UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2020

For the transition period from ______________ to _____________

Commission file number 000-54218

EVO Transportation & Energy Services, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: 877-973-9191

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of the last business day of the Registrant’s 2020 second fiscal quarter was approximately $22.0 million based on the price of $10.50 per share, the price at which the Registrant’s common equity was last sold as of the last business day of the Registrant’s 2020 second fiscal quarter as reported on the OTC Pink Marketplace.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of January 21, 2022, there were 15,213,145 shares of the registrant’s common stock, par value $0.0001, outstanding.

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements reflect management’s current view about future events. When used in this report, the words “anticipate”, “will”, “believe”, “expects”, “intends”, “estimates”, “projects”, “target”, “goals”, “plans”, “objectives”, “should”, “future,”, “seek”, “may”, “could”, “likely” or similar expressions or the negative of these terms identify forward-looking statements as they relate to EVO Transportation & Energy Services, Inc., a Delaware corporation (“EVO,” the “Company,” “we,” “us” or “our”), its subsidiaries or management. The forward-looking statements in this report generally relate to: EVO’s growth strategy and potential acquisition candidates, EVO’s relationship with the United States Postal Service, gasoline, diesel, and natural gas prices, management’s expectations regarding market trends and competition in the transportation industry, government tax credits and other incentives, insurance, and environmental and safety considerations.

Forward-looking statements are based on information available to management at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause EVO’s results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements. Such statements reflect the current view of management with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section entitled “Risk Factors” of this report) relating to the Company’s industry, its operations and results of operations, and any businesses that may be acquired by it. These factors include, among other factors:

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The preceding list is not intended to be an exhaustive list of all of the topics addressed by our forward-looking statements. Although the forward-looking statements in this report reflect our good faith judgment based on available information, they are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Factors that might cause or contribute to such differences include, among others, those discussed in this report in Item 1A. Risk Factors. In addition, we operate in a competitive and rapidly evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations. As a result of these and other potential risks and uncertainties, our forward-looking statements should not be relied on or viewed as predictions of future events. All forward-looking statements in this report are made only as of the date of this document and, except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason, including to conform these statements to actual results or to changes in our expectations. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission (the “SEC”) after the date we file this report.

We qualify all of our forward-looking statements by this cautionary note.

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PART I

Item 1. Business.

Our Business

EVO Transportation & Energy Services, Inc. is a transportation provider serving the United States Postal Service (“USPS”) and other customers. We believe EVO is the second largest surface transportation company serving the USPS, with a diversified fleet of tractors, straight trucks, and other vehicles that currently operate on either diesel fuel or compressed natural gas (“CNG”). In certain markets, we fuel our vehicles at one of our three CNG stations that serve other customers as well. We are actively engaged in reducing CO2 emissions by operating on CNG, pursuing opportunities to use other alternative fuels, and by optimizing the routing efficiency of our operations to reduce fuel usage. We operate from our headquarters in Phoenix, Arizona and from 10 main terminals located throughout the United States.

EVO has grown primarily through acquisitions, and we have completed seven acquisitions since our initial business combination in 2016. We have also grown organically by obtaining new contracts from the USPS and other customers. In 2020, we generated $200.5 million in revenues and were awarded 12 additional contracts from the USPS which are expected to generate approximately $12 million in annual revenue. We have been actively integrating the acquisitions we have made under common leadership and technology and are now operating under a single umbrella brand.

Service and Product Offering

Mail Transportation

We transport mail and freight by truck for the USPS and other customers through approximately 350 contracts covering over 150,000 average daily route miles in aggregate. We competitively bid on transportation contracts that procure and specify the movement of mail between processing facilities and destination post offices. Customer contracts are typically four years in term and most often are renewed with the incumbent supplier if appropriate service has been performed in accordance with contract requirements including, but not limited to, USPS performance standards, Service Contract Act requirements, Department of Transportation (“DOT”) regulations (federal and state), and all other applicable local and state regulations.

As of December 31, 2020, we held over 300 contracts with the USPS totaling approximately 145,000 average daily route miles of service. Of these, 12 were Dynamic Route Optimization contracts and the remainder were traditional highway route contracts. Our mail transportation operations generated $200.5 million of revenues in 2020, or 87% of our total revenues.

Freight and Brokerage Services

In addition to our USPS mail transportation and delivery services, we provide freight and brokerage services to various corporate customers. In 2020, we transported freight over 11.0 million miles through these operations. Our freight and brokerage services generated $27.8 million of revenues in 2020, or 13% of our total revenues.

Compressed Natural Gas Fueling

We own three CNG fueling stations that serve our fleet and other customers. Those stations are located in Fort Worth, TX, Oak Creek, WI, and Tolleson, AZ and accommodate class 8 trucks and trailers. We have two additional CNG fueling stations located in Jurupa Valley, CA and San Antonio, TX that are no longer operational. Most of our CNG customers fuel at our stations under long term contracts and we have a small number of retail customers. Our CNG fueling operations generated $1.0 million of revenues in 2020, or just under 1% of our total revenues.

History

The Company was incorporated in the State of Delaware on October 22, 2010 under the name “Minn Shares Inc.” From December 2010 until November 2016, Minn Shares Inc. was considered a public “shell” company and dedicated its operations to seeking a potential merger or acquisition partner. On November 22, 2016, the Company and Titan CNG LLC, a Delaware limited liability company in the business of owning and operating compressed natural gas fueling stations (“Titan”), entered into an agreement and plan of securities exchange whereby the members of Titan acquired approximately 90% of the Company’s outstanding shares. Following the closing, the business plan of Titan became the business plan of the Company and all former officers of the Company resigned and were replaced by officers designated by Titan. On August 31, 2017, the Company changed its name from “Minn Shares Inc.” to “EVO Transportation & Energy Services, Inc.”

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Following the November 2016 public shell reverse merger transaction, the Company’s primary strategy was to seek growth through acquisitions. The Company completed the following acquisitions subsequent to November 2016:

Strategy

In 2014, the USPS announced that it intends to significantly reduce its supplier base from over 4,000 surface transportation contractors to less than 1,000 by 2022. As part of this consolidation effort, the USPS began implementing the Dynamic Route Optimization (“DRO”) program and consolidating contracts, which is designed to manage fewer relationships and work with larger prime contractors. Although the DRO program has evolved since its announcement and now operates more like traditional static USPS contracts, we expect additional USPS contracts to come available in the next several years as the USPS continues to consolidate contracts.

We believe EVO is well positioned to take on more business with the USPS as the postal service consolidates vendors and solicits larger contracts for which bigger suppliers are better equipped to bid. We have a dedicated team focused on bidding on new contracts and responding to any inquiries from the USPS on existing contracts. We believe we have an industry-leading ability to provide the USPS with the information and service levels they desire as we bid on new contracts. As a result, we won 12 new contracts with the USPS in 2020. We currently have operations which cover approximately 6% of the USPS transportation portfolio and intend to continue to expand our footprint both organically and through acquisitions to provide greater coverage to the USPS.

We have invested meaningfully in information systems and personnel which we believe will allow us to be effective in managing DRO/consolidation and other USPS contracts. For example, continuing implementation of a transportation management system has allowed us to meet the scheduling and reporting needs of the USPS under its DRO and other programs. Our acquisitive growth strategy has also enabled us to achieve a greater scale than many of our regional and local competitors, which gives us the ability to competitively bid on a high percentage of available contracts.

Our largest customer, the USPS, adopted a robust environmental sustainability plan that includes a stated commitment to reducing greenhouse gas emissions through increased procurement of services from alternative fuels carriers. We have a dedicated focus on reducing emissions through operating routes as efficiently as possible as well as by operating vehicles on CNG. In addition, in certain markets we fuel our vehicles at one of our three operating CNG stations that serve other customers

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as well. We intend to continue to acquire additional vehicles powered by alternative fuels, including electrically powered vehicles. We believe our shared commitment with the USPS to reducing emissions positions the Company to grow our business relationship with the USPS in the future.

We intend to leverage our infrastructure to serve additional customers beyond the USPS. By utilizing our technology platform, network of terminals, and in some cases an ability to offer freight products with similar next day options, we are able to offer transportation services to corporate customers at competitive rates while also improving margins. We will continue to invest in our technology solutions in order to offer industry-leading service to our customers.

We also plan to continue our focus on sustainable operations, both by continuing to utilize our company owned CNG stations and developing transit lanes utilizing CNG trucks near our CNG stations and by acquiring additional vehicles powered by alternative fuels, including electrically powered vehicles. Since January 2019, we completed the acquisition of Sheehy of Waterloo, Wisconsin, which operates the largest fleet of CNG trucks servicing the USPS. We also completed the acquisition of Ursa in 2019, which is based one mile from our Oak Creek CNG station.

Market Overview

Competition

The U.S. mail surface transportation industry is estimated to represent an approximately $5 billion subset of the broader transportation market. The USPS trucking industry is highly competitive and fragmented. In 2014, the USPS had active contracts with over 4,000 transportation contractors, and it publicly announced its goal to reduce that number to below 1,000 by 2022. Although the DRO program has evolved since its announcement and now operates more like traditional static USPS contracts, we expect additional USPS contracts to come available in the next several years as the USPS continues to consolidate contracts.

The Company competes primarily with other transportation companies for contracts with the USPS. We also compete with other motor carriers for the services of drivers, independent contractors and management employees. Our largest customer, the USPS, typically awards its contracts competitively and often renews contracts with incumbent service providers if appropriate services have been performed. The Company believes that the principal differentiating factors in its business, relative to competition, are service, efficiency, pricing, and its focus on alternative fuels, which aligns with the USPS’s stated preference for contractors who prioritize alternative energy options. Additionally, the Company was an early adopter of the DRO program with the USPS. We believe our existing relationship with the USPS and experience with the DRO program provide the Company an additional competitive advantage when bidding on these contracts.

Our Target Customers

The USPS is our primary target customer, but we also seek to provide freight trucking and brokerage services to various corporate customers.

Principal Customers and Suppliers

The USPS is the Company’s primary customer, and for the years ended December 31, 2020 and 2019, the USPS accounted for approximately 87% and 88%, respectively, of the Company’s revenue. As a result, the Company’s trucking operations are highly dependent on the USPS. For a discussion of the risks associated with the possible loss of the USPS as a customer or a significant reduction in the Company’s relationship with the USPS, refer to Item 1A. Risk Factors of this report.

Safety and Risk Management

The Company considers Safety, Risk and Regulatory compliance to be a key focus of all operations. Through this focus, the Company is consistently identifying risks, developing a proactive approach to improving overall Safety performance and reducing employee injuries. Of the many tools used by the company, items such as On-Board Cameras, trucks equipped with accident-avoidance devices, and training on Defensive Driving continue to be effective in reducing vehicle accidents and injuries.

