exercise of warrants then outstanding.

Concentration of Credit Risk—The Company has credit risks related to cash and cash equivalents on deposit with a federally insured bank, as at times it exceeds the*$250,000* maximum amount insured by the Federal Deposit Insurance Corporation (“FDIC”). Additionally, the Company* maymaintain cash and short-term securities invested at Arvest Bank, National Association (“Arvest”). Between FDIC and the Securities Investor Protection Corporation (“SIPC”) coverage, funds up to $750,000, which mayinclude cash up to $500,000, are insured. In addition, Arvest provides excess insurance acquired by them from SIPC for unlimited per customer securities up to a $1 billion cap. There wereno* short-term securities invested at Arvest Bank at* March**31,* 2025.

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Impairment of Long-Lived Assets—Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. The Company evaluates these assets to determine potential impairment by comparing the carrying amount to the undiscounted estimated future cash flows of the related assets. If the estimated undiscounted cash flows are less than the carrying value of the assets, the assets are written down to their fair value. There wasno impairment of long-lived assets, or property and equipment, as of* March 31, 2025and December 31, 2024,*respectively.

Goodwill—Goodwill represents the excess of acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill isnot*** amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely thannot reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option tofirst* assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it isnot more likely thannot that the fair value of a reporting unit is less than its carrying amount, it can conclude the assessment. If the Company concludes otherwise, the Company is required to perform a quantitative analysis to determine the amount of impairment, if any.

The Company has determined that it hasthree reporting unit, and based on both qualitative and quantitative analysis and based on management’s assessment at* March 31, 2025*, the Company recorded a non-cash impairment charge of $10,103,048 on the Company's Consolidated Statements of Operations.No impairment charge was recorded for the year ended* December 31, 2024* resulting in a goodwill balance of $10,103,048 on that date.

Research and Development—Costs incurred in connection with the development of new products and manufacturing methods are charged to operating expenses as incurred. Research and development costs were $98,398 and $70,265 during thethree months ended* March 31, 2025and2024,* respectively.

Stock-Based Compensation—The Company accounts for employee stock-based compensation in accordance with the guidance of*** ASC718, Stock-Based Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered. Non-cash stock-based compensation expense of $546,576 and $1,818,383 was recorded for thethree* months ended* March**31,* 2025 and2024, respectively.

Property and Equipment— Property and equipment are stated at cost, less accumulated depreciation. The Company provides for*** depreciation using the straight-line method over the estimated useful lives of the assets, which range from three tofive years, except leasehold improvements, which are being amortized over the life of the lease term. Property and equipment qualify for capitalization if the purchase price exceeds$2,000. Major repairs and replacements, which extend the useful lives of equipment, are capitalized and depreciated over the estimated useful lives of the property. All other maintenance and repairs are expensed as incurred. See Note3* - Property and Equipment, net.

Other Intangibles— Other intangibles are stated at cost, less accumulated amortization. The Company records amortization expense using the straight-line method over the estimated useful lives of these assets, which range from three toten years. See Note4 - Goodwill and Other Intangibles.

Leases—The Company accounts for leases in accordance with ASC842, Leases (“ASC842”). At the inception or modification of a contract, the Company determines whether a lease exists and classifies its leases as an operating or finance lease at commencement. Right-of-use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent their obligation to make lease payments arising from the lease. See Note13 - Leases.

As most of the Company’s leases donot provide an implicit interest rate, the lease liability is calculated at lease commencement as the present value of unpaid lease payments using the Company’s estimated incremental borrowing rate. The incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term and is determined using a portfolio approach based on information available at the commencement date of the lease.

The lease asset also reflects any prepaid rent, initial direct costs incurred, and lease incentives received. The Company’s lease terms* may*include optional extension periods when it is reasonably certain that those options will be exercised.

Leases with an initial expected term of12 months or less arenot recorded in the Company's consolidated balance sheets and the related lease expense is recognized on a straight-line basis over the lease term. For certain classes of underlying assets, the Company has elected tonot separate fixed lease components from the fixed non-lease components.

