Risk Factors Dashboard

Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.

Risk Factors - EVOA

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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 or revise any forward-looking statements for any reason, including to conform these statements to actual results or to changes in our expectations. 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. (“EVO” and, together with its direct and indirect subsidiaries, the “Company”) is a truckload carrier serving the United States Postal Service (“USPS”) and other customers. We believe EVO is one of the largest surface transportation companies serving the USPS, with a diversified fleet of tractors, straight trucks and other vehicles that currently operate on either diesel fuel, gasoline or compressed natural gas (“CNG”). 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”). EVO also operates a brokerage unit that supports the truckload business and services other corporate customers. In select cases, EVO may subcontract the transportation of certain loads to third-party carriers. We operate from our headquarters in Phoenix, Arizona and from numerous terminals throughout the United States. We operate from our headquarters in Phoenix, Arizona and from 10 main terminals located throughout the United States.

Historically, we have grown primarily through acquisitions and have also grown organically by obtaining new contracts from the USPS and other customers.

Service and Product Offering

Mail Transportation

We transport freight for the USPS and believe we are one of its largest ground transportation suppliers. We competitively bid on transportation contracts that specify the movement of freight between processing facilities, distribution centers and other postal locations. We competitively bid on transportation contracts that procure and specify the movement of mail between processing facilities and destination post offices. Customer contracts with the USPS are typically two to four years in term and may be renewed with the incumbent supplier if appropriate service has been performed in accordance with contract requirements including, but not limited to, USPS performance standards, McNamara-O’Hara Service Contract Act (“SCA”) requirements, Department of Transportation (“DOT”) regulations (federal and state) and all other applicable local and state regulations and if the supplier continues to meet the requirements of the USPS.

As of December 31, 2022, we held over 200 contracts with the USPS. Of these contracts, 15 were Dynamic Route Optimization (“DRO”) contracts and EVO believes it is one of the largest service providers of this contract type. Our mail transportation operations generated $278.5 million in revenue in 2022, or 90% of our total revenues. Our mail transportation operations generated $270.7 million in revenue in 2021 (which includes $34.8 million of nonrecurring revenue), or 89% 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 a variety of corporate customers. Our freight and brokerage services generated $31.2 million of revenues in 2022, or 10% 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, Minn Shares Inc. 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 Minn Shares Inc. outstanding shares. Following the closing, the business plan of Titan became the business plan of Minn Shares Inc. 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. and all former officers of Minn Shares Inc. 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.”

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:

On February 1, 2017, EVO acquired Environmental Alternative Fuels, LLC and its wholly owned subsidiary, EVO CNG, LLC. EVO CNG, LLC is engaged in the business of operating compressed natural gas fueling stations.
On June 1, 2018, EVO acquired Thunder Ridge Transport, Inc. (“Thunder Ridge”). Thunder Ridge is based in Springfield, Missouri and is engaged in the truckload carrier business.
On November 16, 2018, EVO acquired W.E. Graham, Inc., a trucking company based in Memphis, Tennessee and is engaged in the truckload carrier business., a trucking company based in Memphis, Tennessee engaged in the business of fulfilling government contracts for freight trucking services.

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On January 2, 2019, EVO acquired Sheehy Mail, Inc. (“Sheehy”). Sheehy is based in Waterloo, Wisconsin and is engaged in the truckload carrier business.
On February 1, 2019, EVO acquired Ursa Major Corporation (“Ursa”) and J.B. Lease Corporation (“JB Lease”). Ursa and JB Lease are based in Oak Creek, Wisconsin and are engaged in the truckload carrier business.
On July 15, 2019, EVO acquired Courtlandt and Brown Enterprises L.L.C. (“Courtlandt”) and Finkle Transport Inc. (“Finkle”). Finkle and Courtlandt are based in Newark, New Jersey and are engaged in the truckload carrier business.
On September 16, 2019, EVO acquired John W. Ritter, Inc. (“JWR”), Ritter Transportation Systems, Inc. (“Ritter Transportation”), Ritter Transport, Inc. (“Ritter Transport”), and Johmar Leasing Company, LLC (“Johmar,” and together with JWR, Ritter Transportation, and Ritter Transport, the “Ritter Companies”). The Ritter Companies are based in Laurel, Maryland and are engaged in the truckload carrier business.

Strategy

Two of the top USPS priorities for its supply base are on-time service scores and safety performance. The USPS demands a 95% on-time service score for its suppliers and a satisfactory safety rating, including real-time reporting requirements for accidents. EVO’s USPS strategy is anchored around high-performance execution in both of these areas: providing flawless operational excellence and minimizing omitted trips and performing with a best-in-class safety record. We have a dedicated contracting team focused not only on bidding on new contracts but more importantly, providing concierge level service and responding to any and all inquiries from the USPS on a real-time basis. We believe that by executing on these priorities, EVO will continue to be a favored USPS supplier, maximizing new bid opportunities and contract renewal prospects.

