Arcimoto Annual Report 2018

FY2018 Annual Report · Arcimoto
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2018 Annual Report

Included in the 2018 Annual Report:
Form 10-K ﬁ  led with the U.S. Securities and Exchange Commission on
March 29, 2019

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________

FORM 10-K
__________________________

(Mark One)
(cid:54) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the ﬁ scal year ended: December 31, 2018

OR

(cid:133) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 001-38213
__________________________
ARCIMOTO, INC.
(Exact name of registrant as speciﬁ ed in its charter)
__________________________

Oregon
(State or other jurisdiction of 
incorporation or organization)

26-1449404
(IRS Employer 
Identiﬁcation No.)

2034 West 2nd Avenue, Eugene, OR 97402
(Address of principal executive offi  ces and zip code)

(541) 683-6293
(Registrant’s telephone number, including area code)

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

Title of each class
Common Stock, no par value

Name of each exchange of which registered
NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act:
None
__________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁ ned in Rule 405 of the Securities Act. Yes (cid:133) No (cid:54)

Indicate by check mark if the registrant is not required to ﬁ le reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:54)

Indicate by check mark whether the registrant (1) has ﬁ led all reports required to be ﬁ led by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 
preceding 12 months (or for such shorter period that the registrant was required to ﬁ led such reports), and (2) has been subject to such ﬁ ling requirements for the 
past 90 days. Yes (cid:54) No (cid:133)

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation 
S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such ﬁ les).Yes (cid:54) No (cid:133)

Indicate by check mark if disclosure of delinquent ﬁ lers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant’s 
knowledge, in deﬁ nitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:54)

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

Large accelerated ﬁ ler (cid:133)
Non-accelerated ﬁ ler (cid:55)

Accelerated ﬁ ler (cid:133)
Smaller reporting company (cid:55)
Emerging growth company (cid:55)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 
ﬁ nancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133)

Indicate by check mark whether the registrant is a shell company (as deﬁ ned in Rule 12b-2 of the Exchange Act). Yes (cid:133) No (cid:54)

The aggregate market value of the registrant’s common stock held by non-affi  liates of the registrant on June 30, 2018 (based on the closing sale price of $4.26 
per share on that date), was approximately $30,710,000. Common stock held by each offi  cer and director and by each person known to the registrant who owned 
10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affi  liates. This determination of affi  liate status is not 
necessarily conclusive determination for other purposes.

The number of shares of the registrant’s common stock outstanding as of March 29, 2019, was 16,338,765.

Portions of the registrant’s deﬁ nitive Proxy Statement for its 2018 Annual Meeting of Stockholders currently scheduled to be held on May 11, 2019 are incorporated 
by reference into Part III hereof.

DOCUMENTS INCORPORATED BY REFERENCE

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Arcimoto, Inc.

FORM 10-K
For the Annual Period Ended December 31, 2018

TABLE OF CONTENTS

PART I.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Business  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Properties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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21
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PART II.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases 

Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.

of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . 
Quantitative and Qualitative Disclosures About Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Changes in and Disagreements With Accountants on Accounting and Financial 

Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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27
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PART III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Security Ownership of Certain Beneﬁcial Owners and Management and 

Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . 
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Item 15.
Item 16.

Exhibits, Financial Statement Schedules  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Form 10-K Summary  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

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PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements.” Forward-looking statements include, but 
are  not  limited  to,  statements  that  express  our  intentions,  beliefs,  expectations,  strategies,  predictions  or  any  other 
statements relating to our future activities or other future events or conditions. These statements are based on current 
expectations, estimates and projections about our business based, in part, on assumptions made by management. These 
statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are diffi  cult 
to predict. Therefore, actual outcomes and results may, and are likely to, diff er materially from what is expressed or 
forecasted in the forward-looking statements due to numerous factors discussed from time to time in this report and in 
other documents which we ﬁ le with the SEC. In addition, such statements could be aff ected by risks and uncertainties 
related to:

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our ability to generate suffi  cient cash ﬂ ow during the fourth quarter of 2019 to fund our capital expenditure 
requirements and continue operations;

our ability to identify ﬁ nancing sources in the short term on terms favorable to our Company;

our  ability  to  manage  the  distribution  channels  for  our  products,  including  our  ability  to  successfully 
implement  our  rental  strategy,  direct  to  consumer  distribution  strategy  and  any  additional  distribution 
strategies we may deem appropriate;

our ability to maintain quality control over our vehicles and avoid material vehicle recalls;

the number of reservations and cancellations for our vehicles and our ability to deliver on those reservations;

our ability to eff ectively execute our business plan and growth strategy;

unforeseen or recurring operational problems at our facility, or a catastrophic loss of our manufacturing 
facility;

our dependence on our suppliers;

the volatility of our stock price;

changes in consumer demand for, and acceptance of, our products;

overall  strength  and  stability  of  general  economic  conditions  and  of  the  automotive  industry  more 
speciﬁ cally, both in the United States and globally;

changes in the competitive environment, including adoption of technologies and products that compete 
with our products;

our ability to generate consistent revenues;

our ability to design, produce and market our vehicles;

our reliance on key personnel;

changes in the price of oil and electricity;

changes in laws or regulations governing our business and operations;

our ability to identify ﬁ nancing sources in the short term on terms favorable to our Company;

the number of reservations and cancellations for our vehicles and our ability to deliver on those reservations;

our ability to obtain and protect our existing intellectual property protections including patents;

changes in accounting principles, or their application or interpretation, and our ability to make estimates 
and the assumptions underlying the estimates, which could have an eff ect on earnings;

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interest rates and the credit markets;

our ability to maintain our NASDAQ Capital Market listing;

costs and risks associated with litigation; and

other risks described from time to time in periodic and current reports that we ﬁ le with the SEC.

The foregoing list does not contain all of the risks and uncertainties. Any forward-looking statements speak only as of 
the date on which they are made, and except as may be required under applicable securities laws; we do not undertake 
any obligation to update any forward-looking statement to reﬂ ect events or circumstances after the ﬁ ling date 
of this report.

Item 1. Business

Overview

Arcimoto’s mission is to catalyze the shift to a sustainable transportation system. Since our incorporation, we have been 
engaged primarily in the design, development and pre-production of ultra-effi  cient three-wheeled electric vehicles. 
Arcimoto was formed on November 21, 2007 as WTP Incorporated, an Oregon Corporation, and later changed its 
name to Arcimoto, Inc.

We  went  public  in  September  2017,  following  the  conclusion  of  a Tier  2  Regulation A  stock  off ering  that  netted 
$18.1 million, after off ering costs. Our shares are listed on the Nasdaq Capital Market under the ticker symbol ‘FUV.’

Thesis

Current automotive platforms are ineffi  cient by design. Cars can weigh upwards of 4,000 lbs., take up on average almost 
50 square feet of space on the road and when parked, and are way overcapacity for vast majority of daily transportation 
tasks — those involving one or two people, traveling a relatively short distance, with a relatively small amount of stuff .

Arcimoto develops and manufactures products tuned for the actual utility needs of everyday driving. By doing so, we aim 
to deliver meaningfully more effi  cient solutions to the market, at a fraction of the total cost of ownership of today’s cars.

Platform and Technologies

Arcimoto  spent  its  ﬁ rst  decade  developing  and  reﬁ ning  eight  generations  of  a  new  three-wheeled  electric  vehicle 
platform — a light-footprint, nimble reverse-trike architecture that features a low center of gravity for stability on the 
road, dual-motor front wheel drive for enhanced traction, can park three to a space while carrying two large adults 
comfortably, and is more effi  cient, by an order of magnitude, than today’s cars.

Products

Arcimoto is currently developing three vehicle products based on the Arcimoto Platform: the Fun Utility Vehicle® 
(FUV®), the Rapid Responder™, and the Deliverator™. While intended to serve very diff erent market segments, an 
estimated 90% of the constituent parts are the same between our three initial products.

Fun Utility Vehicle

Arcimoto’s  ﬂ agship  product  is  the  Fun  Utility  Vehicle.  The  FUV  delivers  a  thrilling  ride  experience,  exceptional 
maneuverability, comfort for two passengers with gear, rockstar parking (three to a space), and ultra-effi  cient operation, 
all at an aff ordable price. Over time, we anticipate off ering the FUV with several option packages to meet the needs of a 
variety of customers. As of December 31, 2018, we had 3,217 pre-orders for production FUVs, representing an increase 
of 983, or 44%, from the 2,234 pre-orders as of December 31, 2017. As of March 29, 2019, we had 3,883 pre-orders.

Evergreen Edition

Arcimoto plans to enter the market with the Evergreen Edition FUV. We are leading with a consumer product, because we 
are a consumer-ﬁ rst brand. We believe individuals should be able to choose more effi  cient, more aff ordable, and lighter 
footprint mobility solutions, so that more of us can participate in the transition to sustainable transportation future.

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We began taking non-refundable $5,000 reservation payments from our pre-order customers in Oregon, California, 
and Washington for our ﬁ rst Retail Series FUV off ering, the Evergreen Edition, in February of 2019. The Evergreen 
Edition is priced at $19,900 with a set options package, targeted to begin production in Q2 2019. As of the end of Q1, 
we have conﬁ rmed reservations for our planned Q2 production capacity of 100 Evergreen Edition FUVs, and have 
begun taking reservations for Q3 production.

Rapid Responder

The  Rapid  Responder  was  announced  on  February  15,  2019. The  pure-electric  Rapid  Responder  is  developed  on 
the Arcimoto platform, and designed for specialized emergency, security and law enforcement services at a fraction 
of the cost and environmental impact of traditional combustion vehicles. The Rapid Responder aims to deliver ﬁ rst 
responders to incidents more quickly and aff ordably than traditional emergency response vehicles.

Initially  targeting  the  50,000  ﬁ re  stations  across  the  United  States  that  use  traditional  ﬁ re  engines  and  large 
automobiles to respond to calls, Arcimoto plans to market the Rapid Responder as a solution for campus security and 
law enforcement applications as well.

Arcimoto  has  agreed  in  principle  to  test  the  Rapid  Responder  in  pilot  programs  with  the  City  of  Eugene,  the 
Eugene-Springﬁ eld Fire Department, and the city of Eastvale, California. We anticipate that the ﬁ rst production Rapid 
Responders will be delivered in 2020.

Deliverator

Development of the Deliverator (“It Delivers!”) was offi  cially announced on March 19, 2019 with the reveal of the 
ﬁ rst Deliverator prototype.

The Deliverator is a pure electric, last-mile delivery solution designed to more quickly, effi  ciently, and aff ordably get 
goods where they need to go. We plan for the Deliverator to be customizable to carry a wide array of products, from 
pizza, groceries and cold goods to the 65 billion parcels delivered worldwide annually.

We anticipate that the ﬁ rst production Deliverators will be delivered in 2020.

Autonomous Arcimoto

Our long term goal is to off er the market one of the lowest cost, most effi  cient “last mile” human and goods transport 
solutions for the robotically-driven world. Because the platform electronics are capable of taking drive, brake and steer 
commands “by wire,” we intend that our platform will provide a ready foundation for self-driving technology deployment.

Sales and Distribution Model

Arcimoto’s sales and distribution model is direct. Once we are in retail production, our customers will place vehicle 
orders on our website, and the vehicle product will be delivered directly to the end user via common carrier or our own 
delivery ﬂ eet.

We plan to deliver the initial Evergreen FUVs to customers in the three west coast states of Washington, Oregon and 
California. Once Retail Series production is underway, we plan to progress to nation-wide distribution.

Rental Franchise Model

We plan to augment this direct web purchase process with small-footprint experience rental in select key markets. 
This rental model will give prospective customers a direct experience with the physical product before purchasing. 
Furthermore, this rental model is easily franchisable, giving individuals and small business owners the opportunity 
to  operate  their  own  rental  location. Arcimoto  has  contracted  a  franchise  consultant  ﬁ rm,  and  with  their  help  has 
completed the Franchise Disclosure Document, allowing us to dialogue with interested parties.

On  October  27,  2018,  we  opened  our  ﬁ rst  customer  experience  and  rental  location  in  Eugene,  Oregon  and  took 
possession of a second rental location in the Gaslamp District in San Diego, California. We used the Eugene rental 
facility primarily as a test bed for developing the rental operations. The Eugene rental facility allowed prospective 
customers to rent an FUV without the pressures typical of the traditional sales process. We learned a great deal from 

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this short-term test that we believe will help us reﬁ ne our rental operations in preparation for a planned reopening of 
the Eugene rental facility and launch of the San Diego rental operation after Retail FUV production has commenced.

Service and Warranty

We are pursuing three diff erent models for service of the FUV:

Service-on-demand.  Our  initial  model  is  on-demand  and  on-site  vehicle  service  by  Arcimoto  technicians  or 
Arcimoto-authorized technicians. Service-on-demand will likely be the primary model during our West Coast release 
as the majority of the vehicles will be geographically located relatively near the factory. We intend for customers to 
request service either through the Arcimoto mobile app or by calling a 24hr service number.

In-market partnership.  We are currently reviewing potential partners located in our key distribution regions.

Retail facility service.  We plan to employ Arcimoto service technicians at some of our rental locations. Customers 
near those rental locations would be able to deliver their vehicle to that location for service needs.