Accounting Pronouncements Recently Adopted

ASUNo. 2023-07, “Segment Reporting (Topic280): Improvements to Reportable Segment Disclosure”

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2023-07, Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures ("ASU2023-07"), which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU2023-07, as well as existing segment disclosures and reconciliation required under ASC280 on an interim and annual basis. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and for the interim periods beginning after December 15, 2024,with early adoption permitted. The Company adopted the guidance in its Annual Report on Form10*-K for the year ended* December 31, 2024.See Note14* - Segment Information, for further information.

Recently Issued Accounting PronouncementsNot Yet Adopted**

ASUNo. 2023-09, “Income Taxes (Topic740): Improvements to Income Tax Disclosures”

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures ("ASU2023-09"), which requires public entities, on an annual basis, to provide disclosure of specific categories in the reconciliation of the effective tax rate, as well as disclosure of income taxes paid, disaggregated by jurisdiction. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024,with early adoption permitted. The Company is currently evaluating the impact of adopting ASU2023*-09 and will adopt the guidance when it becomes effective on a prospective basis.

ASUNo. 2024-03, “Income Statement (Subtopic220-40): Disaggregation of Income Statement Expenses”

In* November 2024,the FASB issued ASU2024*-03, Income Statement (Subtopic220-40): Disaggregation of Income Statement Expenses ("ASU2024-03"), which requires additional information about certain expenses in the notes to the financial statements. ASU2024-03 is effective for fiscal years beginning after* December 15, 2026,with early adoption permitted. The Company is currently evaluating the impact of adopting ASU2024*-03 and will adopt the guidance when it becomes effective on a prospective basis.

Components of property and equipment, net, consist of the following as of* March 31, 2025* and* December 31, 2024*:

Depreciation expense was $58,184 and $39,212 for thethree months ended* March**31,* 2025 and2024 respectively.

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On* October 30, 2024,the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Maddox Industries, LLC, a Puerto Rico limited liability company (“Maddox Industries”), and Jason Maddox, the sole member of Maddox Industries (the “Seller”), pursuant to which, subject to the terms and conditions of the MIPA, the Company purchased from the Seller all of the issued and outstanding membership interests in Maddox Industries (the “Maddox Acquisition”). The Maddox Acquisition closed on December 18, 2024.*

Unaudited Supplemental Pro Forma Information

The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the Maddox Acquisition discussed above as if it had occurred on* January 1, 2024.The pro forma financial information is presented for illustrative purposes only and isnot* necessarily indicative of the results of operations for thethree months ended* March**31,* 2024 and that would have been realized if the Maddox Acquisition had occurred on* January 1, 2024,nor does it purport to project the results of the combined entity in future periods. The pro forma financial information doesnot* give effect to any anticipated integration costs related to the combined entities.

During thethree months ended* March 31, 2025,the Company concluded that a triggering event had occurred as a result of a decline of the Company's stock price. Consequently, the Company conducted an impairment test for thethree* months ended* March 31, 2025,and recorded a non-cash impairment charge of $10,103,048 for thethree* months ended* March 31, 2025.*

Amortization expense was $222,500 for thethree months ended* March 31, 2025.*

The following table presents a reconciliation of the carrying amount of goodwill for thethree months ended* March 31, 2025.*

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 $8,857 as of March 31, 2025,of which $6,252 is classified as Notes Payable - current and $2,605 is classified as Notes Payable - long term on the Company's consolidated balance sheets as of March 31, 2025*.

Effective* June 15, 2024,the Company entered into a premium financing agreement with First Insurance Funding to finance its directors' and officers' insurance coverages. The $232,067 loan is payable over nine months, beginning in July 2024,and bears interest at 8.25% with monthly payments of $24,093. The balance of this note, including accrued interest, was $23,929 as of March 31, 2025*.