Over the past few years the USPS has consolidated the number of carriers it utilizes and EVO expects further consolidation of this transportation supplier base as the USPS redesigns its network under its “Delivering for America” plan. As the USPS affects a number of contracting, technology and programmatic changes and requirements, we believe it may become more difficult for suppliers to meet the raised USPS standards. We believe EVO’s scale and resources surpass many of our competitors and best position us to successfully bid on large and more complex solicitations. EVO has invested significantly in information systems and personnel that allow us to better manage our USPS contracts and generate data to support day-to-day operations. For example, implementation of a transportation management system (TMS) and a telematics platform has allowed us to meet the scheduling and reporting needs of the USPS. These capabilities are likely to only grow in criticality as the USPS continues to upgrade and transition its systems into the future. EVO plans to continue to invest in solutions that allow us to better compete for additional USPS business currently provided by other suppliers.

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 intend to continue to evaluate additional vehicles powered by alternative energy, including electrically powered vehicles. We intend to continue to acquire additional vehicles powered by alternative fuels, including electrically powered 2 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.

Additionally, the Company was an early participant in the DRO (now LRO) program with the USPS. We believe our existing relationship with the USPS and experience with the LRO program provide the Company additional competitive advantages when bidding on these contracts.

In addition to serving the USPS, EVO plans to accelerate its customer diversification efforts, both organically and inorganically through M&A activity. Utilizing our technology platform, fleet, and network, EVO plans to grow its non-USPS business through new customer acquisition and growth of existing customer accounts. By having a more balanced customer base, EVO will be able to better redeploy its capacity and minimize the impact of any losses of USPS contracts or another individual customer’s business.

Market Overview

Competition

In fiscal year 2022, our largest customer, the USPS spent over $6 billion on ground transportation and transportation services. The USPS ground transportation industry is highly competitive and fragmented. As of 2022, the USPS had over 1,800 local distribution and processing network transportation suppliers. EVO competes primarily with other transportation companies

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for contracts with the USPS, including both asset and asset-light companies. We believe the USPS is looking to further reduce the number of counterparties it transacts with.

The USPS awards its contracts through a competitive bid process and often opts to renew contracts with incumbent service providers if appropriate services have been performed and pricing is competitive with the market. The Company believes that the principal differentiating factors in its business relative to competition, are service, efficiency, technology, pricing, and alternative fuels capabilities. 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 participant in the DRO (now LRO) program with the USPS. 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 LRO program provide the Company additional competitive advantages when bidding on these contracts.

More generally, EVO also competes with other trucking and asset light freight companies for the business of non-USPS freight customers.

Our Target Customers

The USPS is our primary customer, but we also seek to provide truckload and brokerage services to other non-USPS corporate clients. While EVO will continue to bid on new USPS contract solicitations, it is focused strategically on adding new customers and growing its non-USPS revenue base to create a more balanced book of business.

Principal Customers and Suppliers

The USPS is the Company’s primary customer, and for the years ended December 31, 2022 and 2021, the USPS accounted for approximately 90% and 87%, 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. 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, we are regulated by the Federal Motor Carrier Safety Administration (“FMCSA”), a division of the 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.

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 reviews its coverage on an annual basis. 3 The Company maintains insurance coverage for all operations to exceed the requirements of the FMCSA, and consistently reviews its coverage on an annual basis.

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

Fuel

In 2022, we used approximately 9.0 million gallons of diesel and approximately 1.0 million gas gallon equivalents (“GGEs”) of CNG. Our fuel costs are typically passed on to customers.

The Company actively manages its fuel purchasing network in an effort to maintain adequate fuel supplies and reduce its fuel costs. The Company primarily purchases its fuel through a network of retail truck chains with which it has negotiated volume purchasing discounts. 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 above-ground storage tanks at some of its facilities. As of December 31,

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2022 and 2021, 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. 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 an active fleet of over 900 power units and 1,500 trailers with a mix of owned and leased assets and we also utilize short-term rental agreements for some of our fleet. Our vehicles currently operate on either diesel fuel, gasoline and CNG, and we are also pursuing opportunities to introduce other alternative fuel vehicles, including electric vehicles, into our fleet. 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 significant operations centers include Des Moines, Iowa, Columbus, Ohio, St. Other operations centers include Des Moines, Iowa, Columbus, Ohio, St. Louis, Missouri, Madison, Wisconsin, Atlanta, Georgia and Indianapolis, Indiana. 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.

Seasonality

During the fourth quarter, the Company typically experiences surges pertaining to online holiday shopping the length of the holiday season (shopping days between Thanksgiving and Christmas) and benefits from holiday surge pricing on USPS contracts. The Company’s freight trucking operations and, in general, the transportation industry, experience slower seasonal activity in the first quarter. Freight revenues in the first quarter are typically lower due to less consumer demand, fewer revenue earning days, consumers reducing shipments following the holiday season and inclement weather. At the same time, operating costs generally increase, and tractor productivity decreases during the winter months due to decreased fuel efficiency, increased cold weather-related equipment maintenance and repairs, and increased accident claims and costs due to higher accident frequency from adverse road conditions.

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 is subject to 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. 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 FMCSA, imposes safety and fitness regulations on the Company and its drivers, including rules that restrict drivers' hours-of-service. The FMCSA has adopted a data-driven Compliance, Safety and Accountability (“CSA”) program as its safety enforcement and compliance model. 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 carriers and drivers accountable for their role in safety by evaluating and ranking fleets and individual drivers on certain safety-related standards. 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 improvement targets. 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.