Because the Company’s primary business is transportation on public roadways, they are regulated by the Federal Motor Carrier Safety Administration (FMCSA), a division of the US Department of Transportation (DOT), and the Occupational Safety and Health Administration (OSHA). The Company operates its business to exceed the requirements of these agencies, and currently maintains a Satisfactory rating with the FMCSA.

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The primary safety related risks associated with the transportation industry consist of damage to Company equipment or third parties involved in a vehicle accident, personal injury to others involved in an accident, and injuries sustained to employees. The Company maintains insurance coverage for all operations to exceed the requirements of the FMCSA, and consistently reviews said coverage on an annual basis.

To the extent that the Company subcontracts any portion of its business to third party trucking company, those companies operate under their own DOT authority, and provide their own liability and workers compensation insurance which Company has the right to audit from time to time. All third-party trucking companies contracted with Company must meet the insurance requirements and meet the Safety requirements by being rated as Satisfactory by the FMCSA. All third-party trucking companies must also list Company as additional insured on all insurance policies and contain a Waiver of Subrogation on their workers compensation policy.
 

Fuel

In 2020, we used approximately 7.9 million gallons of diesel and approximately 1.7 million gas gallon equivalents (“GGEs”) of CNG. Our fuel costs are typically passed on to customers. In addition, we qualified for a retroactive tax credit of $0.50 per GGE for the roughly 1.7 million GGEs utilized in 2020 and this tax credit was extended through 2021.

The Company actively manages its fuel purchasing network in an effort to maintain adequate fuel supplies and reduce its fuel costs. The Company purchases its fuel through a network of retail truck stops with which it has negotiated volume purchasing discounts. The Company seeks to reduce its fuel costs by routing its drivers to truck stops with which the Company has negotiated volume purchase discounts when fuel prices at such stops are lower than the bulk rate paid for fuel at the Company’s terminals. The Company stores fuel in aboveground and underground storage tanks at some of its facilities.

The Company believes the most effective protection against fuel cost increases is to maintain a fuel-efficient fleet by incorporating fuel efficiency measures and focusing on alternative fuel vehicles, particularly CNG vehicles that can leverage the Company’s current and future CNG fueling stations. The Company may periodically enter into various commodity hedging instruments to mitigate a portion of the effect of fuel price fluctuations. As of December 31, 2020 and 2019, the Company had no liabilities related to commodity hedging instruments recorded in the accompanying consolidated balance sheets. Shortages of fuel, increases in fuel prices, or rationing of petroleum products could have a material adverse effect on the Company’s operations and profitability.

Operations

Fleet

We operate a substantial fleet of tractors, trailers, straight trucks, and local delivery vehicles. We own the vast majority of our fleet, but we also utilize leases and short-term rental agreements for some of our vehicles and trailers. Our vehicles currently operate on either diesel fuel or CNG, and we are also pursuing opportunities to introduce other alternative fuel vehicles, including electric vehicles, into our fleet. We intend to continue to replace our existing fleet with more efficient diesel, CNG and other alternative fuel vehicles.

Operations Centers

We manage regional operations centers with major centers of operations in Oak Creek, Wisconsin, Austin, Texas, Laurel, Maryland, and Newark, New Jersey. Other operations centers include Des Moines, Iowa, Columbus, Ohio, St. Louis, Missouri, Madison, Wisconsin, and Milwaukee, Wisconsin.

Technology

We utilize a suite of systems for transportation management, electronic logging, customer relationship management, brokerage, maintenance, accounting, recruiting, HR, payroll and camera systems. These systems include Omnitracs, Salesforce, NetSuite, Ten Street, APlus, Lytx, and others We expect these systems to provide increased operational efficiencies and revenue maximization.

Seasonality

Due to seasonal increases in USPS volume, the Company’s truck utilization and revenue typically increase during the last quarter of each calendar year. Correspondingly, operating expenses increase, fuel efficiency declines because of engine idling, and harsh weather creates higher accident frequency, increased claims, and higher equipment repair expenditures.

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Government Regulation and Environmental Matters

The Company’s operations are regulated and licensed by various federal, state, and local government agencies. The Company and its drivers must comply with the safety and fitness regulations of the DOT and the agencies within the states that regulate transportation, including those regulations relating to operating authority, safety, drug- and alcohol-testing, hours-of-service, hazardous materials transportation, financial reporting, testing and specification of equipment, and product-handling requirements. Weight and equipment dimensions also are subject to government regulations. The Company also may become subject to new or more restrictive regulations relating to fuel emissions, environmental protection, drivers’ hours-of-service, driver eligibility requirements, on-board reporting of operations, collective bargaining, ergonomics and other matters affecting safety, insurance and operating methods. Other agencies, such as the United States Environmental Protection Agency (“EPA”) and the United States Department of Homeland Security (“DHS”), also regulate the Company’s equipment, operations, drivers and the environment.

The DOT, through the Federal Motor Carrier Safety Administration (“FMCSA”), imposes safety and fitness regulations on the Company and its drivers, including rules that restrict driver hours-of-service. The FMCSA has adopted a data-driven Compliance, Safety and Accountability (the “CSA”) program as its safety enforcement and compliance model. The CSA program holds motor carries and drivers accountable for their role in safety by evaluating and ranking fleets and individual drivers on certain safety-related standards. To promote improvement in all CSA categories, including those both over and under the established scoring threshold, the Company has procedures in place to address areas where it has exceeded the thresholds and the Company periodically reviews all safety-related policies, programs and procedures for their effectiveness and revises them, as necessary, to establish positive improvement. The Company believes its established policies, programs and procedures are adequate to address safety-related concerns but can give no assurance these measures will be effective. The FMCSA issues three categories of safety ratings: satisfactory, conditional, and unsatisfactory. All operating authorities granted by the DOT that are operated by the Company currently have a “satisfactory” FMCSA rating.

The Company is also subject to various labor laws and regulations. The contracts that the Company holds with USPS are subject to the McNamara-O’Hara Service Contract Act (“SCA”) that is administered by the Department of Labor. The SCA, among other things, requires that the Company pay its drivers a minimum hourly wage as determined by the DOL as well as provide a bonified fringe benefit package to its drivers.

The Company is also subject to various environmental laws and regulations governing, among other matters, the operation of fuel storage tanks, release of emissions from its vehicles (including engine idling) and facilities, and adverse impacts to the environment, including to the soil, groundwater and surface water. The Company has implemented programs designed to monitor and address identified environmental risks. Historically, the Company’s environmental compliance costs have not had a material adverse effect on its results of operations.

Employees

As of December 31, 2020, the Company had approximately 1,600 employees, consisting of approximately 1,100 full-time employees and approximately 500 part-time employees. The Company employed approximately 1,400 drivers as of December 31, 2020. The Company is not a party to any collective bargaining agreements.

Company Website

The Company’s website may be accessed at www.evotransinc.com. All of our filings with the Securities and Exchange Commission can be accessed free of charge through our website as soon as reasonably practicable after filing. This includes annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports filed or furnished on Form 8-K and all related amendments.

Item 1A. Risk Factors.

Risks Related to the Company

If we do not obtain sufficient additional capital or generate substantial revenue, we may be unable to pursue our objectives. This raises substantial doubt related to our ability to continue as a going concern.

As disclosed in the notes to our consolidated financial statements included in this report, numerous factors raise substantial doubt about our ability to continue as a going concern. Specific factors include the following:

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If we are unable to improve our liquidity position, we might be unable to continue as a going concern. This could significantly reduce or eliminate the value of our investors’ investment in the Company.

The Company’s level of indebtedness could adversely affect its financial condition and its ability to fulfill its obligations and operate its business.

The Company has incurred significant liabilities, and the Company’s ongoing capital needs are extensive relative to its current cash position. Unless the Company is able to restructure some or all of its outstanding debt and/or raise sufficient capital to fund its continued operations and its debt obligations, the Company will be unable to pay these obligations as they become due. The Company has been unable to pay its obligations under its liabilities as they have become due in the past.

The Company is heavily reliant on its factoring arrangement, and any reductions to the Company’s ability to obtain credit under its factoring arrangement could significantly impact the Company’s liquidity.

The Company obtains liquidity under an accounts receivable factoring arrangement with a financial institution (the “Factor”). Pursuant to the terms of the agreement, the Company, from time to time, sells to the Factor certain of its accounts receivable balances on a recourse basis for approved accounts. The Factor may also advance payment, in its discretion, for unearned future contract amounts. The Factor remits 95% of the purchased accounts receivable balance and accepted unearned future contract amounts for a given month to the Company (the “Advance Amount”) with the remaining balance, less fees, to be forwarded once the Factor collects the full accounts receivable balance or unearned future contract amount, as applicable, from the customer. This is one of our primary sources of liquidity.

The Factor has no obligation to purchase the full amount of accounts receivable balances or unearned future contract amounts that the Company offers to sell, and there can be no assurance that the Factor will continue to purchase accounts receivable or unearned future contract amounts at the same levels as it has in the past. If the Factor determines in its sole discretion to decrease the amount it advances under the factoring arrangement or to terminate the factoring agreement entirely and we are unable to obtain a replacement source of credit on substantially similar terms, it would significantly decrease the Company’s liquidity, which would likely have a material adverse effect on our business, operating results, and financial condition.

We have a limited operating history on which to base an investment decision.

EVO did not begin trucking operations until June 2018. Thus, we are subject to all the risks associated with any business enterprise with a limited operating history. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stages of operation. When evaluating our business and prospects, you must consider the risks, expenses and difficulties that we may encounter as a company that acquired substantially all of its operations in the past three years.

We will need substantial additional capital to fund our growth plans and operate our business.

We require substantial additional capital to fund our capital expenditures and debt service to achieve profitability and to otherwise execute on our business plan. The most likely sources of such additional capital include private placements and public offerings of shares of our capital stock, including shares of our common stock or securities convertible into or exchangeable for our common stock, debt financing or funds from potential strategic transactions. We may seek additional capital from available sources, which may include hedge funds, private equity funds, venture capitalists, lenders/banks and other financial institutions, as well as additional private placements. Any financings in which we sell shares of our capital stock will likely be dilutive to our current stockholders. If we raise additional capital by incurring debt, a portion of our cash flow would have to be dedicated to the payment of principal and interest on such indebtedness. In addition, typical loan agreements also might contain restrictive covenants that may impair our operating flexibility. Such loan agreements, loans, or debentures would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of our stockholders. A judgment creditor would have the right to foreclose on any of our assets resulting in a material adverse effect on our business, operating results or financial condition.