Warranty.  We will begin recording warranty reserves with the commencement of Retail Series production of the 
FUV in the second quarter of 2019. We plan to provide a warranty, based on the warranty in eff ect at the time of 
purchase, which will generally include certain production powertrain components and battery pack sales. We plan to 
accrue warranty reserves at the time a vehicle or powertrain component is delivered to the customer. Warranty reserves 
will include management’s best estimate of the projected cost to repair or to replace any items under warranty, based 
on  actual  warranty  experience  as  it  becomes  available  and  other  known  factors  that  may  impact  our  evaluation  of 
historical data. We will review our reserves quarterly to ensure that our accruals are adequate in meeting expected 
future  warranty  obligations,  and  we  will  adjust  our  estimates  as  needed.  Warranty  expense  will  be  recorded  as  a 
component of cost of revenues in the statement of operations. The portion of the warranty provision which is expected 
to be incurred within 12 months from the balance sheet date will be classiﬁ ed as current, while the remaining amount 
will be classiﬁ ed as long-term liabilities.

Facility

In October 2017, we took possession of our new factory, the AMP, and immediately began retroﬁ tting the space. In 
December  2017,  all  employees  relocated  to  the  new  site  and  we  began  operations  there. To  make  the  new  factory 
usable for our purposes, we updated the building with brighter energy effi  cient lighting, polished the production ﬂ oor 
to improve cleanliness, painted to increase light levels, remodeled the employee facilities and commenced installation 
of the manufacturing equipment. The majority of our manufacturing equipment, key for reducing cost of most sheet 
and tube metal parts on the FUV, was in place by mid-2018. Further, we enclosed approximately 8,000 square feet 
of loading dock area at the AMP to create a well-organized materials space with four truck loading bays, improving 
inventory management.

During the 4th quarter of 2018 we remodeled a 5,700 square foot inventory warehouse located across the street into 
useable offi  ce spaces and moved non-manufacturing personnel into these new offi  ces in order to free up production 
space in the AMP.

Governmental Programs, Incentives and Regulations

Many governmental standards and regulations relating to safety, fuel economy, emissions control, noise control, vehicle 
recycling, substances of concern, vehicle damage, recall, and theft prevention are applicable to new motor vehicles, 
engines, and equipment manufactured for sale in the United States, Europe, and elsewhere. In addition, manufacturing 
and other vehicle assembly facilities in the United States, Europe, and elsewhere are subject to stringent standards 
regulating air emissions, water discharges, and the handling and disposal of hazardous substances. In addition, the 
regulations in this area are constantly evolving, especially with the entry of new vehicles into the market.

Some of the signiﬁ cant standards and regulations aff ecting Arcimoto are discussed below:

Motor Vehicle Safety

The National Highway Traffi  c Safety Administration (the “NHTSA”) deﬁ nes a motorcycle as “a motor vehicle with 
motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in 

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contact with the ground.” In order for a manufacturer to sell motorcycles in the United States, the manufacturer has to 
self-certify to meet a certain set of regulatory requirements promulgated by the NHTSA in its Federal Motor Vehicle 
Safety Standards.

In 2018, Arcimoto developed an internal regulatory compliance team to ensure that the FUV production vehicles will 
meet Federal Motor Vehicle Safety Standards requirements for motorcycles.

Regulatory compliance and safety issues discovered during 2018 were ﬁ led in NHTSA recalls.

EPA certiﬁ cation

Although  Arcimoto’s  products  are  built  on  a  zero  emission  vehicle  platform,  the  EPA  requires  standard  vehicle 
effi  ciency metrics be communicated to consumers, regardless of the vehicle’s drive train. Arcimoto plans to complete 
EPA effi  ciency testing in Q2, in order to meet the requirements for market entry of Arcimoto’s Evergreen FUV.

Electromagnetic Compatibility

The Federal Communications Commission (FCC) is the federal agency responsible for implementing and enforcing the 
communications law and regulations, including title 47 of the Code of Federal Regulations, speciﬁ cally Part 15, which 
regulates unlicensed radio-frequency transmissions, both intentional and unintentional. With very few exceptions, all 
electronics devices must be reviewed to comply with Part 15 before they can be advertised or sold in the US market. 
In 2018, Arcimoto developed an internal regulatory compliance team to ensure that the FUV production vehicles will 
meet these regulatory requirements. Arcimoto has successfully completed over 90% of all required electromagnetic 
compatibility testing and plans to complete this testing and demonstrate full compliance in Q2, in order to meet the 
requirements for market entry of Arcimoto’s Evergreen FUV.

Motor Vehicle Manufacturer and Dealer Regulation

As with helmet laws and driver license requirements, state laws that regulate the manufacture, distribution, and sale 
of motor vehicles are a patchwork, nationwide. Where Arcimoto is allowed by statute to be recognized as a dealer, 
Arcimoto plans to open its own retail distribution facilities or services. For customers living in states where Arcimoto 
is prohibited from selling directly from within the state, we plan to consummate sales at facilities in Oregon and deliver 
the vehicle to the end user via common carrier.

Arcimoto is registered as a manufacturer in Oregon, and California, and as a dealer in Oregon and has applied for a 
dealer license in California.

Franchise Laws for Rental Operations

Arcimoto’s approach to in-market experience relies on prospective customers renting Fun Utility Vehicles. As such, 
we plan to open Company-owned sites, as well as off er independent franchise rental operations. We have prepared 
Franchise  Disclosure  Documentation,  have  approval  in  30  states  and  have  applications  pending  in  3  states  for  the 
ability to sell franchises within those states. We are currently approved for franchise sales in Florida, Rhode Island, 
Texas and all 27 non-registration states.

State Tax Credits

The state of Oregon passed a tax credit qualifying the Arcimoto for both a $2,500 tax credit for purchasing qualiﬁ ed 
electric vehicles and an additional $2,500 tax credit if the purchaser’s annual income is below a certain threshold. We 
anticipate that the state of California may off er a tax credit of $900 or more for the purchase of Arcimoto vehicles.

We will continue to advocate that state legislatures and regulators include Arcimoto’s aff ordable, ultra-effi  cient vehicles 
in their clean vehicle incentive programs.

Federal Tax Credits

Arcimoto is part of a coalition of U.S. electric motorcycle manufacturers who are encouraging the Federal government 
to  extend  the  expired  10%  electric  motorcycle  tax  credit,  and  expand  that  credit  to  include  three-wheeled  electric 
motorcycles as well.

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Operator’s License and Helmet Requirements

State regulations regarding operator licensing and occupant helmet requirements are currently a nationwide patchwork 
with regard to three-wheeled vehicles. While the strong majority of states have some form of exemption from helmet 
and motorcycle license requirements for three-wheeled vehicles, the speciﬁ c wording of each state’s statute may or 
may not include Arcimoto platform vehicles. For example, in our initial market states of California and Oregon, three 
wheeled vehicles that are “fully enclosed” or “enclosed cab” are exempt from helmet and motorcycle endorsement 
requirements.  Washington’s  helmet  law,  by  contrast,  requires  compliance  with  rollover  safety  regulations  and  the 
presence of a steering wheel to exempt riders.

Arcimoto’s advocacy strategy is to work with state legislatures to advocate the normalization of these rules to reduce 
consumer confusion in the marketplace that comes from conﬂ icting state-by-state regulations.

Pollution Control Costs

We are required to comply with stationary source air pollution, water pollution, and hazardous waste control standards 
that are now in eff ect or are scheduled to come into eff ect with respect to our manufacturing operations.

Intellectual Property

Patents

Our  policy  is  to  protect  our  competitive  position  by,  among  other  methods,  ﬁ ling  patent  applications  to  protect 
technology  and  improvements  that  we  consider  important  to  the  development  of  our  business. We  have  generated 
several patents and expect this portfolio to continue to grow as we actively pursue additional technological innovation. 
As of December 31, 2018, we have ﬁ ve issued utility patents, including three patents covering novel aspects of the 
vehicle architecture expiring in 2031 and 2035, one patent covering a vehicle battery system expiring in 2035, and 
one patent covering Arcimoto’s novel dual-motor gearbox design expiring in 2035. The USPTO sent us a Notice of 
Allowance for a fourth utility patent covering the advances made to the platform through the current model FUV and 
expiring in 2035. We ﬁ led an additional non-provisional utility patent application covering advances in the dual-motor 
gearbox.  We  expect  that  the  U.S.  Patent  Offi  ce  will  issue  at  least  two  additional  patents  in  the  ﬁ rst  half  of  2019 
relating to improvements in battery systems and vehicle powertrains. At present, Arcimoto has three additional patent 
applications undergoing examination that relate to a diverse range of vehicle systems, including electrical, powertrain, 
and the overall vehicle platform.

In  addition  to  this  intellectual  property,  we  also  rely  on  our  proprietary  knowledge  and  ongoing  technological 
innovation to develop a competitive position in the market for our products. Each of these patents, patent applications, 
and know-how are integral to the conduct of our business, the loss of any of which could have a material adverse eff ect 
on our business.

Trademarks

We own several trademarks that contribute to the identity and recognition of Arcimoto and its products. Certain of 
these marks are integral to the conduct of our business, a loss of any of which could have a material adverse eff ect on 
our business. We have registered the following with the United States Patent and Trademark Offi  ce:

“The Everyday Electric” (mark consisting of standard characters without claim to any particular font, style, size or 
color) — registered on October 23, 2012, Registration number 4230594

“SRK” (mark consisting of standard characters without claim to any particular font, style, size or color) — registered 
on July 16, 2013, Registration number: 4369026

“ARCIMOTO”  (mark  consisting  of  standard  characters  without  claim  to  any  particular  font,  style,  size  or 
color) — registered on May 15, 2018, Registration number: 5467285

“FUV” (mark consisting of standard characters without claim to any particular font, style, size or color) — registration 
applied for, no conﬂ icting marks noted on offi  ce action received. Registration Number: 87166994. Statement of Use 
ﬁ led on August 31, 2017.

6

“Fun  Utility  Vehicle”  (mark  consisting  of  standard  characters  without  claim  to  any  particular  font,  style,  size  or 
color) — registration applied for, no conﬂ icting marks noted on offi  ce action received. Registration Number: 87260318. 
Statement of Use ﬁ led on August 31, 2017.

Segment Information

We operate as one reportable segment which is the design, development, manufacturing and sales of electric vehicles.

Employees

As of December 31, 2018, we had 67 full-time employees and 3 part-time employees. None of our employees are 
represented by a labor union, and we consider our current relations with our employees to be good.

Geographic Areas

We operate solely in the United States. As such, we held substantially all our assets and generated all our revenue in 
the United States during the ﬁ scal year ended December 31, 2018.

Corporate Information

We were originally formed on November 21, 2007 as WTP Incorporated, an Oregon Corporation. On December 29, 
2011,  we  changed  our  name  to Arcimoto,  Inc.  Our  principal  executive  offi  ces  are  located  at  2034 West  2nd Ave., 
Eugene, Oregon 97402, and our phone number is (541) 683-6293. Our website address is www.arcimoto.com. The 
information on, or that can be accessed through, our website is not part of this report.

Executive Offi  cers

The following table sets forth information concerning our executive offi  cers as of March 29, 2019:

Name
Mark Frohnmayer
Douglas M. Campoli
Terry Becker

Age
44
55
58

Position
President, Chief Executive Officer and Chairman of the Board of Directors
Chief Financial Officer, Treasurer and Secretary
Chief Operating Officer and Director

Mark Frohnmayer — President, Chief Executive Offi  cer and Chairman of the Board of Directors

Mark  Frohnmayer  has  been  our  President,  Chief  Executive  Offi  cer  and  Chairman  of  our  board  of  directors  since 
our  founding  in  November  2007.  Previously,  he  was  one  of  the  founders  of  GarageGames.com,  Inc.,  a  software 
development company successfully sold to IAC, Inc. in 2007. Mr. Frohnmayer holds a B.S. in Electrical Engineering 
and Computer Science from UC Berkeley.

Douglas M. Campoli — Chief Financial Offi  cer, Treasurer and Secretary

Douglas M. Campoli has been our Chief Financial Offi  cer since June 2015. Prior to joining Arcimoto, he was the 
Founder of Strategic Financial Consulting from February 2013 to June 2015, providing ﬁ nancial consulting services 
for  startup  and  existing  businesses.  From  September  2012  to  September  2013,  Mr.  Campoli  was  Chief  Financial 
Offi  cer of ManaFuel, bringing energy independence to Paciﬁ c Island Nations. From May 2007 to February 2011, he 
was Chief Financial Offi  cer of GarageGames.com, Inc. From 2004 to May 2007, Mr. Campoli was Chief Financial 
Offi  cer of SeQuential Biofuels, Inc. Prior to 2004, he held various ﬁ nancial positions at Genuity Inc. (previously GTE 
Internetworking) and AT&T Paradyne Corp. Mr. Campoli holds a B.S. in Business and Finance from the University of 
South Florida and an M.B.A. with a concentration in Finance from the University of Tampa.

Terry Becker — Chief Operating Offi  cer and Director

Terry Becker has been a director since May 2015 and Chief Operating Offi  cer since September 2017. From February 
2014  to  September  2017,  Mr.  Becker  was  Director  of  Engineering  and  Global  Product  Support  at  Peterson  Paciﬁ c 
Corporation. Prior to that, from October 2012 to February 2014, Mr. Becker worked at Arcimoto as its Engineering, 
Manufacturing and Operations Manager. From December 2008 to September 2012, Mr. Becker was the Deputy Director 
of Operations for an AeroTech segment of John Bean Technologies Corporation. Mr. Becker holds an A.S. degree in 
engineering physics from Loma Linda University and a B.S.in Mechanical Engineering from Walla Walla University.