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The Company is also subject to various labor laws and regulations. The contracts that the Company holds with USPS are subject to the SCA that is administered by the Department of Labor (the “DOL”). 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 bona fide 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, 2022, the Company had 1,760 employees, consisting of 1,200 full-time employees and 560 part-time employees. The Company employed 1,491 drivers as of December 31, 2022.

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 generate substantial revenue or obtain sufficient additional capital, 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 annual report, numerous factors raise substantial doubt about our ability to continue as a going concern. Specific factors include the following:

our historical operating losses, net losses and cash used in operations;
continued net losses during 2021 and 2022 after excluding the nonrecurring revenue that resulted from the USPS settlement agreements and the nonrecurring gains that resulted from the extinguishment of certain debt obligations;
continued cash used in operations during 2021 and 2022 after excluding the nonrecurring cash receipts that resulted from the USPS settlement agreements;
continued working capital deficit and stockholders’ deficit as of September 30, 2023;
the structure of our factoring arrangement;
existing defaults on certain of our debt obligations; and
uncertainty regarding our ability to obtain additional financing in the future.

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.

Our level of indebtedness could adversely affect our financial condition and our ability to fulfill our obligations and operate our business.

We have incurred significant liabilities, and our ongoing capital needs are extensive relative to our current cash position. Unless we are able to restructure some or all of our outstanding debt and/or raise sufficient capital to fund continued operations and our debt obligations, we may be unable to pay these obligations as they become due. 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. In the past, we have been unable to pay our obligations as they have become due.

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

In 2022, we incurred a net loss of $18.2 million, which included a $5.3 million pre-tax loss on the extinguishment of certain debt obligations. In 2021, we reported net income of $14.3 million, which included $34.8 million of nonrecurring pre-tax revenue resulting from the USPS settlement agreements, as well as a $11.0 million pre-tax gain on the extinguishment of certain debt obligations. In 2021, we reported net income of $14.3 million that included $34.8 million of nonrecurring pre-tax revenue resulting from the USPS settlement agreements, as well as a $11.0 million pre-tax gain on the extinguishment of certain debt obligations. 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

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EVO's 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 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.

As of December 31, 2022, we identified seven deficiencies in internal control that are considered to be material weaknesses and other deficiencies that are 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, management has concluded that our disclosure controls and procedures were not effective as of December 31, 2022 due to the material weaknesses in our internal control over financial reporting described in Item 9A of this Annual Report on Form 10-K. In addition, the Company’s management has concluded that our disclosure controls and procedures were not effective as of December 31, 2021 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.

In addition, while we 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 are heavily reliant on our factoring arrangement, and any reductions to our ability to obtain credit under the factoring arrangement could significantly impact our liquidity.

We obtain liquidity under an accounts receivable factoring arrangement with Triumph Business Capital (the "Factor"). Pursuant to the terms of the agreement, from time to time, we sell to the Factor certain of our accounts receivable balances on a recourse basis for approved accounts. 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 remits 95% of the contracted accounts receivable balance for a given month to us with the remaining balance, less fees, to be forwarded once the Factor collects the full accounts receivable balance from the factoring 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 we offer 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 our liquidity, which would likely have a material adverse effect on our business, operating results and financial condition.

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

We may require substantial additional capital to fund our capital expenditures, service our debt, refinance existing debt, fund strategic relationships, respond to competitive pressures and to otherwise execute on our business plan. The most likely sources of such additional capital are private placements and public offerings of shares of our capital stock, including shares of EVO’s common stock or securities convertible into or exchangeable for EVO’s common stock, debt financing or funds from potential strategic transactions. 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. 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

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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 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.

In the event of an economic downturn or disruption in the credit markets, our indebtedness could place us at a competitive disadvantage in terms of our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and prevent us from meeting our debt obligations compared to our competitors that are less leveraged.

This could have negative consequences that include: (i) increased vulnerability to adverse economic, industry or competitive developments; (ii) cash flows from operations that are committed to payment of principal and interest, thereby reducing our ability to use cash for our operations, capital expenditures and future business opportunities; (iii) increased interest rates that would affect our variable rate debt; (iv) potential noncompliance with financial covenants, borrowing conditions and other debt obligations, where applicable; (v) lack of financing for working capital, capital expenditures, product development, debt service requirements and general corporate or other purposes; and (vi) limits on our flexibility to plan for, or react to, changes in our business, market conditions or in the economy.

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 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 and retain 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. 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 principal stockholder, Antara Capital Master Fund LP, and it appointed two directors to the EVO board of directors.

Our principal stockholder beneficially owns a substantial majority of our outstanding common stock and it appointed two directors to the EVO board in June 2022. Accordingly, it has the ability to exert substantial influence over our business affairs, including electing directors, appointing officers, determining officers’ compensation, issuing additional equity securities or

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incurring additional debt, effecting or preventing a merger, sale of assets or other corporate transaction and amending our articles of incorporation.

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

We incur significant costs associated with our public company reporting requirements and other rules implemented by the Securities and Exchange Commission. Compliance with such rules and regulations increases our administrative costs and make some activities more time-consuming and costlier as compared to our peers that are not subject to public company reporting requirements. 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 also must implement additional finance and accounting systems, procedures and controls to satisfy these reporting requirements. We will need to implement additional finance and accounting systems, procedures and controls to satisfy these reporting requirements. In addition, we hire additional legal and accounting staff and consultants to enable us to comply with 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 could limit our ability to realize our objectives.