Our ability to raise additional capital may depend in part on our success in meeting sales and operating goals. We currently have no committed sources of additional capital and there is no assurance that additional financing will be available in the

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amounts or at the times required, or if it is, on terms acceptable or favorable to us. If we are unable to obtain additional financing when and if needed, our business will be materially impacted and our investors may lose the value of their entire investment.

Potential inquiries into or audits of our Paycheck Protection Program loan, as well as the results of any such inquiries or audits, could have a significant adverse effect on us and our financial condition.

We applied for and received a $10 million Paycheck Protection Program ("PPP") loan under the CARES Act. On May 8, 2020, we received a letter from the Select Subcommittee on the Coronavirus Crisis of the U.S. House of Representatives demanding that we return the PPP loan. We elected not to return the PPP loan proceeds as requested and our PPP loan was subsequently forgiven. Also, the United States Small Business Administration ("SBA") has stated that it intends to audit the PPP loan application of any company, like us, that received PPP loan proceeds of more than $2 million. Our decision to retain the PPP loan may require members of our management team to devote attention to future correspondence and requests from the Select Subcommittee, the SBA, or other regulators, which would reduce the amount of time available to management to focus on our operations and strategic initiatives. If we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP loan, or it is otherwise determined that we were ineligible to receive the PPP loan, we may be subject to penalties, including significant civil, criminal and administrative penalties.

We have a history of losses and may incur additional losses in the future.

In 2020 and 2019, we incurred net losses of $46.8 million and $32.7 million, respectively. We may continue to incur losses, the amount of our losses may increase, and we may never achieve or sustain profitability, any of which would adversely affect our business, prospects and financial condition and may cause the price of our common stock to fall. In addition, to try to achieve or sustain profitability, we may take actions that result in material costs or material asset or goodwill impairments.

We may experience impairment of our long-lived assets and our goodwill.

Long-lived assets, including property, plant and equipment, are tested for impairment whenever circumstances indicate that the carrying value of these assets may not be recoverable. Long-lived assets are considered impaired if the carrying value of the asset exceeds the sum of the future expected undiscounted cash flows to be derived from the asset. We also periodically evaluate our goodwill for potential impairment. When we perform the quantitative goodwill impairment test, we compare the fair value of the reporting unit to the carrying value, which includes goodwill. If the carrying value is higher than the fair value, the goodwill is considered impaired. Once an asset is considered impaired, an impairment loss is recorded within operating expense for the difference between the asset’s carrying value and its fair value. For assets held and used in the business, management generally determines fair value using estimated future cash flows to be derived from the asset, discounted to a net present value using an appropriate discount rate. For assets held for sale or for investment purposes, management determines fair value by estimating the proceeds to be received upon sale of the asset, less disposition costs.

We may incur significant costs to comply with public company reporting requirements and other costs associated with being a public company.

We may incur significant costs associated with our public company reporting requirements and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costlier. As a public company, we are required to comply with rules and regulations of the SEC, including expanded disclosure and more complex accounting rules. We will need to implement additional finance and accounting systems, procedures and controls to satisfy these reporting requirements. In addition, we may need to hire additional legal and accounting staff to enable us to comply with these reporting requirements. These costs could have an adverse effect on our financial condition and limit our ability to realize our objectives.

We may not be able to meet the internal control reporting requirements imposed by the SEC.

As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. If we are unable to timely comply with all of these requirements, potential investors might deem our financial statements to be unreliable and our ability to obtain additional capital could suffer.

We have identified seven material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

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The Company identified seven deficiencies in internal control that it considered to be material weaknesses and other deficiencies that it considered to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal controls, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. In addition, the Company’s management has concluded that our disclosure controls and procedures were not effective as of December 31, 2020 due to the material weaknesses in our internal control over financial reporting described in Item 9A of this Annual Report on Form 10-K. As a result, we will be required to expend significant resources to develop the necessary documentation and testing procedures required by Section 404, and there is a risk that we will not comply with all of the necessary requirements. The material weaknesses may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations. Additionally, if we cannot remediate the material weaknesses in internal controls or if we identify additional material weaknesses in internal controls that cannot be remediated in a timely manner, investors and others with whom we do business may lose confidence in the reliability of our financial statements, and in our ability to obtain equity or debt financing could suffer.

We partially funded the construction of certain of our fueling stations using grant funds that we are required to repay if we do not satisfy certain operational metrics.

EVO CNG, LLC received grants in the amounts of $0.4 million and $0.1 million to assist in the construction and equipping of our San Antonio and Fort Worth fueling stations, respectively. The grants must be repaid if EVO CNG, LLC sells, transfers, destroys or otherwise loses title, possession, ownership or control of the equipment funded with the grants during the terms of the respective grant agreements. Our San Antonio fueling station is not operating, which might increase the risk that we will lose title, possession, ownership or control of the equipment at that station and that we will be required to repay the grant we received related to that station.

We depend on certain key personnel, and our operating performance may be adversely impacted by the loss of any such key personnel.

Our ability to execute our business plans and objectives depends, in large part, on our ability to attract and retain qualified personnel. Competition for personnel is intense and there can be no assurance that we will be able to attract and retain personnel. In particular, we are dependent upon the services of our management team. Our inability to utilize the services of our management team members could have an adverse effect on us and there would likely be a difficult transition period in finding replacements for any of them. The execution of our strategic plan will place increasing demands on our management and operations. If we lose or are unable to obtain the services of key personnel, our ability to manage our business and implement our strategic plan could be delayed or hindered, which could have a material adverse effect on our business, financial condition and results of operations.

We are controlled by our current executive officers, directors and principal stockholders.

Our executive officers, directors and principal stockholders beneficially own a substantial majority of our outstanding common stock. Accordingly, our executive officers, directors and principal stockholders will have the ability to exert substantial influence over our business affairs, including electing directors, appointing officers, determining officers’ compensation, issuing additional equity securities or incurring additional debt, effecting or preventing a merger, sale of assets or other corporate transaction and amending our articles of incorporation.

We may not successfully manage our recent and planned growth.

We have expanded our business through acquiring additional companies that provide contract trucking services to the USPS and leveraging our expanded operations to bid on additional USPS trucking contracts. We plan to continue to expand through acquisitions, bidding on additional USPS trucking contracts, and expanding both our freight and brokerage operations in the future. Any expansion of operations we have undertaken or may undertake entail and will entail risks and such actions may involve specific operational activities that may negatively impact our profitability. Consequently, investors must assume the risk that (i) such expansion may ultimately involve expenditures of funds beyond the resources available to us at that time, and (ii) management of such expanded operations may divert management’s attention and resources away from its existing operations. These factors may have a material adverse effect on our present and prospective business activities.

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Risks Related to the Company’s Operations

The Company derives substantially all of its revenue from one customer, the loss of which would have a material adverse effect on the Company’s business.

Substantially all of the Company’s revenue is generated from the USPS, the loss or reduction of which would have a material adverse effect on the Company’s business.

Economic conditions may adversely affect the USPS and its ability to remain solvent. The United States Government Accountability Office described the USPS’s financial condition as “deteriorating and unsustainable” and reported that the USPS lost approximately $69 billion from fiscal years 2007 through 2018. The USPS’s financial difficulties can negatively impact the Company’s results of operations and financial condition and the Company’s ability to comply with the covenants in its debt agreements, especially if the USPS were to delay or default on payments to us. There can be no assurance that the Company’s relationship with the USPS will continue as presently in effect. The Company’s contracts with the USPS are terminable for convenience by the USPS upon advance notice ranging from 60 days for some contracts to 180 days for DRO contracts. A default in performance by the Company under one USPS contract can constitute a cross-default allowing the USPS to terminate some or all of the Company’s other contracts with the USPS. A reduction in, or termination of, the Company’s services by the USPS would have a material adverse effect on the Company’s business and operating results.

The Company has significant ongoing capital expenditure requirements. If the Company is unable to obtain additional capital on favorable terms or at all, it may not be able to execute on its business plans and its business, financial condition, results of operations, cash flows and prospects may be adversely affected.

The Company’s business is capital intensive. Its capital expenditures focus primarily on equipment replacement and, to a lesser extent, facilities, equipment growth, and investments in information technology. The Company also expects to devote substantial financial resources to grow its operations and fund its acquisition activities. As a result of the Company’s funding requirements, it likely will need to raise funds through the sale of additional equity or debt securities or seek additional financing through other arrangements to increase its cash resources. Any sale of additional equity or debt securities may result in dilution to its stockholders. Public or private financing may not be available in amounts or on terms acceptable to the Company, if at all.

If the Company is unable to obtain additional financing, it may be required to delay, reduce the scope of, or eliminate future acquisition activities or growth initiatives, which could adversely affect its business, financial condition and operating results. In such case, the Company may also operate its equipment (including tractors and trailers) for longer periods, which would result in increased maintenance costs, which would in turn reduce its operating income.

The Company’s trucking business is affected by general economic and business risks that are largely beyond its control.

The Company’s trucking business is cyclical and is dependent on a number of factors, many of which are beyond our control. The Company believes that some of the most significant of these factors are economic changes that affect supply and demand in transportation markets in general, including excess tractor capacity in comparison with shipping demand and recessionary economic cycles.

The Company also is subject to cost increases outside of its control that could materially reduce its profitability if it is unable to increase its rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver wages, owner-operator contracted rates, interest rates, taxes, tolls, license and registration fees, insurance, equipment and healthcare for its employees.

The Company’s suppliers’ business levels also may be negatively affected by adverse economic conditions or financial constraints, which could lead to disruptions in the supply and availability of equipment, parts and services critical to its operations. A significant interruption in the Company’s normal supply chain could disrupt its operations, increase its costs and negatively impact its ability to serve its customers.

In addition, events outside the Company’s control, such as strikes or other work stoppages at its facilities or at customer, port, border or other shipping locations, or actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign state, or heightened security requirements could lead to reduced economic demand, reduced availability of credit or temporary closing of the shipping locations or United States borders. Such events or enhanced security measures in connection with such events could impair the Company’s operating efficiency and productivity and result in higher operating costs.

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The trucking industry is highly competitive and fragmented, and the Company’s business and results of operations may suffer if it is unable to adequately address downward pricing and other competitive pressures.

The Company competes with many truckload carriers of varying sizes, including some that may have greater access to equipment, a wider range of services, greater capital resources, less indebtedness or other competitive advantages. The Company also competes with smaller, regional service providers that cover specific shipping lanes or that offer niche services. Numerous competitive factors could impair the Company’s ability to maintain or improve its profitability. These factors include the following:

Driver shortages and increases in driver compensation could adversely affect the Company’s profitability and ability to maintain or grow its trucking business.