Effective* August 20, 2024,the Company entered into a premium financing agreement with AFCO Insurance Premium Finance to finance insurance coverages other than its directors' and officers' insurance coverages. The $417,051 loan is payable over eleven months, beginning in September 2024,and bears interest at 8.24% with monthly payments of $39,493. The balance of this note, including accrued interest, was $155,299 as of March 31, 2025*.

Convertible Note

On* January 18, 2024,the Company entered into a convertible promissory note agreement ("Note") for $1,000,000 with an unrelatedthird*-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 800,000 share of the Company's common stock at $1.50 per share. These options expiretwo years from the date of the Note. On May 6, 2024,the Note was cancelled and replaced with a short-term note. During thethird* quarter of2024, the short-term note was converted into 505,051 shares of common stock in satisfaction of the convertible note payable.

The Company has elected to measure the Note and options at fair value. In estimating the fair value of the Note, a Monte Carlo simulation model is applied. The required inputs include the current stock price, the risk-free rate and volatility of the common stock. The Note's fair value is classified as Level2 under the fair value hierarchy as provided by ASC820. In estimating the fair value of the options, the Black-Scholes Merton Model is used. The required inputs include the current stock price, the exercise price, the term of the options, the risk-free rate and the volatility of the common stock. The options' fair value is classified a Level2 under the air value hierarchy as provided by ASC820. 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 are bifurcated between the Note and the options. The amount allocated to the options is $431,405 which is the fair value of the options on the date of the Note. The remaining proceeds received are allocated to the Note. Under the fair valuation election, both the Note and options are remeasured to their respective fair values at the reporting date. Changes in fair values for the Note and options are recorded as an unrealized gain or loss on convertible note fair value in Other (Expense)/Income in the Company's consolidated statements of operations for thethree months ended* March31,* 2025. As a result of this election, the Company recorded an unrealized loss $557,497 for the Note for thethree months ended* March31,* 2024 for the Note. As a result of this election, the Company recorded an unrealized gain of $132,412 and an unrealized loss $1,012,430 for the options for thethree months ended* March**31,* 2025 and2024 for the options, respectively.

Amended and Restated Standby Equity Purchase Agreement ("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”) intwo* tranches, resulting in net proceeds (net of discounts and fees) to the Company of $2,635,500. The Company received thefirst tranche of the Pre-Paid Advance in the principal amount of $2 million on* October 31, 2024in exchange for the Promissory Note dated October 31, 2024 (the “EVTV-1 Promissory Note”), and thesecond* tranche of the Pre-Paid Advance in the principal amount of $1 million on* December 17, 2024in 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 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, 2025and were convertible at a conversion price equal to the lower of (i) $2.1480 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 thefive consecutive trading days immediately preceding the conversion date (butno* lower than the “floor price” then in effect, which was $0.3580 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 64,103 shares of common stock to the Investor as a commitment fee.

During thefirst quarter of2025, 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,1,743,476 shares of the Company's common stock were issued at a weighted average price of $0.57. During the same quarter, the obligation under the EVTV-1 Promissory Note in the principal amount of $2 million 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,1,490,304 shares of the Company's common stock were issued at a weighted average price of $0.41. The remaining principal balance of the EVTV-1 Promissory Note on* March 31, 2025*was $1,383,343.

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 Level2 under the fair value hierarchy as provided by ASC820. As a result of this election, the Company recorded an unrealized gain of $745 for the EVTV-1 Promissory Note and an unrealized gain of $350 for the EVTV-2 Promissory Note for thethree months ended* March 31, 2025.*

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”) intwo* tranches, (ii) amend the maturity date for the EVTV-1 Promissory Note to* March 9, 2026,*and (iii) amend the floor price for the Note EVTV-1 to $0.0713 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 maybe extended at the option of the Investor. The Additional Promissory Notes are convertible at a conversion price equal to the lower of (i) $1.00 per share or (ii)93% of the lowest daily VWAP during thefive consecutive trading days immediately preceding the conversion date (butno* lower than the “floor price” then in effect, which is $0.0713 per share, subject to adjustment from time to time in accordance with the terms contained in the Additional Promissory Notes).