Risks Related to the Company’s Operations

We derive substantially all of our revenue from one customer, the loss of which would have a material adverse effect on our business.

Approximately 90% of our 2022 revenue was generated from the USPS. The loss or reduction of business from this customer would have a material adverse effect on our business.

Economic conditions may adversely affect the USPS and its ability to remain solvent. The United States Government Accountability Office has in the past described the USPS’s financial condition as “deteriorating and unsustainable.” The USPS’s financial difficulties can negatively impact our results of operations and financial condition and our ability to comply with the covenants in our debt agreements, especially if the USPS were to delay or default on payments to us. 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.

There can be no assurance that our relationship with the USPS will continue as presently in effect. In 2021, the USPS announced its “Delivering for America” plan to transform the USPS. If we are not able to achieve its business objectives while adhering to the USPS’s initiatives under that plan, there would likely be a material adverse effect on our business, operating results and financial condition.

Additionally, our 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 us under one USPS contract can constitute a cross-default allowing the USPS to terminate some or all of our other contracts with the USPS. 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, our services by the USPS would have a material adverse effect on our business, operating results and financial condition. 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.

We have significant ongoing capital expenditure requirements. If we are unable to obtain additional capital on favorable terms or at all, we may not be able to execute on our business plans and our business, financial condition, results of operations, cash flows and prospects may be adversely affected. 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.

Our business is capital intensive. Capital expenditures focus primarily on equipment replacement and, to a lesser extent, facilities, equipment growth and investments in information technology. Its capital expenditures focus primarily on equipment replacement and, to a lesser extent, facilities, equipment growth, and investments in information technology. We also expect to devote substantial financial resources to grow our operations and fund our acquisition activities. As a result of our funding requirements, we may need to raise funds through the sale of additional equity or debt securities or seek additional financing through other arrangements to increase our cash resources. 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 us, if at all.

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

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

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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.

We may not make acquisitions in the future, which could impede growth, or if we do, we may not be successful in integrating any acquired businesses, either of which could have a material adverse effect on our business.

Historically, a key component of our growth strategy has been to pursue acquisitions of complementary businesses. Our growth could be impeded if we do not make any acquisitions. If we make acquisitions, we can make no assurances that we will be successful in negotiating, consummating or integrating the acquisitions. If we succeed in consummating future acquisitions, our business, financial condition and results of operations, may be materially adversely affected because:

some of the acquired businesses may not achieve anticipated revenue, earnings or cash flows;
we may assume liabilities that were not disclosed to us or otherwise exceed our estimates;
we may be unable to integrate acquired businesses successfully, or at all, and realize anticipated economic, operational and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical or financial problems;
acquisitions could disrupt our ongoing business, distract our management and divert our resources;
we may experience difficulties operating in markets in which we have had no or only limited direct experience;
we may incur transactions costs and acquisition-related integration costs;
we could lose customers, employees and drivers of any acquired company;
we may incur additional indebtedness; and
we may issue additional shares of EVO’s common stock, which would dilute the ownership of our then-existing stockholders.

Failure to successfully implement our cost and revenue initiatives could cause our future financial results to suffer.

We are implementing various cost and revenue initiatives to further increase our profitability, including advanced pricing analytics and revenue management tools, cross-selling to strategic accounts, process improvements, workforce productivity and further back-office optimization. If we are not able to successfully implement these cost and revenue initiatives, our future financial results may suffer.

Our business is affected by general economic and business risks that are largely beyond our control.

The trucking industry is cyclical and is dependent on a number of factors, many of which are beyond our control. We believe 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 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.

We are also subject to cost increases outside of our control that could materially reduce our profitability if we are unable to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver wages, subcontractor rates, interest rates, taxes, tolls, license and registration fees, insurance, equipment and healthcare for our employees.

Our 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 our operations. A significant interruption in the normal supply chain for equipment or parts could disrupt our operations, increase our costs and negatively impact our ability to serve our customers. 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.

Additional events outside of our control, such as strikes or other work stoppages at our 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 U.S. borders. Such events or enhanced security measures in connection with such events could impair our operating efficiency and productivity and result in higher operating costs. 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 our business and results of operations may suffer if we are unable to adequately address downward pricing and other competitive pressures.

We compete 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. We also compete with smaller, regional service providers that cover specific shipping lanes or that offer niche services. The Company also competes with smaller, regional service providers that cover specific shipping lanes or that offer niche services. Numerous competitive factors could impair our ability to maintain or improve profitability. Numerous competitive factors could impair the Company’s ability to maintain or improve its profitability. These factors include the following:

many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth in the economy, which may limit our ability to maintain or increase freight rates, may require us to reduce our freight rates or may limit our ability to maintain or expand our business;
some shippers, including the USPS, have reduced or may reduce the number of carriers they use by selecting core carriers as approved service providers and in some instances we may not be selected;
many customers, including the USPS, solicit bids from multiple carriers for their shipping needs, which may depress freight rates or result in a loss of business to competitors;
the continuing trend toward consolidation in the trucking industry may result in more large carriers with greater financial resources and other competitive advantages, and we may have difficulty competing with them;
advances in technology may require us to increase investments in our equipment and systems in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments;
we may have higher exposure to litigation risks as compared to smaller carriers; and
smaller carriers may build economies of scale with procurement aggregation providers, which may improve the smaller carriers’ abilities to compete with us.

