Good day, ladies and gentlemen, and thank you for your patience. Welcome to ADOMANI’s Q3 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder this conference is being recorded. I would now like to turn the conference over to you host, Investor Relations, Mr. James Carbonara from Hayden IR. Sir, you may begin.

Thank you, operator. And once gain, good day and welcome to ADOMANI’s third quarter 2018 earnings call. With me on the call are Jim Reynolds, President and Chief Executive Officer; and Mike Menerey, Chief Financial Officer. I would like to begin the call by reading the Safe Harbor statement. All statements made on this call with the exception of historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although ADOMANI believes that the expectations reflected in such forward-looking statements are reasonable on the basis of current expectations, we can make no assurance that such expectations will prove to be correct. Also these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results to differ considerably from ADOMANI’s current expectations due to changes in operating performance, technical and economic factors and other risk and uncertainties disclosed in ADOMANI’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by ADOMANI from the time-to-time with the Securities and Exchange Commission. Any forward-looking statements included in this earnings call are made only as of the date of this call. ADOMANI does not undertake any obligation to update or supplement any forward-looking statements to reflect new information, subsequent events or circumstances, except as required by law. ADOMANI cannot assure you that projected results or events will be achieved. Now, I will turn the call over to Jim Reynolds, President and Chief Executive Officer of ADOMANI. Jim, please proceed.

Thank you, James. And everybody, welcome. As you can see from our earnings release, sales for the third quarter of 2018 were $2.6 million. That’s an increase of 117% as compared to the first six months ending June 30th, and brings sales revenue for the first nine months of the year to $3.8 million. Backlog at September 30th was $3.6 million. As of October the 5th, backlog has increased by 78% to $6.5 million. Driving our growth is the significant available funding for electric vehicles that is starting to be released. And when we talk about just starting to be released, the order we received on October the 5th was a combination of local air district funds, state funds and money from the awarded school districts and the grand scheme of things a very small grant. The next phase of electric school bus funding is expected to come from the $10 billion dollar rural school grant which we're expecting to be released the next 30 days, followed by the larger $75 million from the California Energy Commission and the $220,000 per vehicle from the California Air Resources Board HVIP program. We are expecting this to be released in Q1 of next year. The expected funding from both programs may result in the sale of approximately 400 electric buses from these grants, of which we know Blue Bird and the dealer A-Z Bus sales have been working hard to contact each potential grantee to position the Blue Bird all-electric bus as the bus of choice. Such sales by Blue Bird and its dealer will lead to additional drivetrain orders for ADOMANI. To put that in perspective, the early October purchase order we received for 16 electric drivetrain helped increase our backlog to 6.5 million. As a result, we view the potential…

Thank you, Jim. Good afternoon, everyone. You've probably seen our 10-Q and the earnings release by now. I'll try to be brief with this, simply more time for questions. But as Jim mentioned, sales were $2.6 million and $3.8 million for the three and nine months ended September 30th respectively. Cost of sales was $2.5 million and $3.7 million for the three and nine months. For the nine months that includes a $15,000 inventory valuation that was recorded in the first quarter. There were no sales or cost of sales for the same periods of 2017. General and administrative expenses in the third quarter were $1,534,000 compared to $11,716,000 in the third quarter of 2017, a decrease of $10.2 million. That was primarily related to a $10.3 million decrease in non-cash stock-based compensation expense, which was offset a little bit by a $200,000 accrual for potential bad debt expense related to a note receivable that we recorded in Q3 of ‘18 and reductions in other general and administrative expenses. The third quarter 2018 general and administrative expenses include approximately $528,000 of non-cash charges, including $317,000 that’s stock-based compensation expense and the $200,000 bad debt item I just mentioned. General and administrative expenses were $9.3 million for the nine month period ended September 30th compared to $18.4 million for the same period in 2017, a decrease of $9 million. That’s primarily related to a $9.6 million decrease in non-cash stock-based compensation expense, partially offset by increases in other G&A expenses and accounting for that bad debt item I just mentioned. The $9.3 million in general and administrative expenses for the nine months ended September 30th ‘18 includes approximately $6.3 million of non-cash charges, which are comprised essentially of the $6.1 million in stock-based compensation expense and the $200,000 bad debt item.…

Thank you. [Operator instructions]. Our first question comes from Craig Irwin of Roth Capital Partner. Your line is now open.

Good evening, gentlemen. Thanks for taking my questions. So first I wanted to start with an update on the efforts you have been making in partnership with Blue Bird. On past calls and at different times you've given us an update on the number of Ride-and-Drive events including specific number in California and the total number of quotes that this has resulted in with potential customers out there. Do you have an update for us -- is it something where you can help us quantify the number of customer touches and you know expansion of the pipeline as we look at ‘19?