Thefirst tranche of the Additional Pre-Paid Advance was disbursed on* February 25, 2025in 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”). Thesecond* tranche of the Additional Pre-Paid Advance will be in the principal amount of $2 million and advanced by the Investor upon the Company obtaining approval of its stockholders for the issuance of shares in excess of the Exchange Cap (as defined in the A&R SEPA). The Company’s stockholders approved the issuance of shares in excess of the Exchange Cap at a special meeting of the Company’s stockholders held on* May 1, 2025.At the closing of thesecond* tranche of the Additional Pre-Paid Advance, the Investor will advance to the Company the principal amount of such tranche, less a discount in the amount equal to 5% of the principal amount of such tranche netted from the purchase price due and structured as an original issue discount.

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 common stock. The Promissory Notes' fair values are classified as Level2 under the fair value hierarchy as provided by ASC820. As a result of this election, the Company recorded an unrealized loss of $417,300 for the EVTV-3 Additional Promissory Note for thethree months ended* March 31, 2025.*

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

The Company has 5,000,000 authorized shares of its preferred stock, par value $0.00001 per share, on* March31,* 2025 and* December 31, 2024.There wasno outstanding shares of preferred stock on March31,* 2025 and* December 31, 2024.*

The Company has 350,000,000 authorized shares of its common stock, par value$0.00001 per share, of which 23,106,392 and 19,872,612 shares of the Company's common stock were outstanding on* March**31,* 2025 and* December 31, 2024,*respectively.

A&R SEPA

On* September 23, 2024,the Company entered into the Original SEPA, which was amended and restated pursuant to the A&R SEPA on October 31, 2024.Pursuant to the A&R SEPA, except for so long as there is a balance outstanding under the Promissory Notes and the Additional Promissory Notes (as defined below), and subject to certain limitations and conditions set forth therein, the Company has the right, butnot* the obligation, to sell to the Investor, and the Investor agreed to purchase from the Company, an aggregate amount of up to $25,000,000 of shares of the Company’s common stock at the Company's request, from time to time, until* November 1, 2027.See Note6* – Debt.

The Company’s outstanding warrants as of* March 31, 2025* are summarized as follows, and all were exercisable at that date.

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** December 2020Warrants

The warrants issued pursuant to that certain Securities Purchase Agreement, dated as of* December 24, 2020,that the Company entered into with certain institutional and accredited investors and pursuant to which, among other things, the Company sold and issued, and the investors purchased, shares of the Company’s common stock and related warrants to purchase additional shares of the Company’s common stock in a series oftwo* closings, contain a call provision whereby the Company, after the13-month anniversary of the issuance date, and if the volume weighted average price of the common stock for such date exceedsfour times the exercise price of the warrants for20 consecutive trading days,* maycall the warrants that havenot* previously been exercised, and the warrant holders haveten trading days within which to exercise before the warrants* maybe cancelled. From among these warrants, warrants for 12,833 shares of common stock expired in2023,* warrants for 431,250 shares of common stock expired on* January 28, 2025,and warrants for 958,334 shares of common stock will expire on May 7, 2026.*

** September 2024Warrants

On* September 12, 2024,the Company entered into securities purchase agreements withfour* private investors with respect to the private placement of an aggregate of 512,047 shares of the Company’s common stock at a price of $1.66 per share and warrants to purchase up to an aggregate of 512,047 shares of the Company's common stock. The Company received aggregate gross cash proceeds from this private placement (exclusive of proceeds from any future exercise of the warrants) of $850,000. The warrants have a term oftwo years and are exercisable at any time after* September 16, 2024,at an exercise price of $1.66 per share. The warrants expire on September 11, 2026.*

The outstanding options at* March 31, 2025* consisted of the following:

At* March 31, 2025* 9,252,620 of the outstanding stock options were exercisable.