Driver shortages and increases in driver compensation could adversely affect our profitability and ability to maintain or grow our business.

Driver shortages could require us to spend more to attract and retain drivers. The market for qualified drivers is intensely competitive, which may subject us to increased payments for driver compensation. 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, we may face difficulty maintaining or increasing our number of drivers. 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, we experience regular driver turnover, which requires us to continually recruit a substantial number of drivers in order to operate our existing equipment. 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 we are unable to continue to attract and retain a sufficient number of drivers, we 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 us, which could adversely affect our profitability and ability to maintain or grow our business. 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, design changes of new engines, future use of autonomous tractors and volatility in the value of used equipment could adversely affect our results of operations and cash flows.

We are subject to risk with respect to higher prices for new tractors and trailers. We have at times experienced an increase in prices for new tractors and trailers and the resale value of the tractors have not always increased to the same extent. Prices have increased and may continue to increase, due, in part, to (i) government regulations applicable to newly manufactured tractors and diesel engines, (ii) increases in commodity prices, (iii) shortages of component parts, such as semiconductors, and (iv) and due to the pricing discretion of equipment manufacturers in periods of high demand. Compliance with EPA regulations has increased the cost of our new tractors and could impair equipment productivity, result in lower fuel mileage and increase our operating expenses. These adverse effects, combined with the uncertainty as to the reliability of the vehicles equipped with the newly designed diesel engines and the residual values realized from the disposition of these vehicles, could increase our costs or otherwise materially adversely affect our business, financial condition and results of operations as the regulations become effective. Furthermore, future use of autonomous tractors could increase the price of new tractors and decrease the value of used non-autonomous tractors.

A depressed market for used equipment could require us to trade our revenue equipment at depressed values or to record losses on disposal or impairments of the carrying values of our revenue equipment that is not protected by residual value arrangements. Used equipment prices are subject to substantial fluctuations based on freight demand, supply of new and used equipment,

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availability and terms of financing, the presence of buyers for export to foreign countries and commodity prices for scrap metal. If there is a deterioration of resale prices, it could have a material adverse effect on our business, financial condition and results of operations. We have seen a softening of the used equipment market recently.

Certain of our revenue equipment financing arrangements have balloon payments at the end of the finance terms equal to the values we expect to be able to obtain in the used market. To the extent the used market values are lower than such balloon payments, we may be forced to sell the equipment at a loss and our results of operations would be materially adversely affected.

Insurance and claims expenses could significantly reduce our profitability.

We are exposed to claims related to cargo loss and damage, property damage, personal injury, workers’ compensation, group health and group dental. We have insurance coverage with third-party insurance carriers, but we assume a significant portion of the risk associated with these claims due to our self-insured retention and deductibles, which can make our insurance and claims expense higher or more volatile. 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, we face the risks of increasing premiums and collateral requirements and the risk of carriers or underwriters leaving the transportation sector, which may materially affect our insurance costs or make insurance more difficult to find, as well as increase our collateral requirements. 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. We could experience increases in our insurance premiums in the future if we decide to increase our coverage or if our claims experience deteriorates.

In addition, we are 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 our insurance or claims expense increases, and we are unable to offset the increase with higher freight rates, our results of operations could be materially and adversely affected. 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. Our results of operations may also be materially and adversely affected if we experience a claim in excess of our coverage limits, a claim for which coverage is not provided or a covered claim for which our insurance company fails to perform. 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.

If we are required to accrue or pay additional amounts because claims prove to be more severe than our recorded liabilities, our financial condition and results of operations may be materially adversely affected.

We accrue the costs of the uninsured portion of pending claims based on estimates derived from our evaluation of the nature and severity of individual claims and an estimate of future claims development based upon historical claims development trends. Actual settlement of our retained claim liabilities could differ from our estimates due to a number of uncertainties, including evaluation of severity, legal costs and claims that have been incurred but not reported. Due to our high retained amounts, we have significant exposure to fluctuations in the number and severity of claims. If we are required to accrue or pay additional amounts because our estimates are revised or the claims ultimately prove to be more severe than originally assessed, our financial condition and results of operations may be materially adversely affected.

We face litigation risks that could have a material adverse effect on the operation of our business.

Our business is subject to the risk of litigation by employees, applicants, subcontractors, customers, vendors, government agencies, stockholders and other parties through private actions, class actions, administrative proceedings, regulatory actions and other processes. We and our peers are subject to lawsuits alleging violations of various federal and state wage and hour laws regarding, among other things, minimum wage, meal and rest periods, overtime eligibility and failure to pay for all hours worked. A number of these lawsuits have resulted in the payment of substantial settlements or damages by other carriers.

The cost to defend, settle and resolve litigation may be significant. Not all claims are covered by our insurance (including wage and hour claims), and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our retention amounts, or cause increases in future premiums, the resulting expenses could have a material adverse effect on our business, financial condition and results of operations.

