Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2.

Summary of Significant Accounting Policies

Basis of Presentation

—The consolidated financial statements and related disclosures as of

March 31, 2018

and for the

three

months ended

March 31, 2018

and

2017

are unaudited, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. In our opinion, these unaudited financial statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair statement of the results for the interim periods. These unaudited financial statements should be read in conjunction with our audited financial statements for the years ended

December 31, 2017

and

2016

included in our Annual Report on Form

10

-K for the fiscal year ended

December 31, 2017. 

The results of operations for the

three

months ended

March 31, 2018

are

not

necessarily indicative of the results to be expected for the full year.

Principles of Consolidation

—The accompanying financial statements reflect the consolidation of the individual financial statements of ADOMANI, Inc., ADOMANI California, Inc., Adomani (Nantong) Automotive Technology Co. Ltd., School Bus Sales of California, Inc., and Zero Emission Truck and Bus Sales of Arizona, Inc. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

—The carrying values of our financial instruments, including cash, notes receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

No.

820,

“Fair Value Measurement” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a

three

-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level

1:

Observable inputs such as quoted prices in active markets;

Level

2:

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

Level

3:

Unobservable inputs that are supported by little or

no

market data and that require the reporting entity to develop its own assumptions.

The Company does

not

have any assets or liabilities that are required to be measured and recorded at fair value on a recurring basis.

Revenue Recognition

—The Company recognizes revenue from the sales of advanced

zero

-emission electric drivetrain systems for fleet vehicles and from contracting to provide engineering services. In

May 2014,

the FASB issued new accounting guidance, ASC Topic

606,

“Revenue from Contracts with Customers”, to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP. The amendments in this guidance state an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This new guidance requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized.

On

January 1, 2018,

the Company adopted ASC Topic

606

using the modified retrospective method applied to those contracts which were

not

completed as of

January 1, 2018.

Results for reporting periods beginning after

January 1, 2018

are presented under ASC Topic

606,

while prior period amounts are

not

adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC Topic

605.

The adoption of ASC Topic

606

did

not

result in a cumulative

impact on the Company as of

January 1, 2018

and the application of ASC Topic

606

had

no

impact on its statement of operations for the

three

months ended

March 31, 2018

.

Net Loss Per Share

—Basic net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the diluted weighted average number of shares of common stock outstanding during the period. The diluted weighted average number of shares of common stock outstanding is the basic weighted number of shares of common stock adjusted for any potentially dilutive debt or equity securities.

Concentration of Credit Risk

—The Company has credit risks related to cash and cash equivalents on deposit with a federally insured bank, as at times it exceeds the

$250,000

maximum amount insured by the Federal Deposit Insurance Corporation.

Recent Accounting Pronouncements

—Management has considered all recent accounting pronouncements issued, but

not

effective, and does

not

believe that they will have a significant impact on the Company’s financial statements.