7

Item 1A. Risk Factors

Investing  in  our  common  stock  involves  a  high  degree  of  risk.  Investors  should  consider  carefully  the  risks  and 
uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including 
the  ﬁ nancial  statements  and  the  related  notes,  before  deciding  to  invest  in  shares  of  our  common  stock.  If  any  of 
the  following  risks  were  to  materialize,  our  business,  ﬁ nancial  condition,  results  of  operations,  and  future  growth 
prospects could be materially and adversely aff ected. In that event, the market price of our common stock could decline 
and investors could lose part or all of their investment in our common stock.

The notes to our ﬁ nancials for the ﬁ scal year ended December 31, 2018 and 2017 include an explanatory paragraph 
expressing substantial doubt as to our ability to continue as a going concern.

The  notes  accompanying  our  December  31,  2018  and  2017  audited  ﬁ nancial  statements  contain  an  explanatory 
paragraph  expressing  substantial  doubt  about  our  ability  to  continue  as  a  going  concern. The  ﬁ nancial  statements 
in this Annual Report on Form 10-K have been prepared “assuming that we will continue as a going concern.” Our 
ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately 
on generating future proﬁ table operations. There can be no assurance that we will be able to raise suffi  cient additional 
capital  or  eventually  have  positive  cash  ﬂ ow  from  operations  to  address  all  of  our  cash  ﬂ ow  needs.  If  we  are  not 
able to ﬁ nd alternative sources of cash, or generate positive cash ﬂ ow from operations, our operations business and 
shareholders may be materially and adversely aff ected.

We are an early stage company and have not yet generated signiﬁ cant revenues.

We have incurred a net loss in each year since our inception, have eleven years of operating history and have generated 
limited revenues since inception. Our limited operating history makes evaluating our business and future prospects 
diffi  cult  and  may  increase  the  risk  of  your  investment. Arcimoto  was  founded  in  2007,  and  we  have  only  recently 
started ﬁ nal regulatory testing of our vehicles. We do not expect to start small scale Retail Series production of the 
FUVs until the second quarter of 2019. Our vehicle requires signiﬁ cant investment prior to commercial introduction 
and may never be commercially successful.

Customer ﬁ nancing and insuring our vehicles may prove diffi  cult because retail lenders are unfamiliar with our 
vehicles and the vehicles do not have a loss history in the insurance industry.

Retail lenders are unfamiliar with our vehicles and may be hesitant to provide ﬁ nancing to our customers. Our vehicles 
do not have a loss history in the insurance industry which may cause our customers diffi  culty in securing insurance 
coverage. The  lack  of  loss  history  has  been  a  factor  in  the  Company’s  inability  to  secure  Supplemental  Liability 
Insurance for our rental customers.

Unforeseen or recurring operational problems at our facility, or a catastrophic loss of our manufacturing facility, 
may cause signiﬁ cant lost or delayed production and adversely aff ect our results of operations.

Our manufacturing process could be aff ected by operational problems that could impair our production capability and 
the timeframes within which we expect to produce our vehicles. Our manufacturing facility contains high cost and 
sophisticated machines that are used in our manufacturing process. Disruptions or shut downs at our facility could be 
caused by:

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• 

• 

• 

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• 

maintenance outages to conduct maintenance activities that cannot be performed safely during operations;

prolonged power failures or reductions;

breakdown, failure or substandard performance of any of our machines or other equipment;

noncompliance with, and liabilities related to, environmental requirements or permits;

disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads;

ﬁ res,  ﬂ oods,  snow  or  ice  storms,  earthquakes,  tornadoes,  hurricanes,  microbursts  or  other  catastrophic 
disasters, national emergencies, political unrest, war or terrorist activities; or

other operational problems.

8

If our manufacturing facility is compromised or shut down, it may experience prolonged startup periods, regardless of 
the reason for the compromise or shutdown. Those startup periods could range from several days to several weeks or 
longer, depending on the reason for the compromise or shutdown and other factors. Any disruption in operations at our 
facility could cause a signiﬁ cant loss of production, delays in our ability to produce our vehicles and adversely aff ect 
our results of operations and negatively impact our customers. Further, a catastrophic event could result in the loss of 
the use of all or a portion of our manufacturing facility. Although we carry property insurance, our coverage may not 
be adequate to compensate us for all losses that may occur. Any of these events individually or in the aggregate could 
have a material adverse eff ect on our business, ﬁ nancial condition and operating results.

We may not be able to obtain adequate ﬁ nancing to continue our operations.

The design, manufacture, sale and servicing of vehicles is a capital-intensive business. At December 31, 2018, our 
working capital was approximately $3,754,000, a decrease of approximately $9,594,000 from the comparable period 
in 2017. We have previously raised funds through equity investment, convertible and non-convertible notes to meet our 
cash needs, but there is no guarantee that we will be able to raise enough additional capital in the short term to meet our 
ongoing cash requirements. Our need to raise additional funds to sustain operations and reach our vehicle production 
goals is dependent on how quickly we can secure ﬁ nancing and reduce the cost of our vehicles. We may raise additional 
funds through the issuance of equity, equity-related, or debt securities or through obtaining credit from government or 
ﬁ nancial institutions. We cannot assure anyone that we will be able to raise additional funds when needed. We cannot 
be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise 
additional funds when we need them, we will be unable to continue operations.

We may not have an adequate number of shares of common stock authorized to enable us to complete future equity 
ﬁ nancing transactions, which may adversely aff ect our ability to raise the capital necessary to continue operations.

We  are  authorized  to  issue  20,000,000  shares  of  common  stock,  of  which  15,032,341  shares  were  outstanding  on 
December 31, 2018. At December 31, 2018, we had reserved 3,348,988 shares of common stock for issuance upon 
exercise of our outstanding options and warrants. In addition, at such date, we had 467,000 shares of our common 
stock reserved for future issuance under our 2018 Omnibus Stock Incentive Plan, 130,521 shares of our common stock 
reserved for future issuance under our 2015 Stock Incentive Plan, and 11,996 shares of our common stock reserved 
for future issuance under our Amended and Restated 2012 Employee Stock Beneﬁ t Plan. If all of these securities were 
exercised, the total number of shares of our common stock that we would be required to issue would be 3,962,839, 
which  in  addition  to  the  15,032,341  shares  outstanding,  would  leave  1,004,820  authorized  but  unissued  shares  of 
common stock.

As  a  result  of  our  limited  number  of  authorized  and  unissued  shares  of  common  stock,  we  may  have  insuffi  cient 
shares of common stock available to issue in connection with any future equity ﬁ nancing transactions we may seek 
to undertake. Until we increase the number of authorized shares available for issuance, we may not be able to raise 
additional capital, which may adversely aff ect our ability to continue operations.

If  we  are  unable  to  eff ectively  implement  or  manage  our  developing  growth  strategy,  our  operating  results  and 
ﬁ nancial condition could be materially and adversely aff ected.

As part of our developing growth strategy, we may modify our distribution channels and engage in strategic transactions 
with third parties to open rental locations, or open new retail, manufacturing, research or engineering facilities, expand 
our existing facility, add additional product lines or expand our businesses into new geographical markets. For example, 
we opened our ﬁ rst customer experience and rental location in Eugene, Oregon in October 2018. We used this location 
primarily as a test bed for developing the rental operations. We plan to reopen this location and possibly a second rental 
location in San Diego, California when retail production ramps up. Rental operations are an untested business model 
for us. There is a range of risks inherent in such a strategy that could adversely aff ect our ability to successfully achieve 
these objectives, including, but not limited to, the following:

• 

• 

our inability to pay the leasing costs associated with our rental facilities in the near term;

the  potential  failure  to  successfully  operate  rental  locations  (including  the  inability  to  obtain  suffi  cient 
types and amounts of insurance (e.g., customer supplemental liability) that would allow the rental industry 
to develop) or integrate a rental vehicle business into our existing infrastructure;

9

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

an inability to attract and retain the customers, employees, suppliers and/or marketing partners of a rental 
business;

the uncertainty that we may not be able to generate, anticipate or meet consumer demand;

the potential disruption of our business;

the increased scope and complexity of our operations could require signiﬁ cant attention from management 
and impose constraints on our operations or other projects;

inconsistencies between our standards, procedures and policies and those of new rental facilities and costs 
or ineffi  ciencies associated with the integration of our operational and administrative systems if necessary;

unforeseen expenses, delays or conditions, including the potential for increased regulatory compliance or 
other third-party approvals or consents, or provisions in contracts with third parties that could limit our 
ﬂ exibility to take certain actions;

the costs of compliance with local laws and regulations and the implementation of compliance processes, 
as well as the assumption of unexpected labilities, litigation, penalties or other enforcement actions;

the uncertainty that new product lines will generate anticipated sales;

the uncertainty that new rental or retail businesses will achieve anticipated operating results;

our cost reduction eff orts might not be successful;

the diffi  culty of managing the operations of a larger company; and

the diffi  culty of competing for growth opportunities with companies having greater ﬁ nancial resources 
than we have.

Any one of these factors could impair our growth strategy, result in delays, increased costs or decreases in the amount 
of expected revenues derived from our growth strategy and could adversely impact our prospects, business, ﬁ nancial 
condition or results of operations.

We depend on our senior management team, and the loss of one or more key employees or an inability to attract and 
retain highly skilled employees could adversely aff ect our business.

Our  success  depends  largely  upon  the  continued  services  of  our  key  executive  offi  cers  and  other  employees.  We 
also rely on our leadership team in the areas of ﬁ nance, research and development, marketing, services, and general 
and administrative functions, and on mission-critical individual contributors in sales and research and development. 
From time to time, there may be changes in our executive management team resulting from the hiring or departure of 
executives, which could disrupt our business.

None of our key employees is bound by an employment agreement for any speciﬁ c term and we may not be able to 
successfully attract and retain senior leadership necessary to grow our business. Our future success depends upon our 
ability to attract and retain executive offi  cers and other key technology, sales, marketing, engineering, manufacturing 
and support personnel and any failure to do so could adversely impact our business, prospects, ﬁ nancial condition and 
operating results.

To continue to execute our growth strategy, we also must attract and retain highly skilled personnel. Competition is 
intense for sales people and for engineers with high levels of experience in designing and developing electric vehicles. 
The pool of qualiﬁ ed personnel with engineering or manufacturing experience and/or experience working with the 
electric vehicle market is limited overall and speciﬁ cally in Eugene, Oregon, where our principal offi  ce is located. In 
addition, many of the companies with which we compete for experienced personnel have greater resources than we 
have and are located in metropolitan areas that may attract more qualiﬁ ed workers.

In addition, in making employment decisions, particularly in high-technology industries, job candidates often consider 
the  value  of  the  equity  awards  they  are  to  receive  in  connection  with  their  employment. Volatility  in  the  price  of 
our stock might, therefore, adversely aff ect our ability to attract or retain highly skilled personnel. Furthermore, the 
requirement to expense certain stock awards might discourage us from granting the size or type of stock awards that 

10

job candidates require to join us. If we fail to attract new personnel or fail to retain and motivate our current personnel, 
our business and future growth prospects could be severely harmed.

Recent political trends in the United States have created new uncertainty regarding the continuation of the ATVMLP.

Recent announcements regarding budgeting and appropriations from the federal government have created uncertainty 
regarding whether the Advanced Technology Vehicles Manufacturing Loan Program (the “ATVMLP”) will continue to 
exist in its current form. We intend to submit an application to the ATVMLP in the second half of 2019. The ATVMLP 
program  provides  for  low-cost  loans  that  can  be  used  to  reequip,  expand,  or  establish  manufacturing  facilities  for 
advanced technology vehicles in the United States. There is no guarantee that we would receive such a loan and are 
not dependent on receiving such a loan. If we do not receive ﬁ nancing under the ATVMLP, we may be required to seek 
ﬁ nancing from other sources at terms that are not as favorable to us.

Future disruptive new technologies could have a negative eff ect on our business.

We are subject to the risk of future disruptive technologies. If new vehicle technologies (electric or otherwise) develop 
that are superior to our vehicles, or are perceived to be superior by consumers, it could have a material adverse eff ect 
on us.

The  markets  in  which  we  operate  are  highly  competitive,  and  we  may  not  be  successful  in  competing  in  these 
industries. We currently face competition from new and established domestic and international competitors and 
expect to face competition from others in the future, including competition from companies with new technology.

The worldwide vehicle market, particularly for alternative fuel vehicles, is highly competitive today and we expect 
it will become even more so in the future. There is no assurance that our vehicles will be successful in the respective 
markets in which they compete. Many established automobile manufacturers such as Audi, BMW, Daimler, General 
Motors, Tesla, Toyota  and Volvo,  as  well  as  other  newer  companies  such  as  Elio,  Sondors  and  Electra  Meccanica, 
have entered or are reported to have plans to enter the alternative fuel vehicle market, including hybrid, plug-in hybrid 
and fully electric vehicles. In some cases, such competitors have announced an intention to produce electric vehicles 
exclusively now or at some point in the future. Most of our current and potential competitors have signiﬁ cantly greater 
ﬁ nancial, technical, manufacturing, marketing, vehicle sales networks and other resources than we do and may be able 
to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of 
their products. Increased competition could result in lower vehicle unit sales, price reductions, revenue shortfalls, loss 
of customers and loss of market share, which could harm our business, prospects, ﬁ nancial condition and operating 
results.  Additionally,  industry  overcapacity  has  resulted  in  many  manufacturers  off ering  marketing  incentives  on 
vehicles in an attempt to maintain and grow market share; these incentives historically have included a combination of 
subsidized ﬁ nancing or leasing programs, price rebates, and other incentives. As a result, we are not necessarily able 
to set our prices to off set higher costs. Continuation of or increased excess capacity could have a substantial adverse 
eff ect on our ﬁ nancial condition and results of operations.