We may be subject, and have been subject in the past, to litigation resulting from trucking accidents. The number and severity of litigation claims may be worsened by distracted driving by both truck drivers and other motorists. These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or damages and increases of our insurance costs.

We rely significantly on our information technology systems, a disruption, failure or security breach of which or an inability to keep pace with technological advances could have a material adverse effect on our business.

We rely on information technology throughout all areas of our business to initiate, track and complete deliveries; process financial and nonfinancial data; compile results of operations for internal and external reporting; and achieve operating efficiencies and growth. Each of our information technology systems may be susceptible to various interruptions, including equipment or network failures, failed upgrades or replacement of software, user error, power outages, natural disasters, cyber-attacks, theft or misuse of data, terrorist attacks, computer viruses, hackers, or other security breaches. We may in the future experience security breaches and other interruptions of our information technology systems despite our best efforts to prevent

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them. Our efforts to mitigate exposure to these risks through the establishment and maintenance of technology security programs and disaster recovery plans may not be sufficient. A significant disruption, failure or security breach in our information technology systems, or those of our technology and communications services vendors, could have a material adverse effect on our business, which could include operational disruptions, loss of confidential information, external reporting delays or errors, legal claims or damage to our business reputation.

We also could experience an inability to keep pace with technological advances, resulting in our information technology platforms becoming obsolete or our competitors developing related or similar service offerings more effective than ours. Furthermore, we make strategic investments in technology that naturally entail risks and uncertainties, some of which are beyond our control. For example, we may not be able to derive value from strategic investments or we may incur higher than expected costs in realizing a return on such investments or overestimate the benefits that we receive or realize from such investments. Therefore, we cannot provide assurance that any of our strategic investments will generate anticipated financial returns. If our strategic investments fail to meet our expectations, our business and results of operations may be adversely impacted.

In addition, we are currently dependent on a single vendor platform to support certain information technology functions. If the stability or capability of such vendor is compromised and we were forced to migrate to a new platform, it could materially adversely affect our business, financial condition and results of operations.

Some of our employees work remotely, which may increase the cybersecurity risks to our business, including an increased demand for information technology resources, increased risk of phishing, and other cybersecurity attacks.

We have, and will continue to have, a portion of our employee population that works from home full-time or under flexible work arrangements, and we have provided associates with expanded remote network access options which enable them to work outside of our corporate infrastructure and, in some cases, use their own personal devices, which exposes us to additional cybersecurity risks. Our employees working remotely may expose us to cybersecurity risks through: (i) unauthorized access to sensitive information as a result of increased remote access, including our employees’ use of Company-owned and personal devices and videoconferencing functions and applications to remotely handle, access, discuss, or transmit confidential information, (ii) increased exposure to phishing and other scams as cybercriminals may, among other things, install malicious software on our systems and equipment and access sensitive information, and (iii) violation of international, federal or state-specific privacy laws. We believe that the increased number of employees working remotely has incrementally increased our cyber risk profile, but we are unable to predict the extent or impacts of those risks at this time. A significant disruption of our information technology systems, unauthorized access to or loss of confidential information, or legal claims resulting from our violation of privacy laws could each have a material adverse effect on our business.

Our agreements with subcontracted operators expose us to risks that we do not face with our company drivers.

We rely, in part, upon independent subcontractors to perform the services for which we contract with customers. Our reliance on subcontractors creates numerous risks for our business. If our subcontractors fail to meet our contractual obligations or otherwise fail to perform in a manner consistent with our requirements, we may be required to utilize alternative service providers at potentially higher prices or with some degree of disruption of the services that we provide to customers. If we fail to deliver on time, if our contractual obligations are not otherwise met, or if the costs of our services increase, then our profitability and customer relationships could be harmed. 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 our subcontractors are affected by conditions and events that are beyond our control and may also be beyond their control. Adverse changes in the financial condition of the subcontractors or increases in their equipment or operating costs could cause them to seek higher revenues or to cease their business relationships with us. 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 we charge our customers could be impacted by such issues, which may in turn limit pricing flexibility with customers, resulting in fewer customer contracts and decreasing our revenues. 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.

If one of our subcontractors is subject to negative publicity, it could reflect on us and have a material adverse effect on our business, brand and financial performance. Under certain laws, we could also be subject to allegations of liability for the activities of our subcontractors. Under certain laws, the Company could also be subject to allegations of liability for the activities of its sub-contractors.

Subcontractors are third-party service providers, as compared to company drivers who are employed by us. As independent business owners, the subcontractors may make business or personnel decisions that conflict with our best interests. As independent business owners, the Company’s sub-contractors may make business or personnel 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 subcontractor may deny loads of freight from time to time. In these circumstances, we must be able to timely deliver the freight in order to maintain relationships with our customers. In these circumstances, the Company must be able to timely deliver the freight in order to maintain relationships with customers.

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If our employees were to unionize, our operating costs could increase and our ability to compete could be impaired.

None of our employees are currently represented under a collective bargaining agreement; however, we always face the risk that our 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 our business and our relationship with employees, including actions that could substantially liberalize the procedures for union organization. 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. In addition, we 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. 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. We believe the applicability of the SCA to our employees reduces the likelihood of organizational activity.