Driver shortages could require the Company to spend more to attract and retain drivers. The market for qualified drivers is intensely competitive, which may subject the Company to increased payments for driver compensation. Also, because of the competition for drivers, the Company may face difficulty maintaining or increasing its number of drivers. Compliance and enforcement initiatives included in the CSA program implemented by the FMCSA and regulations of the DOT relating to driver time and safety and fitness could also reduce the availability of qualified drivers. In addition, the Company experiences regular driver turnover, which requires the Company to continually recruit a substantial number of drivers in order to operate existing equipment. If the Company is unable to continue to attract and retain a sufficient number of drivers, it could be required to operate with fewer trucks and face difficulty meeting customer demands or be forced to forego business that would otherwise be available to it, which could adversely affect its profitability and ability to maintain or grow its business.

Increased prices for, or decreases in the availability of, new equipment and decreases in the value of used equipment could adversely affect the Company’s results of operations and cash flows.

Investment in new equipment is a significant part of the Company’s annual capital expenditures, and the Company’s trucking business operates optimally with an available supply of tractors and trailers from equipment manufacturers to operate and grow its business. In recent years, manufacturers have raised the prices of new equipment significantly due to increased costs of materials and parts shortages. If new equipment prices increase more than anticipated, the Company could incur higher depreciation and rental expenses than anticipated. If the Company is unable to fully offset any such increases in expenses with freight rate increases and/or improved fuel economy, its results of operations and cash flows could be adversely affected.

The Company may also face difficulty in purchasing new equipment due to decreased supply. From time to time, some original equipment manufacturers (OEM) of tractors and trailers may reduce their manufacturing output due to lower demand for their products in economic downturns or a shortage of component parts. Component suppliers may either reduce production or be unable to increase production to meet OEM demand, creating periodic difficulty for OEMs to react in a timely manner to increased demand for new equipment and/or increased demand for replacement components as economic conditions change. The COVID-19 pandemic and resulting supply chain disruptions have particularly limited OEMs' ability to satisfy demand. In those situations, the Company may face reduced supply levels and increased acquisition costs. An inability to continue to obtain an adequate supply of new tractors or trailers for its operations could have a material adverse effect on its business, results of operations and financial condition.

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During prolonged periods of decreased tonnage levels, the Company and other trucking companies may make strategic fleet reductions, which could result in an increase in the supply of used equipment. When the supply exceeds the demand for used equipment, the general market value of used equipment decreases. Used equipment prices are also subject to substantial fluctuations based on availability of financing and commodity prices for scrap metal. A depressed market for used equipment could require the Company to trade its equipment at depressed values or to record losses on disposal or an impairment of the carrying values of its equipment that is not protected by residual value arrangements. Trades at depressed values and decreases in proceeds under equipment disposals and impairment of the carrying values of its equipment could adversely affect its results of operations and financial condition.

Seasonality and the impact of weather and other catastrophic events adversely affect the Company’s trucking operations and profitability.

The Company’s tractor productivity decreases during the winter season because inclement weather impedes operations. At the same time, operating expenses increase due to, among other things, a decline in fuel efficiency because of engine idling and harsh weather that creates higher accident frequency, increased claims and higher equipment repair expenditures. The Company also may suffer from weather-related or other events, such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes and explosions, which may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy its assets or the assets of its customers or otherwise adversely affect the business or financial condition of its customers, any of which could adversely affect its results or make its results more volatile.

The trucking industry is highly regulated and changes in existing laws or regulations, or liability under existing or future laws or regulations, could have a material adverse effect on its results of operations and profitability.

The Company operates in the United States pursuant to operating authority granted by the DOT. The Company, as well as its company and leased labor drivers, must also comply with governmental regulations regarding safety, equipment, environmental protection and operating methods. Examples include regulation of equipment weight, equipment dimensions, fuel emissions, driver hours-of-service, driver eligibility requirements, and on-board reporting of operations. The Company may become subject to new or more restrictive regulations relating to such matters that may require changes in its operating practices, influence the demand for transportation services or require it to incur significant additional costs. Possible changes to laws and regulations include:

From time to time, various legislative proposals are introduced, including proposals to increase federal, state or local taxes, including taxes on motor fuels and emissions, which may increase the Company’s or its third party providers’ operating costs, require capital expenditures or adversely impact the recruitment of drivers. The Company also could lose revenue if its customers divert business from it because it has not complied with their sustainability requirements.

Safety-related evaluations and rankings under the CSA program could adversely impact the Company’s relationships with its trucking customers and its ability to maintain or grow its fleet, each of which could have a material adverse effect on its results of operations and profitability.

The Compliance, Safety and Accountability (the “CSA”) program includes compliance and enforcement initiatives designed to monitor and improve commercial motor vehicle safety by measuring the safety record of both the motor carrier and the driver. These measurements are scored and used by the FMCSA to identify potential safety risks and to direct enforcement

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action. The FMCSA issues three categories of safety ratings: satisfactory, conditional, and unsatisfactory. As of December 31, 2020, all DOT operating authority numbers operated by the Company currently have a “satisfactory” FMCSA rating.

The Company’s CSA scores are dependent upon its safety and compliance experience, which could change at any time. In addition, the safety standards prescribed in the CSA program or the underlying methodology used by the FMCSA to determine a carrier’s safety rating could change and, as a result, the Company’s ability to maintain an acceptable score could be adversely impacted. If the FMCSA adopts rulemakings in the future that revise the methodology used to determine a carrier’s safety rating in a manner that incorporates more stringent standards, then the Company’s CSA scores could be adversely affected. If the Company receives an unacceptable CSA score, its relationships with customers could be damaged, which could result in a loss of business or otherwise adversely affect the Company.

The CSA program affects drivers because their safety performance and compliance impact their safety records and, while working for a carrier, will impact their carrier’s safety record. The methodology for determining a carrier’s DOT safety rating relies upon implementation of Behavioral Analysis and Safety Improvement Categories (“BASIC”) applicable to the on-road safety performance of the carrier’s drivers and certain of those rating results are provided on the FMCSA’s Carrier Safety Measurement System website. As a result, certain current and potential drivers may no longer be eligible to drive for the Company, the Company’s fleet could be ranked poorly as compared to its peer firms, and the Company’s safety rating could be adversely impacted. The occurrence of future deficiencies could affect driver recruiting and retention by causing high-quality drivers to seek employment (in the case of company drivers) or contracts (in the case of third party drivers) with other carriers, or could cause the Company’s customers to direct their business away from the Company and to carriers with better fleet safety rankings, either of which would adversely affect the Company’s results of operations and productivity. Additionally, the Company may incur greater than expected expenses in its attempts to improve its scores as a result of poor rankings. Those carriers and drivers identified under the CSA program as exhibiting poor BASIC scores are prioritized for interventions, such as warning letters and roadside investigations, either of which may adversely affect the Company’s results of operations.

The requirements of CSA could also shrink the trucking industry’s pool of drivers if drivers with unfavorable scores leave the industry. As a result, the costs to attract, train and retain qualified drivers could increase. A shortage of qualified drivers could also increase driver turnover, decrease asset utilization, limit growth and adversely impact the Company’s results of operations and profitability.

The Company is subject to environmental and worker health and safety laws and regulations that may expose it to significant costs and liabilities and have a material adverse effect on its results of operations, competitive position and financial condition.

The Company is subject to stringent and comprehensive federal, state, and local environmental and worker health and safety laws and regulations governing, among other matters, the operation of fuel storage tanks, release of emissions from its vehicles (including engine idling) and facilities, the health and safety of its workers in conducting operations, and adverse impacts to the environment. Under certain environmental laws, the Company could be subject to strict liability, without regard to fault or legality of conduct, for costs relating to contamination at facilities the Company owns or operates or previously owned or operated and at third-party sites where the Company disposed of waste, as well as costs associated with the clean-up of releases arising from accidents involving the Company’s vehicles. The Company often operates in industrial areas, where truck terminals and other industrial activities are located, and where soil, groundwater or other forms of environmental contamination have occurred from historical or recent releases and for which the Company may incur remedial or other environmental liabilities. The Company also maintains aboveground and underground bulk fuel storage tanks and fueling islands at some of its facilities and vehicle maintenance operations at certain of its facilities. The Company’s operations involve the risks of fuel spillage or seepage into the environment, environmental damage and unauthorized hazardous material spills, releases or disposal actions, among others.

Increasing efforts to control air emissions, including greenhouse gases, may have an adverse effect on the Company. Federal and state lawmakers have implemented various climate-change initiatives and greenhouse gas regulations and may implement additional initiatives in the future, all of which could increase the cost of new tractors, impair productivity and increase the Company’s operating expenses.

Compliance with environmental laws and regulations may also increase the price of the Company’s equipment and otherwise affect the economics of the Company’s trucking business by requiring changes in operating practices or by influencing the demand for, or the costs of providing, transportation services. For example, regulations issued by the EPA and various state agencies that require progressive reductions in exhaust emissions from diesel engines have resulted in higher prices for tractors and diesel engines and increased operating and maintenance costs. Also, in order to reduce exhaust emissions, some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors, such as the Company’s, may idle. These restrictions could force the Company to alter its drivers’ behavior, purchase on-board power units that do not require the engine to idle or face a decrease in productivity. The Company is also subject to potentially stringent rulemaking related to sustainability practices, including conservation of resources by decreasing fuel consumption. This increased focus

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on sustainability practices may result in new regulations and/or customer requirements that could adversely impact the Company’s business. Historically, the Company’s environmental compliance costs have not had a material adverse effect on its results of operations; however, there can be no assurance that such costs will not be material in the future or that future compliance will not have a material adverse effect on the Company’s business and operating results.

If the Company has operational spills or accidents or if it is found to be in violation of, or otherwise liable under, environmental or worker health or safety laws or regulations, the Company could incur significant costs and liabilities. Those costs and liabilities may include the assessment of sanctions, including administrative, civil and criminal penalties, the imposition of investigatory, remedial or corrective action obligations, the occurrence of delays in permitting or performance of projects, and the issuance of orders enjoining performance of some or all of the Company’s operations in a particular area. The occurrence of any one or more of these developments could have a material adverse effect on our results of operations, competitive position and financial condition. Environmental and worker health and safety laws are becoming increasingly more stringent and there can be no assurances that compliance with, or liabilities under, existing or future environmental and worker health or safety laws or regulations will not have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows or prospects.

Insurance and claims expenses could significantly reduce the Company’s profitability.