Our  success  is  dependent  upon  consumers’  willingness  to  adopt  three-wheeled,  tandem-seated  two-passenger 
vehicles.

If we cannot develop suffi  cient market demand for three-wheeled vehicles, we will not be successful. Factors that may 
inﬂ uence the acceptance of three-wheeled vehicles include:

• 

• 

• 

• 

• 

• 

• 

perceptions about three-wheeled vehicles’ comfort, quality, safety, design, performance and cost;

the availability of alternative fuel vehicles, including plug-in hybrid electric and all-electric vehicles;

improvements in the fuel economy and cost of service of the internal combustion engine;

uncertainties regarding insurance coverages for the vehicles

the environmental consciousness of consumers;

volatility in the cost of oil and gasoline; and

government  regulations  and  economic  incentives  promoting  fuel  effi  ciency  and  alternate  forms  of 
transportation.

11

We may experience lower-than-anticipated market acceptance of our vehicles.

Although we have conducted some market research regarding our electric vehicles and accumulated 3,217 pre-order 
reservation deposits as of December 31, 2018, many factors both within and outside our control, aff ect the success 
of new vehicles in the marketplace. At this time, it is diffi  cult to measure consumers’ willingness to adopt electric 
vehicles  as  a  mode  of  transportation,  particularly  three-wheeled  electric  vehicles.  Off ering  fuel-effi  cient  vehicles 
that  consumers  want  and  value  can  mitigate  the  risks  of  increasing  price  competition  and  declining  demand,  but 
vehicles that are perceived to be less desirable (whether in terms of price, quality, styling, safety, overall value, or 
other attributes) can exacerbate these risks. For example, if a new vehicle were to experience quality issues at the 
time of launch, the vehicle’s perceived quality could be aff ected even after the issues had been corrected, resulting 
in lower than anticipated sales volumes, market share, and proﬁ tability. Moreover, if a new vehicle is not accepted 
by consumers based on size, styling, or other attributes, we would experience lower than anticipated sales volumes, 
market share, and proﬁ tability.

Our distribution model may result in lower sales volumes.

Our present distribution model is diff erent from the distribution models used by other vehicle manufacturers, except 
for Tesla Motors. Like Tesla, we plan to sell vehicles directly to our customers over the internet or via Arcimoto-owned 
retail stores, rather than through traditional dealer franchises. This direct sales model may result in lower sales due to 
customer reluctance to rely on web-based vehicle purchasing. We are unable to evaluate the eff ectiveness of our present 
distribution model and it may result in lower or higher sales volumes, market share, and proﬁ tability.

Additionally, we may not be able to sell our vehicles through this sales model in each state in the United States as 
some states have laws that may be interpreted to impose limitations on the direct-to-consumer sales of our vehicles. 
The application of these state laws to our operations is diffi  cult to predict. Laws in some states will limit our ability to 
obtain dealer licenses from state motor vehicle regulators and may continue to do so in the future.

In addition, decisions by regulators permitting us to sell vehicles may be subject to challenges by dealer associations and 
others as to whether such decisions comply with applicable state motor vehicle industry laws. In similar circumstances, 
Tesla has prevailed in many of these lawsuits and such results reinforce our continuing belief that state laws were not 
designed to prevent our distribution model. In some states, there have also been regulatory and legislative eff orts by 
vehicle dealer associations to propose bills and regulations that, if enacted, would prevent us from obtaining dealer 
licenses in their states given our current sales model. A few states have passed legislation that clariﬁ es our ability to 
operate, but at the same time limits the number of dealer licenses we can obtain or stores that we can operate. Tesla 
has also ﬁ led a lawsuit in federal court in Michigan challenging the constitutionality of the state’s prohibition on direct 
sales as applied to its business which has a similar distribution model to our business.

Internationally, there may be laws of which we are unaware of in jurisdictions we wish to enter that may restrict our 
sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, 
diffi  cult to interpret and may change over time.

The  discovery  of  defects  in  vehicles  resulting  in  delays  in  new  model  launches,  recall  campaigns,  reputational 
damage, or increased warranty costs may negatively aff ect our business.

Meeting or exceeding many government-mandated safety standards is costly and often technologically challenging. 
Government safety standards also require manufacturers to remedy defects related to vehicle safety through safety 
recall campaigns, and a manufacturer is obligated to recall vehicles if it determines that the vehicles do not comply 
with  a  safety  standard.  Should  we  or  government  safety  regulators  determine  that  a  safety  or  other  defect  or  a 
noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch of such vehicle 
could be delayed until such defect is remedied. The costs associated with any protracted delay in new product launches 
necessary to remedy such defects, or the cost of recall campaigns or warranty costs to remedy such defects in vehicles 
that have been sold, could be substantial. Further, adverse publicity surrounding actual or alleged safety-related or 
other defects could damage our reputation and adversely aff ect sales of our vehicles.

12

We are dependent on our suppliers, the majority of which are single source suppliers, and the inability of these 
suppliers to deliver necessary components of our products in a timely manner at prices, quality levels, and volumes 
acceptable to us, or our inability to effi  ciently manage these components, could have a material adverse eff ect on 
our ﬁ nancial condition and operating results.

Our products contain numerous purchased parts which we source globally from multiple direct suppliers, the majority 
of  whom  are  currently  single  source  suppliers. Any  signiﬁ cant  unanticipated  demand  or  delays  with  our  suppliers 
could require us to procure additional components in a short amount of time, and in the past we have also replaced 
certain suppliers because of their failure to provide components that met our quality control standards. There is no 
assurance that we will be able to secure additional or alternative sources of supply or develop our own replacements 
for certain highly customized components of our products. If we encounter unexpected diffi  culties or delays with key 
suppliers, and if we are unable to ﬁ ll these needs from other suppliers, we could experience production delays and 
potential loss of access to important technology and parts for producing, servicing and supporting our products.

There is no assurance that suppliers will ultimately be able to meet our cost, quality and volume needs. Furthermore, 
as the scale of our vehicle production increases, we will need to accurately forecast, purchase, warehouse and transport 
to our manufacturing facilities components at much higher volumes than we have experience with. If we are unable 
to accurately match the timing and quantities of component purchases to our actual production plans or capabilities, 
or  successfully  implement  automation,  inventory  management  and  other  systems  to  accommodate  the  increased 
complexity in our supply chain, we may have to incur unexpected storage, transportation and write-off  costs, which 
could have a material adverse eff ect on our ﬁ nancial condition and operating results.

We  may  be  unable  to  accurately  forecast  our  vehicle  delivery  needs,  which  could  harm  our  business,  ﬁ nancial 
condition and results of operations.

Arcimoto plans to deliver vehicles to Oregon, Washington, and California via its internal transportation resources, 
primarily trucks and trailers. However, we anticipate that we will reach a point when utilizing a third party common 
carrier  for  vehicle  deliveries  will  become  a  necessity.  Because  of  the  signiﬁ cant  investment  in  equipment  and 
management  to  implement  a  third  party  common  carrier  vehicle  delivery  plan,  it  will  be  important  to  accurately 
forecast  vehicle  delivery  volumes  in  advance.  It  will  be  diffi  cult  to  predict,  especially  months  in  advance,  when 
our vehicle delivery volumes and geographic expansion will require using a third party common carrier for vehicle 
deliveries and if we miscalculate this timing, it could have a material adverse eff ect on our business, ﬁ nancial condition 
and results of operations.

Failure  to  maintain  the  strength  and  value  of  our  brand  could  have  a  material  adverse  eff ect  on  our  business, 
ﬁ nancial condition and results of operations.

Our success depends, in part, on the value and strength of our brand. Maintaining, enhancing, promoting and positioning 
our brand, particularly in new markets where we have limited brand recognition, will depend largely on the success 
of our marketing and merchandising eff orts and our ability to provide high-quality services, warranty plans, products 
and resources and a consistent, high-quality customer experience. Our brand could be adversely aff ected if we fail to 
achieve these objectives, if we fail to comply with laws and regulations, if we are subject to publicized litigation or 
if our public image or reputation were to be tarnished by negative publicity. Some of these risks may be beyond our 
ability to control, such as the eff ects of negative publicity regarding our suppliers or third party providers of services or 
negative publicity related to members of management. Any of these events could hurt our image, resulting in reduced 
demand  for  our  products  and  a  decrease  in  net  sales.  Further,  maintaining,  enhancing,  promoting  and  positioning 
our brands’ images may require us to make substantial investments in marketing and employee training, which could 
adversely aff ect our cash ﬂ ow and which may ultimately be unsuccessful. These factors could have a material adverse 
eff ect on our business, ﬁ nancial condition and results of operations.

We will be almost entirely dependent upon revenue generated from one product in the near-term, and our future 
success will be dependent upon our ability to design and achieve market acceptance of new vehicle models.

We currently have planned only one vehicle platform that can accept multiple models, which will be available with an 
open sided base model with options for doors, air conditioning, extended battery range and other options. In the near 

13

term, our revenues will be almost completely dependent on revenue generated from sales of the FUV vehicle, with 
some additional revenue coming from customization options and maintenance servicing. There can be no assurance 
that we will be able to design future models of vehicles, or develop future services, that will meet the expectations of 
our customers, or that our future models will become commercially viable.

In addition, historically, automobile customers have come to expect new and improved vehicle models to be introduced 
frequently. In order to meet these expectations, we may in the future be required to introduce on a regular basis new 
vehicle  models  as  well  as  enhanced  versions  of  existing  vehicle  models. As  technologies  change  in  the  future  for 
automobiles, we will be expected to upgrade or adapt our vehicles and introduce new models in order to continue 
to  provide  vehicles  with  the  latest  technology.  We  have  limited  experience  simultaneously  designing,  testing, 
manufacturing  and  selling  vehicles. To  date,  we  have  focused  our  business  on  the  development  of  a  low-cost  and 
high  effi  ciency  vehicle  and  have  targeted  a  relatively  narrow  consumer  group. We  will  need  to  address  additional 
markets and expand our customer demographic to further grow our business. Our failure to address additional market 
opportunities could materially harm our business, ﬁ nancial condition, operating results and prospects.

We have experienced in the past, and may experience in the future, signiﬁ cant delays or other complications in the 
design, manufacture, launch and production ramp of our vehicle, which could harm our brand, business, prospects, 
ﬁ nancial condition and operating results.

Having experienced past delays or complications suggests that we may experience future launch, manufacturing and 
production ramp delays or other complications in connection with our vehicles. For example, we may underestimate 
the amount of time necessary for regulatory testing and design changes or design changes necessary for automated 
production like robotic welding which would delay the production of our vehicles. While we continue to make progress 
resolving such early issues, it is diffi  cult to predict exactly how long it will take for all issues to be cleared or when 
further issues may arise. Any signiﬁ cant additional delay or other complication in the production of our vehicles or the 
development, manufacture, launch and production ramp of our future products, including complications associated 
with expanding our production capacity, supply chain or regulatory approvals, could materially damage our brand, 
business, prospects, ﬁ nancial condition and operating results.

Developments and improvements in alternative technologies such as hybrid engine or full electric vehicles or in the 
internal combustion engine or continued low retail gasoline prices may materially and adversely aff ect the demand 
for our three-wheeled vehicles.

Signiﬁ cant developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural 
gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely aff ect our 
business and prospects in ways that we do not currently anticipate. If alternative energy engines or low gasoline prices 
make existing four-wheeled vehicles with greater passenger and cargo capacities less expensive to operate, we may not 
be able to compete with manufacturers of such vehicles.

Legal, Regulatory and Litigation Risks

Increased safety, emissions, fuel economy, or other regulations may result in higher costs, cash expenditures, and/
or sales restrictions.

The motorized vehicle industry is governed by a substantial amount of government regulation, which often diff ers by 
state and region. Government regulation has arisen, and proposals for additional regulation are advanced, primarily 
out of concern for the environment, vehicle safety, and energy independence. In addition, many governments regulate 
local product content and/or impose import requirements as a means of creating jobs, protecting domestic producers, 
and inﬂ uencing the balance of payments. The cost to comply with existing government regulations is substantial, and 
future, additional regulations could have a substantial adverse impact on our ﬁ nancial condition.

Unusual or signiﬁ cant litigation, governmental investigations or adverse publicity arising out of alleged defects in 
our vehicles, or otherwise may derail our business.

Although we plan to comply with governmental safety regulations, mobile and stationary source emissions regulations, 
and other standards, compliance with governmental standards, does not necessarily prevent individual or class action 
lawsuits,  which  can  entail  signiﬁ cant  cost  and  risk.  In  certain  circumstances,  courts  may  permit  tort  claims  even 

14

when our vehicles comply with federal law and/or other applicable law. Furthermore, simply responding to actual or 
threatened litigation or government investigations of our compliance with regulatory standards, whether related to our 
vehicles or business or commercial relationships, may require signiﬁ cant expenditures of time and other resources. 
Litigation also is inherently uncertain, and we could experience signiﬁ cant adverse results if litigation is ever brought 
against us. In addition, adverse publicity surrounding an allegation of a defect, regulatory violation or other matter 
(with or without corresponding litigation or governmental investigation) may cause signiﬁ cant reputational harm that 
could have a signiﬁ cant adverse eff ect on our sales.

We may become subject to product liability claims, which could harm our ﬁ nancial condition and liquidity if we are 
not able to successfully defend or insure against such claims.