Well, Craig, thanks for the question. It's difficult for us to give you a set number on the Ride-and-Drives because once they past 45 and we have multiple buses across the country and Ride-and-Drives going on in New York and Texas and Florida and California all at the same time, we kind of lose track of that. But regarding the number of quotations that has surpassed 300 now, a lot of the quotes that have been given are for projects that are outstanding, that have yet to be funded by either state or federal or local entities. But as soon as they're funded, we feel pretty confident that the number of quotes will turn into sales opportunities for us because of Blue Bird’s stature in the industry and their leadership.

That’s really encouraging. So can you maybe give us a little color on whether there are many elephants out there, I was thinking elephants for ADOMANI would be something like maybe a 30, 40, 50 bus order from a single customer. I mean are you seeing customers look at large -- potentially large initial buys?

Look, Craig as you -- you know we have discussed in the past a lot of this is driven by funding. And while the funding agencies want to have more than just one or two buses in any one district, they are reluctant to put all the rates in one basket. So we have had multiple districts out there who have claimed to be the first district with a number of buses that are all-electric and be a leader in whatever state it might be in, but the funding typically like the $75 million for the Energy Commission. They have broken California into four sections and allocated $18.75 million into each one. So that will reduce the number -- I don’t know, there is only going to be 50 or so buses in each area, may be 100 buses in each area when you combine it with the HVIP money. So those 400 units and 100 units in an area will probably be five buses, six buses. The last order we saw that came through was for 10 buses for one customer. That’s going to be considered I think a large order at this time. There will be a lot of multiple orders. But the good news is when we get orders from Blue Bird it’s for one of two types of drivetrains. We build those two types and it maybe that we are getting an order for 50 drivetrains that may go to 15 different customers. That doesn’t affect us in that because we are going to ship it to one customer Blue Bird. They will install it and then their dealers will disseminate that through the different school districts.

Thank you for that. I also wanted to ask about the backlog, $6.5 million is again strong. Can you maybe breakdown for us how much the backlog slips in the fourth quarter? And what the relative portion is from drivetrains versus complete vehicles?

Complete vehicles right now is scheduled to be I think $1.82 million and other $1.5 million or so will be for drivetrains. That's our projection right now.

And are you talking specifically about the fourth quarter or the $6.5 million backlog?

We are talking about the $6.5 million backlog that will go out in the fourth quarter.

Would be 3.6 million.

Okay.

Well, out of $6 million plus backlog, we are still looking at $3.5 million of that to go up in the fourth quarter and the balance to go out in the first quarter of next year.

Okay, thank you for that clarification. So then the balance sheet was really strong and you sort of mentioned that in your comments on the cash flow. One of the items that was a nice contribution for you was a $1.3 million reduction in other current assets. Can you maybe describe for us what that was? What specifically benefited you in the other current assets during the quarter?

Primarily the transfer from prepaid deposits on the drivetrains to cost of sales because of the shipments we had in the third quarter.

Okay. And then the remaining other current assets, is that also primarily prepayments as well?

Yes, prepaid insurance and alike, the standard stuff, yes.

Okay. Excellent, excellent. And then last question from me. 200,000 in the bad debt item is pretty small but can you maybe share with us any color what this was -- to the counterparty was, is it something that could potentially occur?

It’s against the $500,000 note receivable that we discussed in our financial statements that was actually issued in June of ‘17. We don’t know for certain whether we’re going to collect the entire note or not. We took a conservative approach and recorded a reserve against it in the third quarter, because there is some doubt whether we will or not, and there’s certainly a lot of work we have to do to work with the borrower to get us repaid. We’re undertaking that. We have a plan in place that’s being executed right now. So it may turn out. We didn’t need the reserve, but we just don’t know at this time. So we’ve decided to be conservative.

And we don’t see it repeating itself.

[Operator Instructions]. Our next question comes from Ed Woo of Ascendiant Capital. Your line is open.

Yes. Thank you for taking my question and congratulations on the quarter. I was just curious how many -- what’s your installed base ADOMANI car, buses that are on the road today at the various school districts?

Right now, it’s less than 50, because most of it’s in process that’s been shipped and has been installed. So it’ll be a while before it gets to the 50 range and then for up to 100. But it’s -- from our perspective, the installed base at school districts is very important because that will lead to additional sales because of the good experience. But we’re a little bit limited, because once we ship the drivetrains Blue Bird has to install it, has to test it, get it back out to the dealer, dealer has to go through the PDI experience and then get to the customer. So there is a lag time between, the time we ship and the customer actually receives the product.

Do you have any idea roughly how many are actually at the customer now or are they pretty much all in transit still?

We had an event with Blue Bird and their dealer in September with about seven units and I believe those seven are the first ones to be deployed at school districts and receive approval to transport children.