The Company is exposed to claims related to cargo loss and damage, property damage, personal injury, workers’ compensation, group health and group dental. The Company has insurance coverage with third-party insurance carriers, but it assumes a significant portion of the risk associated with these claims due to its self-insured retention and deductibles, which can make its insurance and claims expense higher or more volatile. Additionally, the Company faces the risks of increasing premiums and collateral requirements and the risk of carriers or underwriters leaving the transportation sector, which may materially affect its insurance costs or make insurance more difficult to find, as well as increase its collateral requirements. The Company could experience increases in its insurance premiums in the future if it decides to increase its coverage or if its claims experience deteriorates. In addition, the Company is subject to changing conditions and pricing in the insurance marketplace and the cost or availability of various types of insurance may change dramatically in the future. If the Company’s insurance or claims expense increases, and the Company is unable to offset the increase with higher freight rates, its results of operations could be materially and adversely affected. The Company’s results of operations may also be materially and adversely affected if it experiences a claim in excess of its coverage limits, a claim for which coverage is not provided or a covered claim for which its insurance company fails to perform.

Difficulty in obtaining goods and services from the Company’s vendors and suppliers could adversely affect the Company’s business.

The Company is dependent upon its vendors and suppliers, including equipment manufacturers, for tractors, trailers and other products and materials. The Company believes that it has positive vendor and supplier relationships and is generally able to obtain favorable pricing and other terms from such parties. If the Company fails to maintain amenable relationships with its vendors and suppliers, or if its vendors and suppliers are unable to provide the products and materials the Company needs or undergo financial hardship, the Company could experience difficulty in obtaining needed goods and services, and subsequently, its business and operations could be adversely affected.

The Company’s contractual agreements with its sub-contracted operators expose it to risks that it does not face with its company drivers.

The Company relies, in part, upon independent sub-contractors to perform the services for which it contracts with customers. The Company’s reliance on sub-contractors creates numerous risks for the Company’s business.

If the Company’s sub-contractors fail to meet the Company’s contractual obligations or otherwise fail to perform in a manner consistent with the Company’s requirements, the Company may be required to utilize alternative service providers at potentially higher prices or with some degree of disruption of the services that the Company provides to customers. If the Company fails to deliver on time, if its contractual obligations are not otherwise met, or if the costs of its services increase, then the Company’s profitability and customer relationships could be harmed.

The financial condition and operating costs of the Company’s sub-contractors are affected by conditions and events that are beyond the Company’s control and may also be beyond their control. Adverse changes in the financial condition of the Company’s sub-contractors or increases in their equipment or operating costs could cause them to seek higher revenues or to cease their business relationships with the Company. The prices the Company charges its customers could be impacted by such issues, which may in turn limit pricing flexibility with customers, resulting in fewer customer contracts and decreasing the Company’s revenues.

Sub-contractors typically use tractors, trailers and other equipment bearing the Company’s trade names and trademarks. If one of the Company’s sub-contractors is subject to negative publicity, it could reflect on the Company and have a material adverse

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effect on the Company’s business, brand and financial performance. Under certain laws, the Company could also be subject to allegations of liability for the activities of its sub-contractors.

Sub-contractors are third-party service providers, as compared to company drivers who are employed by the Company. As independent business owners, the Company’s sub-contractors may make business or personal decisions that conflict with the Company’s best interests. For example, if a load is unprofitable, route distance is too far from home or personal scheduling conflicts arise, a sub-contractor may deny loads of freight from time to time. In these circumstances, the Company must be able to timely deliver the freight in order to maintain relationships with customers.

If the Company’s sub-contractors are deemed by regulators or judicial process to be employees, the Company’s business and results of operations could be adversely affected.

Tax and other regulatory authorities have in the past sought to assert that sub-contractors in the trucking industry are employees rather than independent contractors. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If the Company’s sub-contractors are determined to be its employees, it would incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor, employment, and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.

The Company is dependent on computer and communications systems, and a systems failure or data breach could cause a significant disruption to its business.

The Company’s business depends on the efficient and uninterrupted operation of its computer and communications hardware systems and infrastructure. The Company currently maintains its computer systems at multiple locations, including several of its offices and terminals and third-party data centers, along with computer equipment at each of its terminals. The Company’s operations and those of its technology and communications service providers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, terrorist attacks, internet failures, computer viruses, data breaches (including cyber-attacks or cyber intrusions over the internet, malware and the like) and other events generally beyond its control. Although the Company believes that it has robust information security procedures and other safeguards in place, as cyber threats continue to evolve, it may be required to expend additional resources to continue to enhance its information security measures and investigate and remediate any information security vulnerabilities. A significant cyber incident, including system failure, security breach, disruption by malware or other damage, could interrupt or delay the Company’s operations, damage its reputation, cause a loss of customers, agents or third party capacity providers, expose the Company to a risk of loss or litigation, or cause the Company to incur significant time and expense to remedy such an event, any of which could have a material adverse impact on its results of operations and financial position.

If the Company’s employees were to unionize, the Company’s operating costs could increase and its ability to compete could be impaired.

None of the Company’s employees are currently represented under a collective bargaining agreement; however, the Company always faces the risk that its employees will try to unionize. Further, Congress or one or more states could approve legislation and/or the National Labor Relations Board (the NLRB) could render decisions or implement rule changes that could significantly affect the Company’s business and its relationship with employees, including actions that could substantially liberalize the procedures for union organization. For example, in December 2014, the NLRB implemented a final rule amending the agency’s representation-case proceedings that govern the procedures for union representation. Pursuant to this amendment, union elections can now be held within 10 to 21 days after the union requests a vote, which makes it easier for unions to successfully organize all employees, in all industries. In addition, the Company can offer no assurance that the Department of Labor will not adopt new regulations or interpret existing regulations in a manner that would favor the agenda of unions. The Company believes the applicability of the SCA to Company employees reduces the likelihood of organizational activity.

Any attempt to organize by the Company’s employees could result in increased legal and other associated costs and divert management attention, and if the Company entered into a collective bargaining agreement, the terms could negatively affect its costs, efficiency and ability to generate acceptable returns on the affected operations. In particular, the unionization of the Company’s employees could have a material adverse effect on its business, financial condition, results of operations, cash flows and prospects because:

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Higher health care costs and labor costs could adversely affect the Company’s financial condition and results of operations.

With the passage in 2010 of the United States Patient Protection and Affordable Care Act (the PPACA), the Company is required to provide health care benefits to all full-time employees that meet certain minimum requirements of coverage and affordability, or otherwise be subject to a payment per employee based on the affordability criteria set forth in the PPACA. Many of these requirements have been phased in over a period of time, with the majority of the most impactful provisions affecting the Company having begun in the second quarter of 2015. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. The PPACA also requires individuals to obtain coverage or face individual penalties, so employees who are currently eligible but have elected not to participate in the Company’s health care plans may ultimately find it more advantageous to do so. It is also possible that by making changes or failing to make changes in the health care plans the Company offers it will have difficulty attracting and retaining employees, including drivers. The costs and other effects of these healthcare requirements may significantly increase the Company’s health care coverage costs and could materially adversely affect its financial condition and results of operations.

The COVID-19 pandemic and other similar outbreaks may have a material adverse impact on our business, financial condition, and results of operations in the future.

The continued spread and impact of novel coronavirus (COVID-19) might materially negatively impact our future results of operations and financial condition. COVID-19 has created, and any other outbreaks of similar contagious diseases or other adverse public health developments could create, significant volatility, uncertainty and economic disruption. COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:

The extent to which the COVID-19 pandemic impacts the Company will depend on numerous evolving factors and future developments that we are not able to predict, including: the geographic scope, severity, and duration of the pandemic; governmental, business and other actions in response to the pandemic (which could include limitations on the Company’s operations or mandates to provide services in a specified manner); the impact of the pandemic on economic activity; the response of the overall economy and the financial markets; expenses we have incurred and may incur in the future in connection with our response to the pandemic; the health of and the effect on our workforce and our ability to meet staffing needs; and the potential effects on our internal controls, including those over financial reporting, as a result of changes in working environments. In 2020, services the Company provides USPS were deemed “essential” such that the Company was required to continue operations during “lockdowns” and similar restrictive measures limiting business activity generally.

In response to the spread of COVID-19, we have modified our business practices for the continued health and safety of our employees. Specifically, we have implemented measures to enhance the sanitization process of the Company’s equipment and properties, increased the social distancing of our employees by working remotely where possible, and provided driving associates with personal protective equipment (PPE). We may take further actions, or be required to take further actions, that are in the best interests of our employees in the future. The implementation of health and safety practices, including federal or state vaccine mandates and similar measures, could impact our productivity and costs, which could have a material adverse impact on our business, financial condition, and results of operations. In addition, the focus on managing and mitigating the impacts of COVID-19 on our business may cause us to divert or delay the application of our resources toward existing or new initiatives or investments, which could have a material adverse impact on our results of operations.

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To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also exacerbate many of the other risks set forth in this Annual Report on Form 10-K, including those relating to our financial performance and debt obligations. There are no comparable recent events that provide guidance as to the effect the COVID-19 global pandemic may have, and as a result, the ultimate impact of the pandemic is highly uncertain and subject to change.

The Company may be adversely affected by fluctuations in the price or availability of CNG and diesel fuel.

Fuel is one of the Company’s largest operating expenses. Fuel prices fluctuate greatly due to factors beyond the Company’s control, such as political events, price and supply decisions by oil producing countries and cartels, terrorist activities, environmental laws and regulations, armed conflicts, depreciation of the dollar against other currencies, world supply and demand imbalances, and hurricanes and other natural or man-made disasters, each of which may lead to an increase in the cost of fuel. Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain. Because the Company’s operations are dependent upon fuel, significant fuel cost increases, shortages or supply disruptions could materially and adversely affect its results of operations and financial condition. Although the Company's customers generally reimburse it for fuel expenses, those reimbursements are typically at fuel prices applicable to the preceding month. As a result, those reimbursements might be for amounts lower than the Company's fuel costs as fuel prices fluctuate.

Our use of natural gas vehicles “NGVs” might not produce expected competitive advantages, and costs associated with using NGVs could exceed the related benefits that we are able to realize, both of which could adversely affect the Company’s results of operations and cash flows.

We operate NGVs because we believe our use of NGVs provides us with a competitive advantage when bidding on USPS and other freight contracts. However, higher costs associated with purchasing and repairing NGVs might exceed any benefits attributable to our use of NGVs. For example, there are a limited number of original equipment manufacturers of NGVs and the engines, fuel tanks and other equipment required to upfit a gasoline or diesel engine to run on natural gas, which can increase costs related to purchasing and repairing NGVs as well limit the supply of NGVs available to purchase and therefore our ability to add to our fleet. Also, some of the higher costs of owning and operating NGVs have historically been offset by federal and state government incentives, including those that offset part or all of the additional up-front cost to acquire NGVs or convert vehicles to run on natural gas, those that waive vehicle weight limits for NGVs, and those that offer tax credits. However, those incentives may not continue. If those government incentives are discontinued or not renewed, our operating costs could significantly increase.