We may become subject to product liability claims, which could harm our business, prospects, operating results and 
ﬁ nancial condition. The motor vehicle industry experiences signiﬁ cant product liability claims and we face an inherent 
risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal 
injury or death. A successful product liability claim against us could require us to pay a substantial monetary award. 
Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and 
inhibit  or  prevent  commercialization  of  other  future  vehicle  candidates,  which  could  have  material  adverse  eff ect 
on  our  brand,  business,  prospects  and  operating  results. Any  lawsuit  seeking  signiﬁ cant  monetary  damages  either 
in excess of our liability coverage, or outside of our coverage, may have a material adverse eff ect on our reputation, 
business and ﬁ nancial condition. We may not be able to secure product liability insurance coverage on commercially 
acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced 
to make a claim under our policy.

Limited intellectual property protection may cause us to lose our competitive advantage and adversely aff ect our 
business.

We have been granted three utility patents, have been issued a Notice of Allowance on a fourth, and have ﬁ led four 
additional non-provisional utility patent applications that are currently pending. These patent applications and/or any 
patent applications we may ﬁ le in the future may not be successful. To date, we have relied on copyright, trademark and 
trade secret laws, as well as conﬁ dentiality procedures and licensing arrangements, to establish and protect intellectual 
property rights to our technologies and vehicles. We typically enter into conﬁ dentiality or license agreements with 
employees, consultants, consumers and vendors in an eff ort to control access to and distribution of technology, software, 
documentation and other information. Policing unauthorized use of this technology is diffi  cult and the steps taken may 
not prevent misappropriation of the technology. In addition, eff ective protection may be unavailable or limited in some 
jurisdictions outside the United States, Canada and the United Kingdom. Litigation may be necessary in the future to 
enforce or protect our rights or to determine the validity and scope of the rights of others. Such litigation could cause 
us to incur substantial costs and divert resources away from daily business, which in turn could materially adversely 
aff ect the business.

Our failure to obtain or maintain the right to use certain intellectual property may negatively aff ect our business.

Our future success and competitive position depends in part upon our ability to obtain or maintain certain proprietary 
intellectual  property  used  in  our  principal  products. This  may  be  achieved,  in  part,  by  prosecuting  claims  against 
others who we believe are infringing our rights and by defending claims of intellectual property infringement brought 
by others. In the future we may commence lawsuits against others if we believe they have infringed our rights, or we 
may become subject to lawsuits alleging that we have infringed the intellectual property rights of others. For example, 
to the extent that we have previously incorporated third-party technology and/or know-how into certain products for 
which we do not have suffi  cient license rights, we could incur substantial litigation costs, be forced to pay substantial 
damages or royalties, or even be forced to cease sales in the event any owner of such technology or know-how were to 
challenge our subsequent sale of such products (and any progeny thereof). In addition, to the extent that we discover 
or have discovered third-party patents that may be applicable to products or processes in development, we may need to 
take steps to avoid claims of possible infringement, including obtaining non-infringement or invalidity opinions and, 
when necessary, re-designing or re-engineering products. However, we cannot assure you that these precautions will 
allow us to successfully avoid infringement claims. Our involvement in intellectual property litigation could result in 
signiﬁ cant expense to us, adversely aff ect the development of sales of the challenged product or intellectual property 

15

and divert the eff orts of our technical and management personnel, whether or not such litigation is resolved in our 
favor. In the event of an adverse outcome in any such litigation, we may, among other things, be required to:

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• 

• 

• 

• 

pay substantial damages;

cease the development, manufacture, use, sale or importation of products that infringe upon other patented 
intellectual property;

expend signiﬁ cant resources to develop or acquire non-infringing intellectual property;

discontinue processes incorporating infringing technology; or

obtain licenses to the infringing intellectual property.

We may be aff ected by uncertainty over government purchase incentives.

Our vehicle cost thesis strongly beneﬁ ts from purchase incentives at the state and national government levels. The 
existence or lack of tax incentives will aff ect the adoption velocity of our products in the marketplace. An inability to 
take advantage of tax incentives may negatively aff ect our revenues.

Motor vehicles, like those produced by Arcimoto, are highly regulated and are subject to regulatory changes.

We  are  aware  that  the  National  Highway Transportation  Safety Administration  is  reviewing  whether  to  adopt  new 
safety regulations pertaining to three-wheeled motor vehicles. Currently, United States motorcycle regulations apply 
to such vehicles. New regulations could impact the design of our vehicles and our ability to produce vehicles, possibly 
negatively aff ecting our ﬁ nancial results. Additionally, state level regulations are inconsistent with regard to whether 
a  helmet  is  required  to  operate  an Arcimoto  vehicle.  Sales  may  be  negatively  impacted  should  any  state  alter  its 
requirements with regard to customer use of helmets.

Risks Related to our Common Stock

Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able 
to resell your shares at or above the price at which you purchase it.

The stock market generally, and our stock in particular, has experienced price and volume ﬂ uctuations. As a result of 
this volatility, you might not be able to sell your common stock at or above the price at which you purchase it. The 
public market for our stock is new. From our Regulation A Off ering on September 21, 2017 through December 31, 
2018, the per share trading price of our common stock has been as high as $6.35 and as low as $1.55. It might continue 
to ﬂ uctuate signiﬁ cantly in response to various factors, some of which are beyond our control. These factors include:

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

• 

changes to the electric car industry, including demand and regulations;

our ability to compete successfully against current and future competitors;

competitive pricing pressures;

our ability to obtain working capital ﬁ nancing;

additions or departures of key personnel;

sales of our common stock;

our ability to execute our growth strategy;

operating results that fall below expectations;

loss of any strategic relationship;

regulatory developments; and

economic and other external factors.

16

In addition, the stock market in general has experienced signiﬁ cant price and volume ﬂ uctuations that have often been 
unrelated or disproportionate to the operating performance of particular companies. These ﬂ uctuations might be even 
more  pronounced  in  the  new  trading  market  for  our  stock. Additionally,  securities  class  action  litigation  has  often 
been instituted against companies following periods of volatility in the overall market and in the market price of a 
company’s securities. This litigation, if instituted against us, could result in substantial costs, divert our management’s 
attention and resources, and harm our business, operating results, and ﬁ nancial condition. On March 11, 2018, we 
were served with a Summons Notice of case number: CGC-18-564904 John R Switzer vs W.R. Hambrecht & Co. 
LLC ET All including Arcimoto, Inc., its offi  cers and directors. On March 28, 2018, we were served with another 
lawsuit entitled Jay Mendelson v. Arcimoto, Inc. et al., case number CGC-18-565324. Please see “Part I. Item 3, Legal 
Proceedings” of this Annual Report on Form 10-K for more information.

We  may  not  be  able  to  satisfy  listing  requirements  of  the  NASDAQ  Capital  Market  to  maintain  a  listing  of  our 
common stock.

Our  common  stock  is  listed  on  the  NASDAQ  Capital  Market  and  we  must  meet  certain  ﬁ nancial,  liquidity  and 
governance criteria to maintain such listing. If we fail to meet any of NASDAQ Capital Market’s listing standards, 
our common stock may be delisted. In addition, our board of directors may determine that the cost of maintaining our 
listing on a national securities exchange outweighs the beneﬁ ts of such listing. A delisting of our common stock from 
the NASDAQ Capital Market may materially impair our stockholders’ ability to buy and sell our common stock and 
could have an adverse eff ect on the market price of, and the effi  ciency of the trading market for, our common stock. In 
addition, the delisting of our common stock could signiﬁ cantly impair our ability to raise capital.

As  a  smaller  reporting  company  and  as  an  emerging  growth  company,  we  are  exempt  from  certain  disclosure 
requirements, which could make our common stock less attractive to potential investors.

We currently and for the foreseeable future expect to be categized as a “smaller reporting company” and an “emerging 
growth company” under the U.S. federal securities laws.

As a smaller reporting company, we are exempt from certain disclosure requirements under those laws. For example, 
we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements; 
we  provide  only  two  years  of  ﬁ nancial  statements;  we  do  not  need  to  provide  the  table  of  selected  ﬁ nancial  data; 
and are not required to comply with Section 404(b) of the Sarbanes-Oxley Act, which requires our registered public 
accounting ﬁ rm to attest to the eff ectiveness of our internal control over ﬁ nancial reporting. As an emerging growth 
company, there are exemptions from reporting requirements similar to those applicable to a smaller reporting company. 
These and certain other “scaled” disclosure provisions under SEC rules for smaller reporting companies and emerging 
growth  companies  could  make  our  common  stock  less  attractive  to  potential  investors,  which  could  make  it  more 
diffi  cult for our stockholders to sell their shares.

Because of our status as a smaller reporting company and an emerging growth company, you will not be able to 
depend on any attestation from our independent registered public accounting ﬁ rm as to our internal control over 
ﬁ nancial reporting for the foreseeable future.

Our independent registered public accounting ﬁ rm will not be required to attest to the eff ectiveness of our internal control 
over ﬁ nancial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act until the later of the year following our 
ﬁ rst annual report required to be ﬁ led with the Commission, the date we are no longer an emerging growth company 
as deﬁ ned in the JOBS Act or the date we no longer qualify as a smaller reporting company. Accordingly, you will 
not be able to depend on any attestation concerning our internal control over ﬁ nancial reporting from our independent 
registered public accounting ﬁ rm for the foreseeable future.

We have not yet ﬁ nalized our internal controls policies and procedures over ﬁ nancial reporting.

We  believe  our  internal  controls  over  ﬁ nancial  reporting  are  robust  for  our  current  stage  of  development. As  we 
move into production, we will be developing and implementing new and more robust internal controls over ﬁ nancial 
reporting which is time consuming, costly, and complicated. These new control policies will include the appropriate 
amount of overhead to allocate to cost of goods sold. If we identify material weaknesses in our internal control over 
ﬁ nancial  reporting,  if  our  management  is  unable  to  assert,  when  required,  that  our  internal  control  over  ﬁ nancial 
reporting is eff ective, or if our independent registered public accounting ﬁ rm is unable to attest, when required, to 

17

the eff ectiveness of our internal control over ﬁ nancial reporting, investors may lose conﬁ dence in the accuracy and 
completeness of our ﬁ nancial reports and the market price of our common stock could be negatively aff ected, and we 
could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other 
regulatory authorities, which could require additional ﬁ nancial and management resources.

We incur increased costs as a result of operating as a listed public company and our management is required to 
devote substantial time to new compliance initiatives and corporate governance practices.

As  a  listed  public  company,  and  particularly  if  at  some  point  in  the  future  we  are  no  longer  an  emerging  growth 
company and a smaller reporting company, we incur signiﬁ cant legal, accounting and other expenses that we have 
not incurred in the past. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, 
the listing requirements of the NASDAQ Capital Market and other applicable securities rules and regulations impose 
various requirements on public companies. Our management and other personnel devote a substantial amount of time 
to compliance with these requirements. Moreover, these rules and regulations will increase our legal and ﬁ nancial 
compliance costs and will make some activities more time-consuming and costlier. For example, we expect that these 
rules and regulations may make it more diffi  cult and more expensive for us to obtain directors’ and offi  cers’ liability 
insurance, which could make it more diffi  cult for us to attract and retain qualiﬁ ed members of our board of directors. 
We cannot predict or estimate the amount of additional costs we will incur as a listed public company or the timing of 
such costs.

Our shares are thinly traded on the NASDAQ Capital Market and an active market may never develop.

There is a very limited trading market for our common stock and we cannot ensure that an active market will ever 
develop or be sustained. In addition, the price of our common stock may not reﬂ ect our actual or perceived value. 
There can be no assurance that there will be an active market for our shares of common stock in the future. The market 
liquidity will be dependent on the perception of our operating business, among other things. We may, in the future, take 
certain steps, including utilizing investor awareness campaigns, press releases, and conferences to increase awareness 
of our business and any steps that we might take to bring us to the awareness of investors may require we compensate 
consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results 
of any eff orts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate 
their investment or liquidate it at a price that reﬂ ects the value of the business and trading may be at an inﬂ ated price 
relative to the performance of our company due to, among other things, availability of sellers of our shares. Because 
there may be a low price for our shares of common stock, many brokerage ﬁ rms or clearing ﬁ rms may not be willing 
to eff ect transactions in the securities or accept our shares for deposit in an account. Even if an investor ﬁ nds a broker 
willing to eff ect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer 
fees, taxes, if any, and any other selling costs may exceed the selling price.

If our shares become subject to the penny stock rules, it would become more diffi  cult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny 
stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national 
securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price 
and volume information with respect to transactions in such securities is provided by the exchange or system. If we 
do not retain our listing on the NASDAQ Capital Market and if the price of our common stock is less than $5.00, our 
common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in 
a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing 
speciﬁ ed information. In addition, the penny stock rules require that before eff ecting any transaction in a penny stock 
not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock 
is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk 
disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy 
of a written suitability statement. These disclosure requirements may have the eff ect of reducing the trading activity 
in the secondary market for our common stock, and therefore stockholders may have diffi  culty selling their shares.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority, or FINRA, has 
adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable 

18

grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced 
securities to their non-institutional customers, broker-dealers must make reasonable eff orts to obtain information about 
the  customer’s  ﬁ nancial  status,  tax  status,  investment  objectives  and  other  information. The  FINRA  requirements 
may make it more diffi  cult for broker-dealers to recommend that their customers buy our common stock, which may 
have the eff ect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be 
willing to make a market in our common stock, reducing a stockholder’s ability to resell shares of our common stock.