On* March 10, 2025,the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors (the "Board") granted the non-employee directors and certain executives and consultants options to purchase 4,150,000 shares of common stock at an exercise price of $0.25 per share, of which 3,850,000 of these options vested immediately upon grant and expire on thetenth anniversary of the grant date. The remaining 300,000 options vest on theone*-year anniversary of the grant date and expire on thetenth anniversary of the grant date.

As of* March 31, 2025*, the outstanding stock options had intrinsic value of $12,035.

Performance Options

On* February 28, 2024,the Company issued options to an external party to purchase 2,000,000 shares of the Company's common stock at an exercise price of $2.75 per share, contingent upon achieving certain sales targets. On September**30,* 2024, the sales targets werenot met and therefore,no compensation expense was recorded for thethree months ended* March 31, 2025.These options expire on February 5, 2027.*

Restricted Shares

In* November 2023,the Company awarded 65,660 restricted shares to a vendor that will vest over asix-month period in exchange for marketing services to be provided over the same period. As a result, the Company recorded stock compensation expense of $0 and $58,671 during thethree* months ended* March 31, 2025,and2024,* respectively.

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The Company has entered into lease agreements with SRI Professional Services, Incorporated (“SRI”), pursuant to which the Company leases equipment used in connection with the operation of its business (the “SRI Equipment Leases”). Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, serves as an executive officer and a member of the board of directors of SRI. Two of the SRI Equipment Leases provide for the leasing oftwo vehicles that commenced on* January 1, 2020and the combined rent under such leases is $3,880 per month, and athird* SRI Equipment Lease provides for a trailer lease that commenced on* December 1, 2019,under which the rent is $3,891 per month. The total monthly payment obligation of the Company under the SRI Equipment Leases is $7,771. As a result of the SRI Equipment Leases, the Company recorded rent expense of $23,312 for thethree* months ended* March**31,* 2025.

The Company has entered into a commercial lease agreement (the “ABCI Office Lease”) with Alpha Bravo Charlie, Inc. (“ABCI”) that commenced on* April 1, 2020,for the lease of office space in Porterville, California. The monthly rent for this facility is approximately $5,000. Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, is a director of ABCI. The Company recorded rent expense of $15,000 for thethree* months ended* March**31,* 2025, in connection with the ABCI Office Lease.

The Company incurred $37,500 of costs related to engineering consulting services from42Motorsports LTD, the owner of which is a sibling of the Company's Chief Executive Officer and Chairman of the Board for thethree months ended* March**31,* 2025.

In connection with the Maddox Acquisition, as discussed in Note4 - Acquisition, the Company recorded a $1,195,963 receivable that was due from Maddox Defense, an entity of which Jason Maddox, the President of the Company, is the sole stockholder.

The Company also paid $45,000 to an entity owned by Jason Maddox for services rendered as President and Interim Chief Financial Officer of the Company in lieu of wages. In addition, the Company also paid $45,000 to an entity owned by Elgin Tracy for services rendered as Chief Operating Officer of the Company in lieu of wages.

Other Agreements

On* December 31, 2021,the Company entered into employment agreements with Phillip W. Oldridge (the “Oldridge Agreement”), its Chief Executive Officer, and with Susan M. Emry (the “Emry Agreement”), its then Executive Vice President. According to the Oldridge Agreement, effective as of March 1, 2021,Mr. Oldridge will receive an annual base salary of $300,000, payable in semi-monthly installments consistent with the Company’s payroll practices. Mr. Oldridge will also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans. Under the Oldridge Agreement, Mr. Oldridge will also receive an amount equal to5%* of the net income of the Company on an annual basis and will be eligible for a bonus at the sole discretion of the Board. The Oldridge Agreement also provides for an automobile monthly allowance of $1,500. Mr. Oldridge’s employment shall continue until terminated in accordance with the Oldridge Agreement. If Mr. Oldridge is terminated without cause or if he terminates his employment for good reason, Mr. Oldridge will be entitled to receive (i)one-year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Oldridge Agreement, (iii) any bonus that would have been payable within thetwelve months following the date of termination, and (iv) the value of any accrued and unused paid time off as of the date of termination. There areno future minimum payments under the terms of the Oldridge Agreement as Mr. Oldridge has the right to terminate the Oldridge Agreement without any contractual payments other than what has been stated in the Oldridge Agreement. According to the Emry Agreement, effective on* January 1, 2022,Mrs. Emry would receive an annual base salary of $200,000 and was eligible for a bonus at the sole discretion of the Board. Mrs. Emry would also receive participation in medical insurance, dental insurance, and the Company’s other benefit plans. The Emry Agreement provided that Mrs. Emry’s employment would continue until terminated in accordance with the Emry Agreement. If Mrs. Emry was terminated without cause or if she terminated her employment for good reason, Mrs. Emry was entitled to receive (i)one-year of base salary, (ii) reimbursement of reimbursable expenses in accordance with the Emry Agreement, and (iii) the value of any accrued and unused paid time off as of the date of termination. Ms. Emry terminated her role as Executive Vice President of the Company effective as of October 15, 2024.*