In addition to potential increases in expenses and other operating costs related to our use of NGVs, if technologies are developed that either reduce the emissions in gasoline and diesel-powered vehicles or improve the operating capabilities of electric, solar, or other alternative fuel technology vehicles, the benefits of NGVs could be significantly reduced. Any such reduction could adversely affect our ability to retain existing freight contracts when they are up for renewal and receive new contracts, which would adversely impact our financial performance.

Risks Related to Our Securities

There is no established trading market for our common stock, and our stockholders may be unable to sell their shares.

There is no established market, private or public, for any of our securities and there can be no assurance that a trading market will ever develop or, if developed, that it will be maintained. There can be no assurance that the Company’s stockholders will ever be able to resell their shares.

Our common stock is subject to the “penny stock” rules of the SEC, which restrict transactions in our stock and may reduce the value of an investment in our stock.

Our common stock is currently regarded as a “penny stock” because our shares are not listed on a national stock exchange or quoted on the NASDAQ Market within the United States and our common stock has a market price less than $5.00 per share. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide a customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer’s account, to make a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction. To the extent these requirements may be applicable; they will reduce the level of trading activity in the secondary market for our common stock and may severely and adversely affect the ability of broker-dealers to sell our common stock.

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

We are an “emerging growth company,” as defined in the JOBS Act, as well as a smaller reporting company. For so long as we remain an emerging growth company and/or a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies or smaller reporting companies. These exemptions include:

We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, we will experience greater detail raising equity capital, there may be a less active trading market for our common stock, and our stock price may be more volatile.

We have never paid and do not expect to pay cash dividends on our shares.

We have never paid cash dividends, and we anticipate that any future profits received from operations will be retained for operations. We do not anticipate the payment of cash dividends on our capital stock in the foreseeable future and any decision to pay dividends will depend upon our profitability, available cash and other factors. Therefore, no assurance can be given that there will ever be any cash dividend or distribution in the future.

We may in the future issue additional shares of our common stock which would reduce investors’ ownership interests in the Company and which may dilute our share value.

Our certificate of incorporation authorizes the issuance of 110,000,000 shares consisting of: (i) 100,000,000 shares of common stock, par value $0.0001 per share; and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share. The future issuance of all or part of our remaining authorized common stock or preferred stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

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The Company’s certificate of incorporation permits the board of directors to issue stock with terms that may subordinate the rights of common stockholders or discourage a third party from acquiring the Company in a manner that might result in a premium price to the Company’s stockholders.

The Company’s board of directors, without any action by the Company’s stockholders, may amend the Company’s certificate of incorporation from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series of stock that the Company has authority to issue. The board of directors may also classify or reclassify any unissued common stock or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption of any class or series of stock. Thus, the board of directors could authorize the issuance of preferred stock with terms and conditions that could have a priority as to distributions and amounts payable upon liquidation over the rights of the holders of the Company’s common stock. For example, the Series A Preferred Stock authorized by the board of directors in April 2018 and the Series B Preferred Stock authorized by the board of directors in March 2020 both rank senior in preference and priority to the Company’s common stock with respect to dividend and liquidation rights and, generally votes with the common stock on an as converted basis on all matters presented for a vote of the holders of common stock, including directors, and entitle the holders of Series A Preferred Stock to fifteen votes for each share of Series A Preferred Stock held and the holders of Series B Preferred Stock to four votes for each share of Series B Preferred Stock held. The Series A Preferred stock and Series B Preferred stock, as well as any other series of preferred stock that the board of directors may authorize in the future could also have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all our assets) that might provide a premium price for holders of the Company’s common stock.

Item 1B. Unresolved Staff Comments.

As a smaller reporting company, the Company is not required to provide disclosure under this item.

Item 2. Properties.

Our principal corporate office is located at 2075 West Pinnacle Peak Rd. Suite 130, Phoenix, AZ 85027 and consists of 6,359 square feet of space. We occupy this office under a 65-month office lease agreement dated November 27, 2019 with monthly rental payments increasing from $12,188 to $13,248 over the initial term of the lease.

We also lease the following properties as main terminals for our trucking segment:

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We lease various additional properties throughout the United States for our trucking segment, none of which are individually material, for operating sites, remote offices, and parking facilities.

Through our subsidiaries, Titan and EAF, we also own or lease six natural gas fueling stations located in California, Texas, Arizona and Wisconsin, three of which are currently operating.

We believe all of our properties are suitable and adequate for current operating needs.

Item 3. Legal Proceedings.

On March 19, 2018, Whisler Holdings, LLC, Mitesh Kalthia, and Jean M. Noutary, the owners of the property leased by El Toro for the Company’s El Toro station, initiated a lawsuit in the Superior Court of Orange County, California, related to the lease agreement for the El Toro station. The complaint alleges breach of contract and sought money damages, costs, attorneys’ fees and other appropriate relief. On October 11, 2018, the court issued a default judgement in favor of the plaintiff in the amount of approximately $0.2 million, which the Company has fully reserved for and is included in Accrued expenses on the accompanying consolidated balance sheets at December 31, 2020 and 2019. No payments have been made to date.

The Company is involved in litigation and claims primarily arising in the normal course of business, which include claims for personal injury, employment-related, or property damage incurred in relation to the transportation of mail and freight. The Company’s insurance program for liability, physical damage, cargo damage and workers’ compensation involves self-insurance with varying risk retention levels. Claims in excess of these risk retention levels are covered by insurance in amounts that management considers to be adequate. Based on its knowledge of the facts and the advice of outside counsel, the Company believes the resolution of claims and pending litigation will not have a material adverse effect on it, taking into account existing reserves.

Item 4. Mine Safety Disclosure.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Common Stock

Our certificate of incorporation authorizes the issuance of up to 100,000,000 shares of common stock, par value $0.0001 per share. Our common stock trades under the symbol “EVOA” on the OTC Expert Market maintained by the OTC Markets Group Inc.; however, no public market has yet developed for our common stock.

As of January 21, 2022, there were 185 holders of record of our common stock.

Dividend Policy

The Company has not paid any cash dividends since inception and does not anticipate or contemplate paying dividends in the foreseeable future. Dividends accrue on our Series A Preferred Stock and Series B Preferred Stock on a cumulative basis but are payable upon declaration of the board of directors. It is the present intention of management to utilize all available funds for the development of the Company’s business.

Recent Sales of Unregistered Securities

None.

Securities Authorized for Issuance under Equity Compensation Plans

See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Item 6. Selected Financial Data.

As a smaller reporting company, the Company is not required to provide disclosure under this item.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management's discussion and analysis of financial condition and results of operations should be read together with “Business” in Part I, Item 1 of this Annual Report, as well as the consolidated financial statements and accompanying footnotes in Part II, Item 8 of this Annual Report. This discussion contains forward-looking statements as a result of many factors, including those set forth under Part I, Item 1A. “Risk Factors” and Part I “Forward-looking Statements” of this Annual Report, and elsewhere in this report. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from those discussed.

Company Overview

EVO Transportation & Energy Services, Inc. is a transportation provider serving the USPS and other customers. We believe we are the second largest surface transportation company serving the USPS, with a diversified fleet of tractors, straight trucks, and other vehicles that currently operate on either diesel fuel or CNG. In certain markets, we fuel our vehicles at one of our three CNG stations that serve other customers as well. We operate from our headquarters in Phoenix, Arizona and from 10 main terminals strategically located throughout the United States.

We have grown primarily through acquisitions, and we have completed seven acquisitions since our initial business combination in 2016. We have also grown organically by obtaining new contracts from the USPS and other customers. During 2020, we were awarded 12 additional contracts from the USPS which are expected to generate approximately $12 million in annual revenue. We have been actively integrating the acquisitions we have made under common leadership and technology and are now operating under a single brand.

Recent Developments

The Company completed the following acquisitions in 2019:

Key Trends & Anticipated Future Trends

The USPS has for more than 100 years contracted with private carriers to transport mail among its processing plants and between such plants and post office locations. In 2016, the USPS began implementing a new Dynamic Route Optimization ("DRO") initiative to retool its private carrier contracting strategy. For decades, the USPS hired private carriers to transport mail over specific routes on a set schedule at fixed prices under its Highway Contract Routes ("HCR") program. The DRO initiative aims to replace fixed-price HCR contracts with rate-per-mile DRO contracts that have varying departure times, lines of travel, and mail types transported based on mail volume. By “optimizing” its routes, the USPS seeks to reduce mileage and lower its transportation costs. The DRO program has evolved since conception and now operates more like the HCR program.

Nonetheless, we believe the USPS’s distribution strategy under the DRO initiative is causing a fundamental change to its contracting activity with private carriers. Historically, HCR contracts often were awarded to smaller carriers capable of performing under a limited number of fixed-price, -route, and -cost contracts. In 2014, the USPS had contracts with more than 4,000 carriers, many servicing the same or overlapping territories. With the implementation of the DRO program, the USPS stated the goal to manage fewer relationships and reduce its number of carriers to fewer than 1,000 by 2022. The USPS has stated that it is aiming to consolidate many contracts within a defined geographical area into one contract with a single carrier. Accordingly, DRO contracts are being awarded to carriers with larger service territories that have the capacity to increase or reduce services to adjust for changes in mail volume.

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We expect the USPS to continue its contract consolidation efforts in the foreseeable future. In its five-year strategic plan for fiscal years 2020 through 2024, the USPS reported it intends to continue to deploy dynamic routing technologies and processes for plant-to-plant and plant-to-post office transportation and to expand carrier relationships where best aligned to improve service reliability, lower costs, and increase capabilities. We believe the USPS’s consolidation efforts can help the Company grow organically through new contracting opportunities.

We believe that the USPS’s intent to increase its reliance on surface transportation providers will also help the Company grow organically. In its ten-year strategic plan announced in March of 2021, the USPS outlined its intent to shift a portion of its mail and package volume from air transport to surface transportation. Specifically, over the next ten years the USPS intends to shift up to 43% of its first class mail volume that is transported by air to surface transportation.

During 2020, we bid on and won 12 new USPS contracts. We intend to continue bidding on new and existing USPS contract opportunities as they arise. USPS contracts are bid competitively and performed in accordance with various requirements, including, but not limited to requirements under the Service Contract Act, Department of Transportation regulations (federal and state), and other applicable local and state regulations. The USPS evaluates the bids based on price, past performance, operational plans, financial resources, and the use of innovation or alternative fuels. USPS contracts typically have four-year terms, but can range from two to six years, and often are renewed with the incumbent carrier after expiration of the initial term.