The preparation of our ﬁ nancial statements involves the use of estimates, judgments and assumptions, and our 
ﬁ nancial statements may be materially aff ected if such estimates, judgments or assumptions prove to be inaccurate.

Financial statements prepared in accordance with accounting principles generally accepted in the United States of 
America,  or  “GAAP”,  typically  require  the  use  of  estimates,  judgments  and  assumptions  that  aff ect  the  reported 
amounts. Often, diff erent estimates, judgments and assumptions could reasonably be used that would have a material 
eff ect on such ﬁ nancial statements, and changes in these estimates, judgments and assumptions may occur from period 
to period over time. Signiﬁ cant areas of accounting requiring the application of management’s judgment include, but 
are not limited to, determining the fair value of assets and the timing and amount of cash ﬂ ows from assets. These 
estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong, we 
would face the risk that charges to income or other ﬁ nancial statement changes or adjustments would be required. Any 
such charges or changes could harm our business, including our ﬁ nancial condition and results of operations and the 
price of our securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” 
for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an 
understanding of our ﬁ nancial statements and our business.

We  have  not  paid  cash  dividends  in  the  past  and  do  not  expect  to  pay  dividends  in  the  future. Any  return  on 
investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. 
The  payment  of  dividends  on  our  common  stock  will  depend  on  earnings,  ﬁ nancial  condition  and  other  business 
and  economic  factors  aff ecting  us  at  such  time  as  our  board  of  directors  may  consider  relevant.  If  we  do  not  pay 
dividends, our common stock may be less valuable because a return on your investment will only occur if our stock 
price appreciates.

You will experience future dilution as a result of future equity off erings.

We may in the future off er additional shares of our common stock or other securities convertible into or exchangeable 
for our common stock. Although no assurances can be given that we will consummate a ﬁ nancing, in the event we do, 
or in the event we sell shares of common stock or other securities convertible into shares of our common stock in the 
future, additional and substantial dilution will occur. In addition, investors purchasing shares or other securities in the 
future could have rights superior to investors in prior off erings. Subsequent off erings at a lower price, often referred to 
as a “down round”, could result in additional dilution.

Future  issuances  of  debt  securities,  which  would  rank  senior  to  our  common  stock  upon  our  bankruptcy  or 
liquidation, and future issuances of preferred stock, which would rank senior to our common stock for the purposes 
of dividends and liquidating distributions, may adversely aff ect the level of return you may be able to achieve from 
an investment in our common stock.

In  the  future,  we  may  attempt  to  increase  our  capital  resources  by  off ering  debt  securities.  Upon  bankruptcy  or 
liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive 
distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if 
we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common 
stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to 
issue debt or preferred securities in any future off ering, or borrow money from lenders, will depend in part on market 
conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such 
future off erings or borrowings. Holders of our common stock must bear the risk that any future off erings we conduct 
or borrowings we make may adversely aff ect the level of return they may be able to achieve from an investment in our 
common stock.

19

Sales by our signiﬁ cant stockholders could have an adverse eff ect on the market price of our stock.

At least one of our stockholders, Mr. Frohnmayer, owns a signiﬁ cant amount of our common stock. If he were to 
sell all or a portion of his holdings of our common stock, the market price of our common stock could be negatively 
impacted. The eff ect of such sales, or of signiﬁ cant portions of our stock being off ered or made available for sale, could 
result in strong downward pressure on our stock price. Investors should be aware that they could experience signiﬁ cant 
short-term volatility in our stock if such stockholders decide to sell all or a portion of their holdings of our common 
stock at once or within a short period of time.

Provisions in our restated certiﬁ cate of incorporation and amended and restated bylaws and Oregon law might 
discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, 
depress the trading price of our common stock.

Provisions of our certiﬁ cate of incorporation and bylaws and Oregon law might discourage, delay, or prevent a merger, 
acquisition, or other change in control that stockholders consider favorable, including transactions in which you might 
otherwise receive a premium for your shares of our common stock. These provisions might also prevent or frustrate 
attempts by our stockholders to replace or remove our management. These provisions include:

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limitations on the ability of stockholders to call special meetings;

the inability of stockholders to cumulate votes at any election of directors; and

the ability of our board of directors to make, alter or repeal our bylaws.

Our  board  of  directors  has  the  ability  to  designate  the  terms  of  and  issue  new  series  of  preferred  stock  without 
stockholder  approval.  In  addition,  Section  60.835  and  Section  60.840  of  the  Oregon  Revised  Statutes  prohibits  a 
publicly held Oregon corporation from engaging in a business combination with an interested stockholder, generally 
a person which together with its affi  liates owns, or within the last three years has owned, 15% or more of our voting 
stock, at any time within the preceding three-year period, unless the business combination is approved in a prescribed 
manner.

The existence of the foregoing provisions and anti-takeover measures could limit the price that investors are willing 
to pay in the future for shares of our common stock. They could also deter potential acquirers of Arcimoto, thereby 
reducing the likelihood that you could receive a premium for your common stock in an acquisition.

If securities industry analysts do not publish additional research reports on us, or publish unfavorable reports on 
us, then the market price and market trading volume of our common stock could be negatively aff ected.

Any trading market for our common stock will be inﬂ uenced in part by any research reports that securities industry 
analysts publish about us. To date, we have been covered by four research analysts. We may not obtain any future 
research coverage by additional securities industry analysts. In the event we are covered by additional analysts, and one 
or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage on 
us, the market price and market trading volume of our common stock could be negatively aff ected.

A cybersecurity breach may adversely aff ect the Company’s reputation, revenue and earnings.

The Company and certain of its third-party service providers and vendors receive, store, and transmit digital personal 
information in connection with the Company’s human resources operations, ﬁ nancial services operations, e-commerce, 
rental franchise management, mobile applications, planned connected vehicle services off erings and other aspects of 
its  business. The  Company’s  information  systems,  and  those  of  its  third-party  service  providers  and  vendors,  are 
vulnerable to the continually evolving cybersecurity risks. The Company’s plan to off er connected vehicle services 
will heighten these risks. Unauthorized parties have attempted to and may attempt in the future to gain access to these 
systems or the information the Company and its third-party service providers and vendors maintain and use through 
fraud or other means of deceiving our employees and third-party service providers and vendors. Hardware, software or 
applications the Company develops or obtains from third-parties may contain defects in design or manufacture or other 
problems that could unexpectedly compromise information security and/or the Company’s operations. The methods 
used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may 
be diffi  cult to anticipate or detect. The Company has implemented and regularly reviews and updates processes and 
procedures to protect against unauthorized access to or use of secured data and to prevent data loss. However, the 

20

ever-evolving threats mean the Company and third-party service providers and vendors must continually evaluate and 
adapt systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security 
breaches or misuses of data. The Company has experienced information security attacks, but to date they have not 
materially compromised the Company’s computing environment or resulted in a material impact on the Company’s 
business or operations or the release of conﬁ dential information about employees, customers, franchisees, suppliers 
or other third parties. Any future signiﬁ cant compromise or breach of the Company’s data security, whether external 
or internal, or misuse of customer, employee, franchisee, supplier or Company data could result in disruption to the 
Company’s operations, signiﬁ cant costs, lost sales, ﬁ nes and lawsuits, and/or damage to the Company’s reputation. In 
addition, as the regulatory environment related to information security, data collection and use, and privacy becomes 
increasingly rigorous, with new and evolving requirements, compliance could also result in the Company being required 
to incur additional costs. The Company has mediated its ﬁ nancial exposure by securing cyber liability insurance.

Item 1B. Unresolved Staff  Comments

Not applicable to smaller reporting companies.

Item 2. Properties

On October 15, 2018, we re-negotiated a lease previously entered into as a month to month lease during June 2018, for 
a 5,291 square foot commercial industrial offi  ce space in Eugene, Oregon. The term of the lease is 60 months which 
began on October 15, 2018. Rent is $4,500 per month and subject to a 3% increase per year. The space is being used 
for manufacturing, offi  ce and general use.

On October 18, 2018, we entered into a lease for a 4,491 square foot space in San Diego, California. The term of 
the lease is 60 months which began on November 1, 2018. Base rent is $8,982 per month. A portion of the space is 
being used for Arcimoto’s California dealer showroom. On October 18, 2018, we sublet 65% of the premises to Hula 
Holdings, Inc. (“Hula”) which it expects to use as a rental center for FUVs, among other general retail, dispatching, 
parking and charging services for electric vehicles. Hula has agreed to pay the landlord 65% of the annual base rent 
and associated costs under the lease.

As of December 31, 2018, we occupied 1,700 square feet of offi  ce area, 32,000 square feet of warehouse space and 
125,000  square  feet  of  asphalt  paving  and  undeveloped  greenﬁ eld. The  space  is  under  lease  expiring  in  2021. We 
believe that our current facilities are suffi  cient for our needs. We may add other facilities or expand existing facilities 
as we expand our employee base and geographic markets in the future, and we believe that suitable additional space 
will be available as needed to accommodate any such expansion of our operations.

Item 3. Legal Proceedings

From time to time, we might become involved in lawsuits, claims, investigations, proceedings, and threats of litigation 
relating  to  intellectual  property,  commercial  arrangements  and  other  matters  arising  in  the  ordinary  course  of  our 
business. For information on our litigation matters, see “Litigation” under Note 11 of the Notes to Financial Statements 
included in Part I, Item 1 of this Annual Report on Form 10-K, which is incorporated by reference herein.

Item 4. Mine Safety Disclosures

Not applicable.

21

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

PART II

Securities

Stock

Arcimoto’s common stock trades on the Nasdaq Global Select Market under the symbol “FUV”.

Holders

As of March 22, 2019, there were approximately 3,525 holders of our common stock.

Dividends

To date, we have paid no dividends with respect to our common stock and we do not anticipate having the ability to 
do so for the foreseeable future.

Sales of Unregistered Securities

With the exception of the Class C preferred stock referenced below that was issued on November 15, 2018, there were 
no unregistered sales of equity securities during the quarter ended December 31, 2018. The shares of Class C preferred 
stock were issued to Mr. Frohnmayer as described below in reliance upon the exemption from registration set forth in 
Section 4(a)(2) of the Securities Act of 1933, as amended.

Share Repurchases

On November 15, 2018, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) with 
Mark Frohnmayer, the President, Chief Executive Offi  cer and Chairman of the Board of Directors of the Company. 
Pursuant to the Exchange Agreement, Mr. Frohnmayer exchanged 2,000,000 of his shares of Company common stock 
for 2,000,000 shares of the Company’s newly created Class C preferred stock. These Class C shares will automatically 
convert back to 2 million shares of common stock upon the ﬁ ling of an amendment to the Restated Articles of Arcimoto 
that increases the number of authorized shares of common stock. Except as otherwise required by law or expressly 
provided in the Related Articles, each share of Class C Preferred Stock has one vote for the election of directors and on 
all matters submitted to a vote of shareholders of Arcimoto. We are not obligated to redeem or repurchase any shares 
of Class C Preferred Stock. Shares of Class C Preferred Stock are not otherwise entitled to any redemption rights, or 
mandatory sinking fund or analogous fund provisions. This transaction was reported in a Current Report on Form 8-K 
ﬁ led on November 21, 2018, which by this reference is incorporated herein as if copied verbatim. There were no other 
repurchases of the Company’s equity securities during the fourth quarter of 2018 and there are no plans, approved or 
otherwise for additional purchases.

Item 6. Selected Financial Data

Not applicable to smaller reporting companies.

22

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

The following discussion and analysis of our ﬁ nancial condition and results of operations for the ﬁ scal year ended 
December 31, 2018, should be read together with our ﬁ nancial statements and related notes included elsewhere in this 
report. The following discussion contains “forward-looking statements” that reﬂ ect our future plans, estimates, beliefs 
and expected performance. Our actual results may diff er materially from those currently anticipated and expressed 
in  such  forward-looking  statements  as  a  result  of  a  number  of  factors. We  caution  that  assumptions,  expectations, 
projections, intentions or beliefs about future events may, and often do, vary from actual results and the diff erences can 
be material. Please see “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We design, develop, manufacture, sell and rent ultra-effi  cient fully electric vehicles. We achieved limited production 
of our ﬁ rst Signature Series vehicles at the end of 2017, with additional, limited Signature Series and Beta vehicle 
production in the 2018. We completed 23 Beta vehicles in 2018 and an additional 5 partial vehicles for testing. We 
anticipate completing 17 additional prototype vehicles in the ﬁ rst half of 2019, for testing of the remaining design 
changes prior to the production of Retail Series vehicles ramping up in 2019. We completed the ﬁ rst rental operations 
test in Eugene, Oregon. We used this location primarily as a test bed for developing the rental operations. We believe 
the rental strategy could turn a small footprint vehicle sales cost center into a revenue center where customers pay us 
for test driving our vehicles. Renting vehicles during the early phase of our development while vehicle production is 
constrained, could increase the potential revenue from each vehicle and create an ongoing revenue stream.

To execute our growth strategy, we will require signiﬁ cant additional funds going forward. No assurances can be made 
that we will be successful in raising the capital in the short term required to continue operations.

Management Opportunities, Challenges and Risks

Demand, Production and Capital

Demand for the Retail Series Arcimoto FUV has continued to increase. As of December 31, 2018, we had 3,217 FUV 
pre-orders with small refundable deposits, representing an increase of 983, or 44%, from the 2,234 pre-orders as of 
December 31, 2017. As of March 29, 2019, we had 3,883 pre-orders.