On* March 28, 2023,the Company entered into an agreement with Berthaphil, Inc. ("Berthaphil") to sublease approximately 3,600 square yards of a warehouse building based in the Clark Freeport Zone in the Philippines (the "Berthaphil Sublease"). The term of the lease istwo years andtwo* months with a turnover date of* July 1, 2023and a rental commencement of September 1, 2023.The Company had originally intended to use the leased space as a production facility as it seeks to expand its business presence in that region and the United States. However, in December 2024,the Company decidednot* to use the leased space for its original purpose. See Note13 - Leases for further information.

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Except as set forth below, we know ofno material, existing or pending, legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There areno proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder of more than5% of our common stock, or any associate of any of the foregoing persons, is an adverse party or has a material interest adverse to our interest.

GreenPower Litigation

On* December 17, 2019,GreenPower Motor Company Inc., a public company incorporated under the laws of British Columbia (“GreenPower”), of which Phillip W. Oldridge, the Company’s Chief Executive Officer and Chairman of the Board, previously served as a senior officer and a member of its board of directors, filed a notice of civil claim, captioned GreenPower Motor Company Inc. v. Phillip Oldridge et al., ActionNo.* S-1914285, in the Supreme Court of British Columbia, against Phillip Oldridge, his trust, Envirotech Drive Systems, Inc. and certain other companies affiliated therewith. On* February 2, 2020,*the Company and the other companies affiliated therewith named in the notice of civil claim filed a response to the civil claim in which they denied certain of the allegations. Fact discovery, through document disclosure and examinations for discoveries, in this matter remains ongoing. The Company believes it has meritorious defenses against GreenPower's claims and intends to vigorously defend itself against those claims.

On or about* July 18, 2021,GreenPower and GP GreenPower Industries Inc. (collectively “the GreenPower entities”), filed a counterclaim against David Oldridge, Phillip Oldridge, the Company and other companies in Supreme Court of British Columbia ActionNo.* S207532. The pleadings in this lawsuit havenot closed and the Company intends to vigorously defend itself against the counterclaim.

On* February 8, 2022,GreenPower Motor Company, Inc., a Delaware corporation, and GreenPower Motor Company Inc., a Canadian corporation, filed a complaint captioned GreenPower Motor Company, Inc. v. Phillip Oldridge, et al., CaseNo.* 5:22-cv-00252 in the United States District Court for the Central District of California. The complaint’s allegations are centered around the same assertions in the pending Canadian litigation.

On* May 10, 2022,the Company, together with other defendants, filed a Motion to Dismiss and/or Stay the lawsuit in the United States District Court for the Central District of California pending the outcome of the Canadian litigation. The Court issued stay of this case pending resolution of parallel litigation in Canada between similar parties. GreenPower and defendants have agreed that the U.S. GreenPower case willnot* proceed while Canadian litigation is pending. The Company believes that it has meritorious defenses against the Greenpower entities' claims and intends to vigorously defend itself against such claims.