In addition to organic growth, the Company expects to further increase its footprint into the transportation industry by acquiring, owning, and operating transportation companies. The Company intends to target acquisition candidates that have won contracts to provide trucking services for the USPS. Our CNG business complements this expansion strategy since fueling our CNG trucks at our own stations in cases where our routes are located near our CNG facilities will allow us to implement cost saving strategies that will increase profitability and increase our presence in this space.

We experienced significant growth in USPS contract revenue through acquisitions and organic growth from 2018 through 2020. We obtained a total of 237 USPS contracts pursuant to our acquisitions of Thunder Ridge on June 1, 2018, Graham on November 18, 2018, Sheehy Mail on January 2, 2019, Ursa and JB Lease on February 1, 2019, Courtlandt and Finkle on July 15, 2019, and the Ritter Companies on September 16, 2019. Our operating subsidiaries won an additional 12 USPS contracts in 2020. We currently service over 350 USPS contracts across 41 states.

Sources of Revenue

Our USPS trucking operations generates revenue for our trucking segment from transportation services under multi-year contracts with the USPS, generally on a rate per mile basis that adjusts monthly for fuel pricing indexes.

Our freight trucking operations generates revenue for our trucking segment by providing both irregular and dedicated route and cross-border transportation services of various products, goods, and materials for a diverse customer base.

Our CNG station revenue is derived predominately pursuant to contractual fuel purchase commitments. These contracts typically include a stand-ready obligation to supply natural gas daily. The CNG stations are also open to individual consumers. In addition to revenue earned from our customers, we may also earn alternative fuel tax credits through certain federal programs. These programs are generally short-term in nature and require legislation to be passed extending the term.

Results from Operations

Year Ended December 31, 2020, Compared to Year Ended December 31, 2019

Trucking Segment

Substantially all of the increases in Trucking revenue and operating expenses from the year ended December 31, 2019 to the year ended December 31, 2020 are due to 2019 including the acquisition of, and partial-year results of operations for, Sheehy, Ursa, JB Lease, Finkle, Courtlandt and the Ritter Companies while 2020 includes full-year results of operations for these acquired businesses.

Trucking revenue: The majority of Trucking revenue is derived from the USPS. The remainder of the revenue is derived from corporate freight hauling. The USPS contracts are typically four years in duration with pricing varying by contract. The vast majority of the USPS contracts include a monthly fuel adjustment.

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Payroll, benefits and related: Of the Company’s roughly 1,600 employees at year-end, approximately 1,400 were drivers. Driver wages are fixed per contract with USPS and are eligible for renegotiation with USPS on a bi-annual basis. In addition to an hourly wage that is set by the Department of Labor, drivers also earn an incremental hourly rate for benefits.

Purchased transportation: Purchased transportation represents payments to subcontracted third-party companies. These contracts are negotiated on a rate per mile basis and the subcontracting company is responsible for supplying all resources to perform the service including, but not limited to labor, equipment, fuel and associated expenses.

Fuel: Fuel expense is comprised of diesel and CNG fuel required to operate the truck fleet. The Company manages fuel cost by negotiating volume discounts from rack fuel rates with select vendors. Despite a 29% increase in Trucking revenue, fuel expense increased 3%. This is due primarily to a decrease in the average DOE fuel price to $2.56 per gallon for 2020 from $3.06 per gallon for 2019.

Equipment rent: The Company rents and leases a portion of its trucks and trailers through a combination of short and long-term arrangements. Efforts are currently underway to rebalance the fleet towards having more company-owned assets, subject to financing availability. Despite a 29% increase in Trucking revenue, equipment rent expense decreased 21%. This is due primarily to a significant reduction in the use of short-term rental arrangements and increased use of equipment under long-term lease arrangements and company-owned assets.

Maintenance and Supplies: Maintenance and supplies expense primarily includes the costs to maintain the fleet. Despite a 29% increase in Trucking revenue, maintenance and supplies expense decreased 15%. This is due primarily to reduced maintenance spend on existing equipment in advance of the planned refreshing of our fleet with newer equipment.

Operating supplies and expenses: Operating and supplies expense includes all other direct costs in the Trucking segment.

Insurance and claims: Insurance and claims is comprised of auto liability and physical damage and workers compensation expense related to the Trucking segment of the business.

CNG Fueling Stations Segment

CNG revenue: Revenue for the CNG stations was $1.0 million and $1.7 million for the years ended December 31, 2020 and 2019, respectively. The decrease is due primarily to additional tax rebate revenue received during 2019.

CNG operating expenses: CNG operating expense is comprised of natural gas, electricity, federal excise tax, vendor use fuel tax and credit card fees.

Impairment of long-lived assets: Long-lived assets impairment expense was $2.3 million and $3.6 million for the years ended December 31, 2020 and 2019, respectively. Substantially all of the impairment expense during each year is related to the CNG fueling stations segment and is due primarily to the compression of commodity prices.

EVO Consolidated

General and administrative: General and administrative expense was $18.5 million and $13.0 million for the years ended December 31, 2020 and 2019, respectively. The increase in general and administrative expense is due primarily to 2019 including the acquisition of, and partial-year results of operations for, Sheehy, Ursa, JB Lease, Finkle, Courtlandt and the Ritter Companies while 2020 includes full-year results of operations for these acquired businesses.

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Depreciation and amortization: Depreciation and amortization expense was $14.8 million and $7.8 million for the years ended December 31, 2020 and 2019, respectively. The increase in depreciation and amortization expense is due primarily to 2019 including the acquisition of, and partial-year results of operations for, Sheehy, Ursa, JB Lease, Finkle, Courtlandt and the Ritter Companies while 2020 includes full-year results of operations for these acquired businesses.

Interest expense: Interest expense increased to $15.0 million for the year ended December 31, 2020 from $7.7 million for the year ended December 31, 2019. The increase in interest expense is due primarily to: (1) the incurrence of a full year of interest expense during 2020 (versus a partial year during 2019) on debt obligations used to finance the Company’s 2019 acquisitions, including the Antara Financing Agreement, as well as the debt obligations assumed in connection with such acquisitions; and (2) the various debt financing and refinancing activities undertaken during 2020 relating to the Antara Financing Agreement. Refer to Note 7, Debt, for a description of these activities.

Loss on extinguishment of debt: The $10.0 million loss on extinguishment of debt during the year ended December 31, 2020 is due primarily to the $10.1 million loss on extinguishment of debt relating to the Company's March 31, 2020 Waiver and Agreement to Issue Warrant (the “Waiver Agreement”) with Antara Capital and the collateral agent. The Waiver Agreement modified a certain affirmative covenant and waived another affirmative covenant in the Antara Financing Agreement and, in exchange, the Company agreed to issue to Antara Capital a warrant to purchase up to 3,250,000 shares of the Company’s Common Stock at an exercise price of $2.50 per share as an incentive. Refer to Note 7, Debt, for further discussion.

Change in fair value of embedded derivative liability: The Antara Financing Agreement contains a mandatory prepayment feature that was determined to be an embedded derivative, requiring bifurcation and fair value recognition for the derivative liability. The fair value of this derivative liability is remeasured at each reporting period, with changes in fair value recognized in the consolidated statement of operations. Refer to Note 7, Debt, and Note 10, Fair Value Measurements, for further discussion.

Change in fair value of warrant liabilities: During the years ended December 31, 2020 and 2019 the Company issued certain warrants that are not considered indexed to the Company's common stock and, therefore, are required to be classified as liabilities and measured at fair value at each reporting date with the change in fair value being recognized in the Company's results of operations during each reporting period. Refer to Note 8, Stockholders' Deficit and Warrants, and Note 10, Fair Value Measurements, for further discussion.

Liquidity and Capital Resources

Year Ended December 31, 2020, Compared to Year Ended December 31, 2019

Changes in Liquidity

Cash and Cash Equivalents. Cash and cash equivalents were $26.6 million and $3.3 million at December 31, 2020 and 2019, respectively. The increase is attributable to financing activities consummated during the year ended December 31, 2020.

Operating Activities. Net cash used in operations was $10.0 million and $15.2 million during the years ended December 31, 2020 and 2019, respectively. For the years ended December 31, 2020 and 2019, the Company had a net loss of $46.8 million and $32.7 million, respectively. For 2020, the net loss was partially offset by $40.2 million in adjustments for non-cash items and $3.4 million of cash provided by changes in working capital. Non-cash items primarily consisted of $14.8 million in depreciation and amortization, $10.0 million in loss on extinguishment of debt, $5.5 million in non-cash interest expense, $2.3 million in impairment charges, non-cash lease expense of $4.5 million, amortization of debt discount and debt issuance costs of $2.1 million, $1.3 million loss on sale of assets, and stock option and warrant-based compensation expense of $0.5 million, partially offset by a $0.4 million adjustment for deferred income taxes. For 2019, the net loss was partially offset by $17.3 million in adjustments for non-cash items and $0.2 million of cash provided by changes in working capital. Non-cash items primarily consisted of $7.8 million in depreciation and amortization, $4.6 million in non-cash interest expense, $3.6 million in impairment charges, non-cash lease expense of $3.2 million, amortization of debt discount and debt issuance costs of $1.6 million, and stock option and warrant-based compensation expense of $1.6 million, partially offset by a $5.5 million adjustment for deferred income taxes.

Investing Activities. Net cash provided by investing activities was $0.9 million for the year ended December 31, 2020. Net cash used in investing activities was $22.4 million for the year ended December 31, 2019. The net cash provided by investing activities during 2020 is related to $1.0 million proceeds from the sale of fixed assets offset by $0.1 million of equipment purchases. The net cash used in investing activities during 2019 is primarily related to $19.5 million of cash consideration paid for acquisitions and $3.1 million of equipment purchases.

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Financing Activities. Net cash provided by financing activities was $32.5 million and $39.2 million for the years ended December 31, 2020 and 2019, respectively. The cash provided by financing activities during 2020 primarily consisted of $185.4 million in advances from factoring receivables, proceeds of $32.8 million from the issuance of debt, and $6.2 million in proceeds from the sale of common stock, preferred stock and warrants, partially offset by $180.8 million in payments on factoring arrangements, $6.8 million in payments of debt principal, and $3.6 million in payments on finance lease liabilities. The cash provided by financing activities during 2019 primarily consisted of $163.5 million in advances from factoring receivables, proceeds of $30.1 million from the issuance of debt, and $11.4 million in proceeds from the sale of common stock and warrants, partially offset by $153.8 million in payments on factoring arrangements, and $11.3 million in payments of debt principal.

Sources of Liquidity

Our primary historical and future sources of liquidity are cash on hand ($26.6 million at December 31, 2020), the incurrence of additional indebtedness, the sale of the Company’s common stock or preferred stock, and advances under our accounts receivable factoring arrangements. However, there can be no assurance that we will be able to obtain additional financing in the future via the incurrence of additional indebtedness or the sale of the Company’s common stock or preferred stock.