Although  we  initially  contemplated  producing  approximately  2,000  vehicles  in  the  eighteen  months  following  the 
closing  of  our  Regulation A  off ering,  management  decided  to  slow  the  rollout  of  FUVs  post-off ering  by  reducing 
the total number of vehicles produced in 2018. Our decision was based, in part, on the following factors that became 
apparent to us in the fourth quarter of 2017:

1. 

The substantial public support we received in our Regulation A off ering in September and October 2017 
allowed  us  to  begin  signiﬁ cant  portions  of  the  Phase  2  production  preparations  which  we  originally 
contemplated would not commence until twelve months after the closing of our Regulation A off ering. The 
Phase 2 manufacturing process requires additional up-front time to build out the manufacturing facility 
and redesign the FUV’s upper frame for robotic mass production. Because we anticipate proﬁ tability will 
only be achieved with the margins and volumes possible utilizing the Phase 2 automated manufacturing 
processes, limiting the number of vehicles built prior to these Phase 2 processes coming online, serves our 
commitment to capital effi  ciency.

2.  We experienced a delay in receiving key, single-source component parts from our suppliers of motors, 
motor controllers, and batteries that were expected in the fourth quarter 2017. Some of these materials 
were not received until the end of ﬁ rst quarter 2018. These supplier delays have continued throughout 
2018.

3. 

The manufacture of the ﬁ rst two Signature Series vehicles took longer than anticipated, due primarily to 
the ﬁ tting of body panel parts. We are using the knowledge we gleaned from the manufacturing processes 
used in the production of our ﬁ rst Signature Series and subsequent Beta vehicles to optimize and ﬁ nalize 
the design and manufacturing processes for the (A-Series) and Retail FUVs. As a venture that embraces 
continuous improvement, we strive to improve our designs and manufacturing processes.

23

We anticipate that achieving full Phase 2 Retail Series production will involve many factors and variables including, 
but not limited to, the scale production supply chain, vehicle design ﬁ nalization, regulatory testing, and key component 
robotic manufacture. We believe that the adjustments we have made to our plan to scale production more closely aligns 
each of these objectives and will enhance our chances to achieve proﬁ tability sooner than if we had stayed with the 
sequencing we originally contemplated.

Trends in Cash Flow, Capital Expenditures and Operating Expenses

We aim to complete an additional 17 vehicles for testing, 11 of which were completed in the ﬁ rst quarter of 2019. 
We aim to ramp up Retail Series production during 2019, starting with 100 vehicles in the second quarter. Given this 
plan, our capital expenditures, which are substantially complete, have included signiﬁ cant capital costs for the tooling, 
production equipment and construction of the FUV production line. However, as stated above, if we are unable to 
successfully raise suffi  cient additional capital to cover our ongoing operating expenses in the short term, we will not 
be able to continue operations.

Operating expenses grew by 229% for the year ended December 31, 2018, as compared to the year ended December 31, 
2017. This increase was driven by beginning the transformation of Arcimoto from a research and development (“R&D”) 
operation into a manufacturing company. The number of employees increased by 106%, from 34 as of December 31, 
2017 to 70 employees (67 full time and 3 part time) as of December 31, 2018. In December 2017, we moved into a new 
approximately 32,000 square foot facility from our previous 5,000 square foot facility. In June 2018, we added 5,291 
square feet of manufacturing and offi  ce space, and in October 2018, re-negotiated the lease for this space. As a result, 
we incurred costs associated with equipping the employees, implementing systems, and running the larger facilities. 
R&D costs increased during the year ended December 31, 2018, as we redesigned the FUV for automated production 
processes, and sales and marketing costs increased due to investor relations expenses associated with being a publicly 
traded company. General and administrative cost continues to increase as we build out manufacturing, service and 
regulatory processes and operate as a public company.

New Accounting Pronouncements

For  a  description  of  our  critical  accounting  policies  and  estimates,  please  refer  to  the  “Summary  of  Signiﬁ cant 
Accounting Policies” in Note 3 to our Financial Statements under Part I, Item 1 of this Annual Report on Form 10-K 
ﬁ led with the SEC on March 29, 2019.

Disclosure About Off -Balance Sheet Arrangements

We  do  not  have  any  outstanding  derivative  ﬁ nancial  instruments,  off -balance  sheet  guarantees,  interest  rate  swap 
transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in 
assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We 
do not have any variable interest in an unconsolidated entity that provides ﬁ nancing, liquidity, market risk or credit 
support to us or that engages in leasing, hedging or research and development services with us.

Critical Accounting Policies and Estimates

Our ﬁ nancial statements are prepared in accordance with GAAP. The preparation of these ﬁ nancial statements requires us 
to make estimates and assumptions that aff ect the reported amounts of assets, liabilities, revenues, costs and expenses and 
related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that 
we believe are reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur 
from period to period. Accordingly, actual results could diff er signiﬁ cantly from the estimates made by our management. 
We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material diff erences between 
these estimates and actual results, our future ﬁ nancial statement presentation, ﬁ nancial condition, results of operations 
and cash ﬂ ows will be aff ected. See Note 3 of the notes to the ﬁ nancial statements at December 31, 2018.

24

Results of Operations

Year ended December 31, 2018 versus year ended December 31, 2017

Revenues

During the years ended December 31, 2018 and 2017, we had revenues of $94,996 and $127,016, respectively. For 
2018  we  had  revenue  from  the  sale  of  our  vehicles  of  $84,000  none  of  which  was  with  related  parties.  We  also 
had revenue of $7,314 from machining and metal work services, $1,680 in vehicle rental income and $2,002 from 
merchandise sales during the year ended December 31, 2018. There was $2,436 in such revenue for the year ended 
December 31, 2017. We received no grant revenue during the year ended December 31, 2018.

During the year ended December 31, 2017, we had revenues of $127,016. Sources of revenue were $84,000 from 
the sale of our vehicles of which $42,000 was with a related party, and $2,436 from merchandise sales, and we also 
recognized grant revenue during the year ended December 31, 2017 amounting to $40,580. Revenue from grants are 
recognized in the period during which the condition under the grant have been met and we made payment for the 
related expense.

Operating Expenses

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of personnel costs for our engineering and research 
teams  and  prototyping  materials  expense.  R&D  expenses  for  the  year  ended  December  31,  2018  and  2017  were 
approximately  $3,815,000  and  $1,451,000,  respectively. The  primary  reason  for  the  increase  in  R&D  expenses  of 
$2,364,000, or 163%, resulted from an increase in engineering salaries and beneﬁ ts of approximately $1,685,000, an 
increase in tools and equipment expense of $290,000, and an increase in R&D materials expense of $400,000. The 
major  R&D  projects  during  2018  were  redesigning  the  vehicle  for  automated  mass  production,  adding  telematics 
capability,  improve  serviceability,  improve  effi  ciency  and  range,  and  ﬁ nal  regulatory  compliance  testing  which  is 
estimated to be completed by the end of May 2019. If this testing is not completed on time it will delay the start of 
retail production and the recognition of sales and revenue. Additional R&D projects performed in 2018 included the 
redesign and testing of electronic componentry for mass production and robustness, tooling and test machining of the 
proprietary gearbox for producibility and subsequent testing of performance, redesign of the bodywork to be vacuum 
formed reducing cost, door development and safety feature validation activity.

Sales and Marketing Expenses

Sales  and  marketing  (“S&M”)  expenses  for  the  year  ended  December  31,  2018  and  2017  were  approximately 
$1,570,000 and $828,000, respectively. The primary reasons for the increase in sales and marketing expenses during 
the  year  ended  December  31,  2018  of  approximately  $742,000  or  90%,  as  compared  to  the  prior  period  was  an 
approximate $410,000 increase in public relations, marketing, and travel expenses associated with investor relations, 
a $137,000 increase in expense for developing and franchising the rental business, and a $136,000 increase in salary 
and beneﬁ ts expenses.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of personnel and facilities costs related to executives, 
ﬁ nance, human resources, information technology, as well as certain human capital and related costs generally included 
in manufacturing that are being utilized to set-up operations associated with workﬂ ow, regulatory compliance, materials, 
service, quality, and legal organizations, as well as legal fees, professional and contract services. G&A expenses for 
the year ended December 31, 2018 were approximately $5,604,000 as compared to $1,064,000 for the same period 
last year, representing an increase of $4,540,000, or 427%. The primary reasons for the increase in the current period 
was due to an approximate $1,430,000 increase in salary and beneﬁ ts associated with developing our manufacturing, 
materials, service, quality and compliance, and other operations, a $1,748,000 increase in expenses associated with 
being a public company (investor relations, insurance, and professional fees), a $434,000 increase in depreciation, a 
$398,000 increase in facilities rent and maintenance, a $155,000 increase in lobbying expense, a $132,000 increase in 
computer and software expense to equip new hires, a $69,000 increase in employee recruiting and retention expense.

25

Interest Expense

Interest expense for the year ended December 31, 2018 was approximately $101,000, as compared to $34,000 during 
the year ended December 31, 2017. The increase in interest expense was due to equipment ﬁ nancing.

Liquidity and Capital Resources

As of December 31, 2018, we had approximately $4,903,000 in cash and cash equivalents representing a decrease in 
cash and cash equivalents of approximately $2,921,000 from December 31, 2017. Sources of cash were predominantly 
from the sale of equity and debt. We anticipate that our current sources of liquidity, including cash and cash equivalents, 
together with our current projections of cash ﬂ ow from operating activities, will provide us with liquidity into the fourth 
quarter of 2019. We need to successfully raise funds in the short term, however, this is subject to market conditions and 
recognizing that we cannot be certain that additional funds would be available to us on favorable terms or at all. The 
amount and timing of funds that we may raise is undetermined and could vary based on a number of factors, including 
our ongoing liquidity needs, our current capitalization, as well as access to current and future sources of liquidity.

We have invested approximately $6,115,000 into tooling and manufacturing capital expenditures for our current FUV 
production facility. At this time, we believe minimal further investment into tooling and manufacturing is required 
until we need to expand production capacity beyond a rate of 10,000 vehicles per year. As we ramp up production, we 
may identify opportunities for reducing cost of goods sold that may require additional capital expenditures.

Cash Flows from Operating Activities

Our cash ﬂ ows from operating activities are signiﬁ cantly aff ected by our cash outﬂ ows to support the growth of our 
business in areas such as R&D, sales and marketing and G&A expenses. Our operating cash ﬂ ows are also aff ected 
by our working capital needs to support personnel related expenditures, accounts payable and other current assets and 
liabilities.

During the year ended December 31, 2018, cash used in operating activities was $12,672,033, which was primarily 
the  result  of  our  net  loss  incurred  of  $11,051,015,  and  increases  in  other  current  assets  of  $1,225,484,  inventory 
of $1,509,048 related to materials for our electric vehicles. We also recorded increases in our accounts payable of 
$53,378,  a  decrease  in  accrued  liabilities  of  $9,340,  and  increases  in  customer  deposits  of  $54,657  and  warranty 
accrual of $25,200. These increases in cash outﬂ ows were partially off set by stock-based compensation of $495,605.

During the year ended December 31, 2017, cash used in operating activities was $3,344,437, which was primarily the 
result of our net loss incurred of $3,315,327, an increase in other current assets of $372,954 and an increase in inventories 
of $167,699 related to materials for our electric vehicles. These increases in cash outﬂ ows were partially off set by an 
increase  in  stock-based  compensation  of  $203,734,  an  increase  in  accrued  liabilities  of  $175,849  mainly  for  payroll 
related liabilities, an increase in accounts payable of $97,838, and a net increase in customer deposits of $13,932.

Cash Flows from Investing Activities

Cash  ﬂ ows  from  investing  activities  primarily  relates  to  the  purchases  and  redemptions  of  certiﬁ cates  of  deposits 
and  capital  expenditures  to  support  our  growth  in  operations,  including  investments  in  manufacturing  equipment 
and  tooling.  During  the  year  ended  December  31,  2018,  we  purchased  $5,250,000  and  redeemed  $11,496,850  of 
certiﬁ cates of deposits, and paid $1,717,038, net of ﬁ nancing, for manufacturing equipment, tooling and FUVs placed 
into Company service or to be included in our rental ﬂ eet. We also received $250 in proceeds from the sale of property 
and equipment and paid $41,988 for security deposits.

Cash  ﬂ ows  from  investing  activities  for  the  year  ended  December  31,  2017  primarily  relates  to  the  purchases  of 
certiﬁ cates  of  deposits  and  capital  expenditures  to  support  our  growth  in  operations,  including  investments  in 
manufacturing equipment and tooling. During 2017, we purchased $6,246,850 of certiﬁ cates of deposits and invested 
$1,960,438 in manufacturing equipment and tooling. We had no such purchases of certiﬁ cates of deposits or capital 
expenditures in 2016.

26

Cash Flows from Financing Activities

During the year ended December 31, 2018, net cash provided by ﬁ nancing activities was $5,262,869, compared to 
$18,961,429 during the year ended December 31, 2017. Cash ﬂ ows used in ﬁ nancing activities during the year ended 
December 31, 2018 mainly comprised of payments on off ering costs of $526,011, and proceeds from the issuance of 
our common stock of $3,014,700, proceeds from the exercise of stock options of $29,259, payments of $255,079 on 
capital lease obligations and $3,000,000 in proceeds from notes payable.