Great. And I know it’s only seven. But what’s your general feedback? I know you mentioned that maybe you want to get them out into the customers’ hands so that they have awesome experience. But what’s your feedback so far?

So far it’s been great. There’s always that chance of something that’s going to have to require additional warranty work or technical support but the design of the products that Blue Bird builds and the design that we implemented into that product seems to work out great. They were approved almost immediately by the California Highway Patrol to be certified. And then they received their S-1 endorsement, which is the ability to carry children and transport them. That happened right away. The districts are now doing their testing, training drivers and doing some limited route. But right now the feedback we get is they’re very positive, very happy and looking forward to getting some more.

Great. And then my last question is just on supply chain. You get a lot of your parts from China. Has there been any impact at all from the tariffs?

Not, none of impact on the tariffs yet, but we're -- I guess we're quasi-concerned that if things aren't resolved down the road that there will be -- I mean we have inventory that we repurchased as in-house now through our sub-contractors that are in place today. So we're okay today and we will be for several months to come. But we're concerned about that in the future.

Great. Well, thank you and good luck.

Thank you, Ed.

Thank you. Our next question comes from Amit Dayal of H.C. Wainright. Your line is open. Q - Amit Dayal Thank you. Hi, Jim. Hi, Mike. These funding catalysts for the 400 electric buses you mentioned coming up by the first quarter of 2019, are these all in California?

These units you’re talking about now are in California. There is also [Cook County] has a $1 million, Ohio has $3 million, Indiana has $2.8 million, New York which had over $100 million has pulled that money out, they’re going to put it -- they're going to replace it with Volkswagen money and we're not exactly sure when. But they'll throw that money into a lot of states that we’re funding like the school buses with their own internally generated funds. Now they're getting the Volkswagen money, they're going to rely on that to start with. Well they have multiple projects all over the country and opportunities everywhere, not only with the Volkswagen money but also state-generated funds.

Got it. And the backlog, the revenues you operate over the next two quarters, again are there only from California or are these also coming from different states?

The 400 are -- well the backlog right now is almost completely California. I think one or two units that are in Washington and another one some place else. But that’s not -- once again, we don't deliver the buses, we don't sell the buses, we sell the drivetrain. So when dealer sells something it goes to Blue Bird, Blue Bird gives us the order and let’s us know whether it's a type C or D. They don't always tell us where the bus is going. So we know other dealers that receipt orders. We don't know which drivetrains we’re building, that we’re shipping, we don’t know which buses are going to what state. They could all come in California, they could be spread over two, three different states.

Understood. And then in regards to your efforts around entering the truck market, what sort of rough timeline do you anticipate where one of these trucks could actually be on the road?

We have two vehicles that will be at the show next week in Pasadena and we'll be showing it to different school districts there. Once those -- and we have six additional trucks and a couple of vans and a couple of chassis. But everything -- Ford homologation, which is what's required to get CARB certification Executive Order has been done, except for the brake tests. The brake tests have to be done at certain facility, so two of the vehicles will be going to Arizona either late next week or the following week early to do the brake tests. Once those are done, we’ll submit paperwork to California Air Resources Board, they review it. If they don't find any problems which they shouldn't, we have done this many times before, if they don't find any problems, they'll issue an Executive Order that those vehicles are legal to be sold. And once they are we’ll attach HVIP funding to them and to be able to take orders starting towards the end of the year. We hope to get them done by mid-November but now maybe it's late November. So we will be able to get them orders taken and then deliveries hopefully by the first quarter of next year. Q - Amit Dayal That’s interesting. I didn’t realize this would be happening this early with this. Good to hear. And just one final question from me. On the G&A front, these costs have come down obviously over the last year. Are these expected to drop further or stabilize at the levels we saw in the third quarter?

I'm sorry, Amit, were you talking about the total G&A expenses or the stock-based comp I didn’t catch this?

Excluding the stock-based comp like -- the cash G&A expenses, are they going to be sort of stabilized here or maybe as you ramp further initiatives will this move higher?

Well, they will go higher as it relates to one item and particular which is commission expense. As we are outselling trucks and things, we are going to be paying commissions. We aren’t paying commissions currently on the drivetrain. So that will go up. The rest of them will creep up here and there. But for the most part we expect them to stay fairly steady.

I think we will be adding a few sales people here and maybe somebody else on accounting. So we are going to be adding a few people but nothing dramatic, nothing like adding $5 million a year to our overhead. It will just be a few hundred thousand I would imagine.

Our next question comes from Joseph Osha of JMP Securities. Your line is open.

I wanted to start if I may with some battery chemistry questions. I see you are mostly going with LFP. But I also see that you referred to “Ultra-fast charging” which I assume it is lithium titanate oxide and also referred to some other chemistry. So I'm really curious as to what your costumers are asking for at this point and what kind of mix you are seeing?