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

restrictive work rules could hamper our efforts to improve and sustain operating efficiency and could impair our service reputation and limit our ability to provide next-day services;
a strike or work stoppage could negatively impact our profitability and could damage customer and employee relationships; and
an election and bargaining process could divert management’s time and attention from our overall objectives and impose significant expenses.

Higher health care costs and labor costs could adversely affect our financial condition and results of operations.

With the passage in 2010 of the United States Patient Protection and Affordable Care Act (the “PPACA”), we are required to provide health care benefits to all full-time employees who 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. Additionally, some states and localities have passed 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 health care plans offered by us 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 we offer, we will have difficulty attracting and retaining employees, including drivers. 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 our health care coverage costs and could materially adversely affect our financial condition and results of operations. 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.

Seasonality and the impact of weather and other catastrophic events adversely affect our trucking operations and profitability.

Our 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 adverse road conditions that creates higher accident frequency, increased accident claims and higher cold weather-related equipment maintenance and repair expenditures. 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. We may also 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 our assets or the assets of our customers or otherwise adversely affect the business or financial condition of our customers, any of which could adversely affect our results or make our results more volatile. 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 COVID-19 pandemic, other similar outbreaks and government responses thereto may have a material adverse impact on our business, financial condition and results of operations.

The continued spread and impact of novel coronavirus (“COVID-19”) and government responses thereto 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:

our revenue may be reduced due to a decrease in demand for our services or the transportation markets in general as a result of the global economic downturn;
our operations may be disrupted or impaired if a significant portion of our drivers or other employees are unable to work due to illness;

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we may experience a loss of business or increased costs resulting from supply chain disruptions and changing transportation needs caused by the nationwide emergency response to the pandemic;
we may experience workforce issues and incur severance payments as a result of adjusting our workforce to market conditions, and we may subsequently experience retention issues and driver shortages;
our management may be distracted as they are focused on mitigating the effects of COVID-19 on our business operations while protecting the health of our workforce, which has required, and will continue to require, a large investment of time and resources; and
we may be at greater risk for cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current and continuing environment of remote connectivity.

The extent to which the COVID-19 pandemic impacts us 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 our 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 we provide the USPS were deemed “essential” such that we were required to continue operations during “lockdowns” and similar restrictive measures limiting business activity generally. 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 modified our business practices for the continued health and safety of our employees. Specifically, we implemented measures to enhance the sanitization process of our equipment and properties, increased the social distancing of our employees by working remotely where possible, and provided driving associates with personal protective equipment (“PPE”). Specifically, we 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.

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.

We may be adversely affected by fluctuations in the price or availability of diesel fuel and gasoline.

Fuel is one of our largest operating expenses. Fuel prices fluctuate greatly due to factors beyond our 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. 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 our operations are dependent upon fuel, significant fuel cost increases, shortages or supply disruptions could materially and adversely affect our results of operations and financial condition. 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 our customers generally reimburse us for fuel expenses, the calculations of those reimbursements typically lag the change in the Department of Energy's fuel index. 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 our fuel costs as fuel prices fluctuate. As a result, those reimbursements might be for amounts lower than the Company's fuel costs as fuel prices fluctuate.

Costs associated with our use of natural gas vehicles (“NGVs”) could exceed the related benefits that we are able to realize, which could adversely affect our results of operations and cash flows.

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.

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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 Regulatory and Governmental Matters

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 our results of operations and profitability.

We operate in the United States pursuant to operating authority granted by the DOT. We, along with our leased labor drivers, must also comply with governmental regulations regarding safety, equipment, environmental protection and operating methods. 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. We may become subject to new or more restrictive regulations relating to such matters that may require changes in our operating practices, influence the demand for transportation services or require us to incur significant additional costs. 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:

increasingly stringent environmental laws and regulations, including changes intended to address fuel efficiency and greenhouse gas emissions that are attributed to climate change;
restrictions, taxes or other controls on emissions;
regulation specific to the energy market and logistics providers to the industry;
changes in the hours-of-service regulations, which govern the amount of time a driver may drive in any specific period;
driver and vehicle electronic logging device requirements;
requirements leading to accelerated purchases of new tractors, trucks or trailers;
mandatory limits on vehicle weight and size;
driver hiring restrictions;
increased bonding or insurance requirements; and
security requirements imposed by the DHS.

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 our or our subcontracted providers’ operating costs, require capital expenditures or adversely impact the recruitment of drivers. In addition, we could lose revenue if our customers divert business from us because we have not complied with their sustainability guidelines or requirements. 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 our relationships with our customers and our ability to maintain or grow our fleet, either of which could have a material adverse effect on our results of operations and profitability.

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 action. The FMCSA issues three categories of safety ratings: satisfactory, conditional and unsatisfactory. As of December 31, 2022, all DOT operating authority numbers operated by us currently have a “satisfactory” FMCSA rating. As of December 31, 2020, all DOT operating authority numbers operated by the Company currently have a “satisfactory” FMCSA rating.

Our CSA scores are dependent upon our 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, our 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 our CSA scores could be adversely affected. If we receive an unacceptable CSA score, our relationships with customers could be damaged, which could result in a loss of business or otherwise adversely affect our business. 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.