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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 areone year or less (with renewal options), the Company concluded in thefourth quarter of2023 that the term renewal options are reasonably certain to be exercised. As a result of changes in certain circumstances related to some of the Company's short-term leases, the Company was required to classify such leases as operating leases in accordance with the provisions of ASC842. 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 with Berthaphil 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 istwo years andtwo* months with a turnover date of* July 1, 2023 (the "turnover date") and a rental commencement of September 1, 2023.However, the warehouse building wasnot* available for use to the Company until the early part of thefourth quarter of2023. Therefore, the commencement date was deferred until thefourth quarter of2023, which is when the Company was given access to use the warehouse building. There was a grace period oftwo months for rental payments starting from the turnover date. The monthly rent for thefirst year is $15,000, escalating to $15,750 for thesecond 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* maybe 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 and the United States. The Company accounted for this lease as an operating lease under ASC842* and recorded an operating lease liability and a corresponding ROU asset for this lease. However, the Company decidednot to use this facility for its original intended purpose and recorded a full impairment on its ROU asset in* December 2024.*

On* July 1, 2024,*the Company entered into a month-to-month lease contract with Southern Management Corporation 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 expense.

On* August 26, 2024,the Company entered into aone*-year lease contract with120 Park SD, LLC 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 theone-year lease term, the lease converts into a month-to-month arrangement. This lease is treated as a short-term lease expense.

The Company's lease agreements donot 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* December31,* 2025 were $73,590. Short-term and long-term operating lease liabilities were $205,156 and $0 at* March31,* 2025, respectively.

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Quantitative information regarding the Company’s leases is as follows:

Future minimum payments under operating leases are as follows:

The Chief Operating Decision Maker ("CODM") is the Chief Executive Officer ("CEO"), who reviews the segment operating results in order to allocate resources and assess performance.

The Company has identified three segments:

(1) Electric vehicles,

(2) Medical supplies and

(3) Drones

The Electric vehicle segment consists of sales of commercial electric vehicles to customers. A significant portion of such sales are through state subsidized or funded programs. The medical supplies segment consists of sales to a related party based on an agreement to supply refurbished medical gowns on a cost-plus pricing arrangement. Through the Company's drone operations, it is also diversifying its portfolio of assets by engaging in the future production and supply of drones that will be used in the agricultural environment.

The table below summarizes the operating results of the Company's segments:

The Company evaluates subsequent events that have occurred after the balance sheet date but before the consolidated financial statements are issued. There aretwo types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that didnot exist at the date of the balance sheet but arose subsequent to that date.

On* May 8, 2025,the Company, through its subsidiary, AG Drones Inc. ("AG Drones"), entered into a Consulting and Manufacturing Agreement with a U.S. drone manufacturer for the manufacture of a U.S.-made heavy lift drone and that, following delivery of the drone and its associated intellectual property, Envirotech plans to open its previously announced drone manufacturing facility in the United States. The Consulting and Manufacturing Agreement provides for the design and build of a heavy lift U.S.-made electric unmanned aerial system ("UAS") for AG Drones in accordance with AG Drones' detailed specifications. Upon delivering the drone to AG Drones, the design-manufacturer will also transfer all accompanying intellectual property to AG Drones in connection with which Envirotech intends to open its U.S. drone manufacturing facility. The delivery of the heavy lift agricultural drone to AG Drones is part of the Company's recent plan of creating an electric drone division. The initial heavy lift drone is purpose-built for the agricultural market, with advanced spraying and mapping functionality, U.S. made, withno* reliance on Chinese parts, AG Drones will be National Defense Authorization Act ("NDAA") compliant.

On* May 15, 2025,the Company signed a non-binding letter of intent to acquire the assets of Kymera, a manufacturer of marine craft. The Company intends for the business to serve as the foundation of it’s new marine division. As planned, the Company intends to enter the electric marine mobility space with the acquisition, reinforcing its long-term vision to deliver next-generation, zero-emission transportation across land, air, and sea. The acquisition is planned to take place during thesecond* quarter of2025.

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