Well I think the 30,000 foot elevation you look down there is, the customers really aren't concerned with the chemistry as much as what they want for performance. So if they're looking at additional lifecycle charging, we might go with NMC. If they are concerned with the speed a bit, we will change the battery chemistry for that. But the customer is not really driving that yet because they really don't understand the different chemistries available and different type of batteries and the charging cycles. They are asking basic questions which are, do they have batteries and what’s the chemistry and thank you very much for letting me know but they aren’t driving that discussion.

Well perhaps I -- and I apologize, I'm so enthusiastic, I geek it out of it. Let me ask you it a different way then. What are you seeing your customers ask for? Are they focused more on range? Are they willing to make the investment in this full rapid charge infrastructure? Where are you seeing them come down in terms of what they are looking for?

Okay. Well, on that question I think range is the first and foremost in everybody's mind, and that’s because they know it's not a diesel bus. They can go 600 miles between fill-ups. We’re telling them a 125 or so. And they look at that and that gives them anxiety, even though they don’t need more than 60 or 70 a day. As far as charging, we get a lot of questions about rapid charging the units, about how quickly they can be charged. But then as we explained to them that here’s the range the vehicle gets, here’s what you need and your expectation. You have opportunity of charging between your routes in the morning, your routes in the afternoon and to plug it in and let it trickle charge at night and take six hours or seven hours to charge when nobody is there, fits their needs exactly. So while they ask about rapid charging, what they’re really concerned with is, what kind of range do I get? And if there is opportunity of charging between the two routes and can I charge it overnight.

Makes sense. Thanks. Second question -- I’m sorry, this is probably ignorant. When you look at the Blue Bird site, you see there’s three different platforms across different classes, they talk about, the RE Electric, the G5, which is the light-duty, and then the Vision which is the engine prop winner. Are you now are planning to be present across all three of those platforms? I just want to make sure I understand.

The Type A, the G5 part of it is a joint venture between Girardin and Blue Bird, and that is now Micro Bird. So that’s Type A bus. We’re dealing directly with Blue Bird on the C and the D which we think is the biggest market for their product. But we’re also -- one of the product lines we will bring out besides the truck and the van is a chassis. And the chassis is going to be electrified from the start. It will offer a great range and offer mostly the bodybuilders which is what pretty much all the Type A school bus and shuttle bus companies are, they’re just bodybuilders, they don’t build the chassis. Typically for electric vehicle, they will buy a Ford F450 chassis. They’ll decontent it, they’ll take out the engine, the transmission, the fuel tank, about 20 parts they don’t need and then they’ll install the electric drivetrain and mount the body on top of that. What we plan on offering is a quicker solution where you don’t supply engines and transmissions that you don’t really need, nor spend the labor to take them out, but you the chassis and mount the body right on it just like you do now with the gasoline or diesel and to them it actually shouldn’t make any difference. So we’ll approach that market whether we go exclusive with Micro Bird or some other company, will be a negotiation point going forward. Micro Bird I think might have their current supplier for drivetrain. So it may not be an option for us. But we will be in that business somewhere down the line.

And then two just competitive questions. I’m wondering if I can get your feedback on. The first is, what you’re seeing out of Line Electric who might run-in too quite a bit? And then secondly, I saw an interesting product down in Long Beach which was Meritor axle that had the integrated motor. I’m just wondering if you could comment on those two competitive -- those two competitors and what you’re seeing or maybe not seeing?

Well, I think I can comment on Lion, I think they’re a good competitor, they make a good product. They have gone from a dealer-based marketing approach to a direct sales approach. I think they have some merit, they will sell some product. So I do like a lot about their product and the people there. What we like better is Blue Bird with 46 dealers across the country, probably I don't know 120 or so warranty repair stations, numerous -- not 10 sales people but 200 salespeople, so -- and a leader and been in business for 90 years versus I think Lion’s four, five years. I think there's a lot to be said for teaming up with one of the industry leaders, especially one that's so eminently involved in alternative fuel and have them be the champion going forward rather than a company that is in the business and they'll have their sales but they're not an industry leader like Blue Bird is.

Got it.

The other point about Lion is that they only make electric light Type Cs. They don't have a Type D. So from that standpoint, they are not a complete competitor to us. They're competitors for the Type Cs.

Noted, thank you. And then on Meritor, have you seen that transactional turn up. They made quite a -- they borrowed a bunch of boot space at the Long Beach, since I was curious as to whether …

I saw them at AT&T, I haven’t seen much out there since then. Meritor is not a household name but certainly industry well-known. I think they’ll find a niche market for themselves somewhere.

Okay, alright. Thanks so much, guys.

Thank you. And there are no further questions in the queue, ladies and gentlemen, this concludes today’s conference. Thank you for your participation and have a wonderful day.