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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 us, our fleet could be ranked poorly as compared to our peers, and our safety rating could be adversely impacted. 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 our customers to direct their business away from us and to carriers with better fleet safety rankings, either of which would adversely affect our results of operations and productivity. 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, we may incur greater than expected expenses in our attempts to improve our scores as a result of poor rankings. 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 our 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 our results of operations and profitability.

We are subject to environmental and worker health and safety laws and regulations that may expose us to significant costs and liabilities and have a material adverse effect on our results of operations, competitive position and financial condition.

We are 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 our vehicles (including engine idling) and facilities, the health and safety of our workers in conducting operations and adverse impacts to the environment. Under certain environmental laws, we could be subject to strict liability, without regard to fault or legality of conduct, for costs relating to contamination at we own or operate or previously owned or operated and at third-party sites where we disposed of waste, as well as costs associated with the clean-up of releases arising from accidents involving our vehicles. 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. We often operate 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 we may incur remedial or other environmental liabilities. 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. We also maintain aboveground fuel storage tanks at some of our facilities and vehicle maintenance operations at certain of our facilities. The Company also maintains aboveground fuel storage tanks at some of its facilities and vehicle maintenance operations at certain of its facilities. Our 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. 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 us. 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 our operating expenses. 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 our equipment and otherwise affect the economics of our 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 may idle. These restrictions could require us to alter our drivers’ behavior, purchase on-board power units that do not require the engine to idle or face a decrease in productivity. 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. We are also subject to potentially stringent rulemaking related to sustainability practices, including conservation of resources by decreasing fuel consumption. The Company is also subject to potentially stringent rulemaking related to sustainability practices, including conservation of resources by decreasing fuel consumption. This increased focus on sustainability practices may result in new regulations and/or customer requirements that could adversely impact our business. Historically, our environmental compliance costs have not had a material adverse effect on our 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 our business and operating results. 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 we have operational spills or accidents or if we are found to be in violation of, or otherwise liable under, environmental or worker health or safety laws or regulations, we 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 our 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 our business, financial condition, results of operations, cash flows or prospects.

16


If our subcontractors are deemed by regulators or judicial process to be employees, our business and results of operations could be adversely affected.

Tax and other regulatory authorities have in the past sought to assert that subcontractors 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 our subcontractors are determined to be employees, we 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. 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.

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.

Risks Related to Our Securities

Shares of EVO's common stock are thinly-traded on OTC-Expert, and our stockholders may be unable to sell their shares.

The shares of EVO’s common stock are thinly-traded on OTC-Expert, meaning that the number of persons interested in purchasing our shares of common stock at or near ask prices at any given time may be relatively small or non-existent. There can be no assurance that a broader or more active trading market will ever develop or, if developed, that it will be sustained. There can be no assurance that EVO’s stockholders will ever be able to resell their shares at or near ask prices or at all. There can be no assurance that the Company’s stockholders will ever be able to resell their shares.

The price of EVO's common stock could be highly volatile.

EVO’s common stock will be subject to price volatility, low volumes of trades and large spreads in bid and ask prices quoted by market makers. Due to the low volume of shares traded on any trading day, persons buying or selling in relatively small quantities may easily influence prices of EVO’s common stock. This low volume of trades could also cause the price of our stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of EVO’s common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. If high spreads between the bid and ask prices of EVO’s common stock exist at the time of a purchase, the stock would have to appreciate substantially on a relative percentage basis for an investor to recoup their investment. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of EVO’s common stock. No assurance can be given that an active market in EVO’s common stock will develop or be sustained. If an active market does not develop, holders of EVO’s common stock may be unable to readily sell the shares they hold or may not be able to sell their shares at all.

EVO’s 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.

EVO's 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 EVO's 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. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to 16 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 EVO's common stock and may severely and adversely affect the ability of broker-dealers to sell EVO's common stock. 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.

17


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 EVO's 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:

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting of Section 404(b) of the Sarbanes-Oxley Act;
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We cannot predict whether investors will find EVO's common stock less attractive if we rely on these exemptions. If some investors find EVO's common stock less attractive as a result, we will experience greater difficulty raising equity capital, there may be a less active trading market for EVO's common stock, and the stock price may be more volatile. If some investors find our common stock less attractive as a result, we will experience greater difficulty 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 EVO's common stock which would reduce investors’ ownership interests in EVO and which may dilute EVO's share value.

EVO's certificate of incorporation authorizes the issuance of 610,000,000 shares consisting of: (i) 600,000,000 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 EVO's 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 EVO's common stock.

EVO'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 us in a manner that might result in a premium price to stockholders.

EVO’s board of directors, without any action by its stockholders, may amend EVO’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 EVO 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 EVO’s common stock. For example, the Series C Preferred Stock authorized by the board of directors in March 2022 and the Series D Preferred Stock authorized by the board of directors in July 2022 rank senior in preference and priority to EVO'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. See Part II, Item 8, Notes to Consolidated Financial Statements, Note 1, Description of Business and Summary of Significant Accounting Policies. The Series C Preferred Stock and the Series D 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 EVO’s common stock. The Series A Preferred stock, Series B Preferred stock, and Series C 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.

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Item 1B. Unresolved Staff Comments.

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

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