Uses of Liquidity

Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, contract payments to independent contractors, and payments for fuel, maintenance and supplies, and other expenses. We also use large amounts of cash and credit for principal and interest payments, as well as operating and finance lease liabilities and capital expenditures to fund the replacement and/or growth in our tractor and trailer fleet.

Going Concern

As of December 31, 2020, we had a cash balance of $26.6 million, a working capital deficit of $98.9 million, stockholders’ deficit of $67.3 million, and material debt and lease obligations of $155.3 million, which included term loan borrowings under a financing agreement with Antara Capital. During the year ended December 31, 2020, we reported cash used in operating activities of $10.0 million and a net loss of $46.8 million.

The following significant transactions and events affecting the Company’s liquidity occurred during the year ended December 31, 2020:

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The following significant transactions and events affecting the Company’s liquidity occurred following the year ended December 31, 2020:

While these transactions and events resulted in an overall increase in the Company’s cash balance as of December 31, 2021, an overall reduction in the Company’s working capital deficit as of December 31, 2021, and an overall extension of the maturity dates for the Company’s debt obligations, the Company continues to have a working capital deficit and stockholders’ deficit as of December 31, 2021 and (after excluding the impacts of the USPS settlement agreements and the forgiveness of the PPP loan discussed above) continues to incur net losses during 2021. As a result of these circumstances, the Company believes its existing cash, together with any positive cash flows from operations, may not be sufficient to support working capital and capital expenditure requirements for the next 12 months, and the Company may be required to seek additional financing from outside sources.

In evaluating the Company’s ability to continue as a going concern and its potential need to seek additional financing from outside sources, management also considered the following conditions:

As a result of the circumstances described above, the Company may not have sufficient liquidity to make the required payments on its debt, factoring or leasing obligations; to satisfy future operating expenses; to make capital expenditures; or to provide for other cash needs.

Management’s plans to mitigate the Company’s current conditions include:

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Notwithstanding management’s plans, there can be no assurance that the Company will be successful in its efforts to address its current liquidity and capital resource constraints. These conditions raise substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of these consolidated financial statements within the Company’s Form 10-K. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result if the Company is unable to continue as a going concern.

Refer to Notes 1, 6, 7 and 11 to the consolidated financial statements for further information regarding our debt, factoring, and lease obligations, including the future maturities of such obligations. Refer to Note 15 to the consolidated financial statements for further information regarding changes in our debt obligations and liquidity subsequent to December 31, 2020.

Off-Balance Sheet Arrangements

Refer to Note 12, Commitments and Contingencies – Off Balance Sheet Arrangements – Captive Insurance.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”). The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses recorded during the reporting periods.

On a periodic basis we evaluate our estimates based on historical experience and various other assumptions we believe are reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions. For further information on our significant accounting policies, refer to Note 1 to our consolidated financial statements included in this report.

We believe the following critical accounting policies involve the most significant judgments and estimates used in the preparation of our consolidated financial statements.

Purchase Accounting

We are required to estimate the fair value of the assets acquired and liabilities assumed in business combinations as of the acquisition date, including identified intangible assets. The amount of purchase price paid in excess of the net assets acquired is recorded as goodwill. The fair values are estimated in accordance with accounting standards which define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair values of the net assets acquired are determined primarily using Level 3 inputs (inputs that are unobservable to the marketplace participant).

The most significant fair value estimates include intangible assets (customer relationships and trade names) subject to amortization. We recorded $4.0 million of acquired intangible assets in connection with our 2019 acquisitions. These amounts of intangible assets were determined based primarily on the acquiree’s projected cash flows. The projected cash flows include various assumptions, including estimated revenue growth rates, operating margins, customer attrition rates, royalty rates, and the appropriate risk-adjusted discount rates used to discount the projected cash flows. The residual value assigned to goodwill was $22.0 million for the 2019 acquisitions.

Goodwill

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We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred, such as a significant adverse change in the business climate or a decision to sell all or a portion of a reporting unit. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. All of the Company’s goodwill is recorded in its Trucking reporting unit.

Goodwill is reviewed for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. When we perform the quantitative goodwill impairment test, we compare the fair value of the reporting unit to the carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, the difference would be recognized as an impairment loss.

The impairment test process requires valuation of the reporting unit, which we determine using primarily the income, or discounted cash flows, approach. The assumptions about future cash flows and growth rates are based on the reporting unit's long-term forecast and are subject to review and approval by senior management. A reporting unit’s discount rate is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. The fair value determination is categorized as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

During the years ended December 31, 2020 and 2019, the annual impairment test did not result in an impairment of goodwill.

Long-Lived Assets

The Company evaluates the recoverability of long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available.

If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts. The assumptions about future cash flows and growth rates are based on the asset group’s long-term forecast and are subject to review and approval by senior management. An asset group’s discount rate is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. The fair value determination is categorized as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

Impairment expense of $2.3 million and $3.5 million was recorded during the years ended December 31, 2020 and 2019, respectively, related to the CNG Fueling Stations asset group.

Fair Valuation of Common Stock, Preferred Stock, Warrants and Stock Options

Our executive officers, directors and principal stockholders beneficially own a substantial majority of the Company’s outstanding common stock. The Company’s common stock does not have an observable quoted market price on the OTC Expert Market because the stock is thinly traded and is not eligible for proprietary broker-dealer quotations. As a result, we must utilize an alternative method to estimate the fair value of our common stock, including when the Company issues other equity instruments for which the common stock is the underlying security. We first use primarily the income, or discounted cash flows, approach to determine the estimated fair value of our total equity. The assumptions about future cash flows and growth rates are based on the Company's long-term forecast and are subject to review and approval by senior management. The discount rate utilized is a risk-adjusted weighted average cost of capital, which we believe approximates the rate from a market participant's perspective. We then use the option-pricing equity allocation method to allocate the estimated total equity value to our common stock and preferred stock. The inputs and assumptions used in the option-pricing model include: (1) the discount rate; (2) the estimated time to liquidity; (3) the Company's expected stock price volatility; (4) the estimated discount

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for the lack of marketability; and (5) the risk-free interest rate. The estimated fair value could be impacted by changes in market conditions, interest rates, growth rates, tax rates, costs, pricing and capital expenditures. The fair value determination is categorized as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs. The estimated fair value of the Company’s common stock is a key assumption in the fair valuation of the preferred stock, warrants and stock options the Company issues.

Stock-Based Compensation

The Company accounts for stock-based compensation awards based on the fair value of the award as of the grant date, which is calculated using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the use of subjective assumptions, including the estimated fair value of the Company’s common stock, the expected term of the award, the expected stock price volatility, expected dividend yield and the risk-free interest rate for the expected term of the award. The expected term represents the period of time the awards are expected to be outstanding. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the awards, we use the simplified method to estimate the expected term for our stock-based compensation awards. Under the simplified method, the expected term of an award is presumed to be the mid-point between the vesting date and the end of the contractual term. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected term of the awards. We assume no dividend yield because dividends on our common stock are not expected to be paid in the near future, which is consistent with our history of not paying dividends on our common stock.

Deferred Income Tax Assets and Liabilities

The carrying values of deferred income tax assets and liabilities reflect the application of our income tax accounting policies in accordance with applicable accounting standards and are based on management’s assumptions and estimates regarding future operating results and levels of taxable income, as well as management’s judgment regarding the interpretation of the provisions of applicable accounting standards. The carrying values of liabilities for income taxes currently payable are based on management’s interpretations of applicable tax laws and incorporate management’s assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes may result in materially different carrying values of income tax assets and liabilities and results of operations.

We evaluate the recoverability of these deferred tax assets by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income inherently rely heavily on estimates. We use our historical experience and our short and long-term business forecasts to provide insight. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. As of December 31, 2020, the Company had federal and state net operating losses of approximately $50.5 million and $30.1 million, respectively. As of December 31, 2019, the Company had federal and state net operating losses of approximately $40.0 million and $25.0 million, respectively. As of December 31, 2020, the Company has approximately $5.9 million of the federal net operating losses available to offset future taxable income for 20 years and will begin to expire in 2036. The remaining $44.6 million of federal net operating losses are carried forward indefinitely to offset future taxable income up to an 80% limitation of taxable income in the year of use. The state net operating losses begin to expire in 2021. These federal and state net operating loss carryforwards are reserved with a full valuation allowance because, based on the available evidence, we believe it is more likely than not that we would not be able to utilize those deferred tax assets in the future. If the actual amounts of taxable income differ from our estimates, the amount of our valuation allowance could be materially impacted.

29

Recently Issued Accounting Pronouncements

Refer to Note 1 to our consolidated financial statements included in this report.

Seasonality and Inflation

Due to increased USPS volume, the Company’s revenue and activity typically increase during the last quarter of each calendar year. At the same time, operating expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher accident frequency, increased claims and higher equipment repair expenditures. The Company also may suffer from weather-related or other events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires, earthquakes and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, affect regional economies, destroy the Company’s assets or adversely affect the business or financial condition of customers, any of which could adversely affect the Company’s results or make the Company’s results more volatile.

To some extent, we experience seasonality with the CNG business. Natural gas vehicle fuel amounts consumed by some of our customers tend to be higher in summer months when fleet vehicles use more fuel to power their air conditioning systems. Natural gas commodity prices tend to be higher in the fall and winter months due to increased overall demand for natural gas for heating during these periods. With the USPS contracts the trucking segment experiences a significant increase in business from the last week of November through the end of December.

Since our inception, inflation has not significantly affected our operating results. However, costs for construction, repairs, maintenance, electricity and insurance are all subject to inflationary pressures, which could affect our ability to maintain our stations adequately, build new stations, expand our existing facilities or pursue additional CNG production projects, or could materially increase our operating costs.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, the Company is not required to provide disclosure under this item.

30

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

EVO Transportation & Energy Services, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheet of EVO Transportation & Energy Services, Inc. and subsidiaries (a Delaware corporation) (the “Company”) as of December 31, 2020, the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company incurred a net loss of $46.8 million during the year ended December 31, 2020, and as of that date, the Company’s current liabilities exceeded its current assets by $98.9 million. These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2021.

Tulsa, Oklahoma

January 31, 2022

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

EVO Transportation & Energy Services, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of EVO Transportation & Energy Services, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 20219, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations and lacks the financial resources it needs to sustain operations for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum llp

Marcum llp

We have served as the Company’s auditor since 2019.

Houston, Texas

August 10, 2021

F-2

EVO TRANSPORTATION & ENERGY SERVICES, INC.

Consolidated Balance Sheets