During  the  year  ended  December  31,  2017,  net  cash  provided  by  ﬁ nancing  activities  was  $18,961,429.  Proceeds 
from the issuance of common stock during the year ended December 31, 2017 were $20,372,271 which consisted of 
$19,146,771 in gross proceeds from our Regulation A off ering of 2,945,657 shares of common stock and $1,225,500 
in gross proceeds from our Regulation D off ering in that period of 245,100 shares of Series A-1 Preferred Stock. In 
addition, we received proceeds from the issuance of convertible debt and a note payable of $275,000. These proceeds 
were slightly off set by $1,285,842 in off ering costs and $400,000 in repayments of notes payable.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 8. Financial Statements and Supplementary Data

The information required by this Item is set forth in the Financial Statements and Notes thereto beginning at page F-1 
of this Report, which are incorporated herein by this reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

This Annual Report does not include a report of management’s assessment regarding internal control over ﬁ nancial 
reporting due to a transition period established by rules of the SEC for newly public companies. In addition, this Annual 
Report  does  not  include  an  attestation  report  of  our  registered  public  accounting  ﬁ rm  regarding  internal  control  of 
ﬁ nancial reporting pursuant to rules of the SEC regarding smaller reporting companies and emerging growth companies.

(a) Evaluation of Disclosure Controls and Procedures

We  maintain  disclosure  controls  and  procedures,  as  deﬁ ned  in  Rule  13a-15(e)  promulgated  under  the  Securities 
Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by 
us in the reports that we ﬁ le or submit under the Exchange Act is recorded, processed, summarized and reported within 
the time periods speciﬁ ed in the SEC’s rules and forms and that such information is accumulated and communicated 
to our management, including its Chief Executive Offi  cer and Chief Financial Offi  cer, as appropriate, to allow timely 
decisions regarding required disclosure. Under the supervision and with the participation of our management, including 
Mark Frohnmayer, our President and Chief Executive Offi  cer, and Douglas M. Campoli, our Chief Financial Offi  cer, 
we conducted an evaluation of the eff ectiveness of the design and operation of our disclosure controls and procedures, 
as deﬁ ned in Rules 13a-15(e) under the Exchange Act, as of the end of the period covered by this report.

Based on that evaluation, our President and Chief Executive Offi  cer and our Chief Financial Offi  cer concluded that as 
of December 31, 2018, our disclosure controls and procedures were eff ective.

(b) Changes in Internal Control Over Financial Reporting

No changes were made to our internal control over ﬁ nancial reporting occurred during the period ended December 31, 
2018, that materially aff ected, or is reasonably likely to materially aff ect, our internal control over ﬁ nancial reporting.

27

Item 9B. Other Information

On October 18, 2018, the Company”) entered into a Standard Industrial/Commercial Single-Tenant Lease-Net (the 
“Lease”) with TEJ Enterprises, LLC (the “Landlord”). Pursuant to the Lease, the Company will lease approximately 
4491 square feet of space located at 630 Tenth Avenue, San Diego, CA (the “Premises”) from the Landlord, which the 
Company expects to use as a rental center for its FUVs, among other general retail, dispatching, parking and charging 
services for electrical vehicles. The Lease, which began on November 1, 2018, has a term of 5 years. Annual base rent 
under the Lease is approximately $8,982.00 per month, plus a 5% management fee.

On October 18, 2018, pursuant to an amendment to the Lease (the “Lease Amendment”), the Company sublet the 
Premises to Hula Holdings, Inc. (“Hula”). Pursuant to the Lease Amendment, Hula has agreed to pay the Landlord 
65% of the annual base rent and associated costs under the Lease. However, upon an event of default under the Lease, 
including the failure to pay rent (subject to a cure period and duty to mitigate), the Landlord may, among other things, 
terminate the Lease and require the Company to surrender possession of the Premises and pay all rent due and payable 
for the balance of Lease’s term.

The description of the Lease and Lease Amendment provided above is qualiﬁ ed in its entirety by reference to the full 
and complete terms of the Lease and Lease Amendment, which are ﬁ led, respectively, as Exhibit 10.7 and 10.8 to this 
Annual Report on Form 10-K.

28

Item 10. Directors, Executive Offi  cers and Corporate Governance

PART III

Information required by this Item concerning our directors is incorporated by reference from the sections captioned 
“Proposal One — Election of Directors” and “Corporate Governance Matters” contained in our proxy statement related 
to the 2019 Annual Meeting of Stockholders currently scheduled to be held on May 11, 2019 (the “Proxy Statement”)

The  information  required  by  this  Item  concerning  compliance  with  Section  16(a)  of  the  United  States  Securities 
Exchange Act of 1934, as amended, is incorporated by reference from the section of the Proxy Statement captioned 
“Section 16(a) Beneﬁ cial Ownership Reporting Compliance”.

Item 11. Executive Compensation

The information required by this Item is incorporated by reference to the information under the sections captioned 
“Executive Compensation” and “Director Compensation” in the Proxy Statement.

Item 12. Security Ownership of Certain Beneﬁ cial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference to the information under the sections in the Proxy 
Statement  captioned:  (i)  “Security  Ownership  of  Certain  Beneﬁ cial  Owners  and  Management”;  and  (ii)  “Equity 
Incentive  Plans”  under  “Proposal  Three  —  Approval  of  Amendment  to  the  Arcimoto,  Inc.  2018  Omnibus  Stock 
Incentive Plan.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference to the information under the section captioned 
“Certain Relationships and Related-Party Transactions” and “Corporate Governance Matters” in the Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by this Item is incorporated by reference to the information under the section captioned 
“Fees Paid to Auditors” in the proxy statement.

29

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) 1. Financial Statements.

See index to ﬁ nancial statements on page F-1 of this Annual Report.

2. Financial Statement Schedules.

All other schedules called for under regulation S-X are not submitted because they are not applicable or not required, 
or because the required information is included in the ﬁ nancial statements or notes thereto.

(b) Exhibits.

The following items will be exhibits to this Annual Report on Form 10-K.

Exhibit
Number
1.1
3.1(a)

3.1(b)

3.2

10.1

10.2

10.3

10.4
10.5

10.6
10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

Exhibit Description
Underwriting Agreement
Second Amended and Restated Articles of 
Incorporation of Arcimoto, Inc.
Articles of Amendment to Second Amended and 
Restated Articles of Incorporation of Arcimoto, Inc.
Second Amended and Restated Bylaws of 
Arcimoto, Inc.
Industrial Lease dated September 3, 2017 by 
and between Arcimoto, Inc. and 2034 LLC
Arcimoto, Inc. Second Amended and Restated 
Stock Incentive Plan #
Arcimoto, Inc. Amended and Restated 2015 
Stock Incentive Plan #
Arcimoto 2018 Omnibus Stock Incentive Plan
Form of Notice of Stock Option Grant and 
Award Agreement
Form of Restricted Stock Award Agreement
Industrial Lease dated October 18, 2018 by and 
between Arcimoto, Inc. and TEJ Enterprises
Amendment to Industrial Lease dated 
October 18, 2018 by and between Arcimoto, Inc. 
and TEJ Enterprises
Exchange Agreement by and between Arcimoto, 
Inc. and Mark Frohnmayer
Form of Subscription Agreement for securities 
offered in registered offering
Subscription Agreement with FOD Capital, LLC 
for shares and warrants and a senior secured note
Warrant to purchase common stock issued to 
FOD Capital, LLC
Senior Secured Note issued in favor of FOD 
Capital, LLC
Security Agreement dated December 27, 2018 
in favor of FOD Capital, LLC
Intellectual Property Security Agreement dated 
December 27, 2018 in favor of FOD Capital, LLC

30

Form

Incorporated by Reference 
(Unless Otherwise Indicated)
Exhibit

File No.

Filing Date
Filed herewith
Filed herewith

Filed herewith

1-A

024-10710

2.2

August 8, 2017

8-K

024-10710

10.1

October 4, 2017

1-A

024-10710

1-A

024-10710

2.2

2.2

August 8, 2017

August 8, 2017

8-K
8-K

001-38213
001-38213

10.4
10.5

June 13, 2018
June 13, 2018

8-K

001-38213

10.6

June 13, 2018
Filed herewith

Filed herewith

8-K

001-38213

10.7

November 21, 2018

8-K

001-38213

10.8

November 21, 2018

8-K

001-38213

8-K

001-38213

4.1

4.2

December 28, 2018

December 28, 2018

8-K

001-38213

10.1

December 28, 2018

8-K

001-38213

10.2

December 28, 2018

8-K

001-38213

10.3

December 28, 2018

Incorporated by Reference 
(Unless Otherwise Indicated)
Exhibit
10.4

File No.
001-38213

Filing Date
December 28, 2018

—

—

—

—
—
—

—

—

—

—

—

—

—
—
—

—

—

—

Filed herewith

Filed herewith

Filed herewith

Filed herewith

Filed herewith
Filed herewith
Filed herewith

Filed herewith

Filed herewith

Filed herewith

Exhibit
Number
10.16

23.1

31.1

31.2

32.1

Exhibit Description
Collateral Assignment of Lease dated 
December 27, 2018 in favor of FOD Capital, LLC
Consent of dbbmckennon, Independent 
Registered Public Accounting Firm
Certiﬁcation of Chief Executive Officer pursuant 
to Section 302 of the Sarbanes-Oxley Act of 
2002.
Certiﬁcation of Chief Financial Officer pursuant 
to Section 302 of the Sarbanes-Oxley Act of 
2002.
Certiﬁcation of Chief Executive Officer and 
Chief Financial Officer pursuant to Section 906 
of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.

Form
8-K

—

—

—

101.INS
—
101.SCH XBRL Taxonomy Extension Schema Document. —
—
101.CAL XBRL Taxonomy Extension Calculation 

101.DEF

Linkbase Document.
XBRL Taxonomy Extension Deﬁnition 
Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase 

101.PRE

Document.
XBRL Taxonomy Extension Presentation 
Linkbase Document.

—

—

—

Item 16. Form 10-K Summary

None.

31

Financial Statements
December 31, 2018 and 2017

ARCIMOTO, INC.
TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2018 

AND 2017:

Page
F-2

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Stockholders’ Equity (Deﬁcit)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-3
F-4
F-5
F-6
F-7 – F-25

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Arcimoto, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Arcimoto, Inc. (the “Company”) as of December 31, 2018 and 
2017, the related statements of operations, stockholders’ equity (deﬁ cit) and cash ﬂ ows, for the years then ended, and 
the related notes (collectively referred to as the “ﬁ nancial statements”). In our opinion, the ﬁ nancial statements present 
fairly,  in  all  material  respects,  the  ﬁ nancial  position  of  the  Company  as  of  December  31,  2018  and  2017,  and  the 
results of its operations and its cash ﬂ ows for the years then ended, in conformity with accounting principles generally 
accepted in the United States of America.

Basis for Opinion

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

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

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

Going Concern

The  accompanying  ﬁ nancial  statements  have  been  prepared  assuming  that  the  Company  will  continue  as  a  going 
concern. As  discussed  in  Note  2  to  the  ﬁ nancial  statements,  the  Company  has  not  achieved  positive  earnings  and 
operating cash ﬂ ows from its intended operations, which raises substantial doubt about its ability to continue as a going 
concern. Management’s plans in regard to these matters are also described in Note 2. The ﬁ nancial statements do not 
include any adjustments that might result from the outcome of this uncertainty.

/s/ dbbmckennon

We have served as the Company’s auditor since 2016.

Newport Beach, California
March 29, 2019

F-2

ARCIMOTO, INC.
BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

ASSETS
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Certiﬁcates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Accounts receivable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

2018

2017

4,903,019 $ 

—
—
1,703,573
1,626,644
8,233,236

5,809,774
41,988

7,824,109
6,246,850
500
194,525
401,160
14,667,144

2,434,026
—

Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

14,084,998 $ 

17,101,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:

Current liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Current portion of capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . 
Note payable, net of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total current liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

717,151 $ 
246,418
454,624
383,800
2,677,076
4,479,069

663,773
255,758
399,967
—
—
1,319,498

Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Long-term capital lease obligations, net of current portion . . . . . . . . . . . . . 
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

25,200
1,513,595
1,538,795

—
—
—

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

6,017,864

1,319,498

Commitments and contingencies (Note 11)

Stockholders’ equity:

Series A-1 preferred stock, no par, 1,500,000 authorized; 0 and 0 shares 

issued and outstanding as of December 31, 2018 and 2017, respectively  . . 

Class C Preferred Stock, no par, 2,000,000 authorized; 2,000,000 and 
0 shares issued and outstanding as of December 31, 2018 and 2017, 
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Common shares 20,000,000 shares authorized no par value; 15,032,341 and 
15,872,001 shares issued and outstanding as of December 31, 2018 and 
2017, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Accumulated deﬁcit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

—

—

—

—

30,102,738
930,869
(22,966,473)
8,067,134

27,177,790
519,340
(11,915,458)
15,781,672

Total liabilities and stockholders’ equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

14,084,998 $ 

17,101,170

See accompanying notes to ﬁ nancial statements.

F-3

ARCIMOTO, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

2018

2017

Revenue

Grant revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Product sales – related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Product sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

— $ 
—
84,000
10,996
94,996

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

127,531

Gross proﬁt (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

(32,535)

40,580
42,000
44,436
—
127,016

78,439

48,577

Operating expenses

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Sales and marketing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

3,814,844
1,569,888
5,604,505
10,989,237

1,451,394
827,941
1,063,635
3,342,970

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

(11,021,772)

(3,294,393)

Other expense (income)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

100,946
(71,703)

34,143
(13,209)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

(11,051,015) $ 

(3,315,327)

Weighted-average common shares outstanding basic and diluted  . . . . . . . . . . . . 
Net loss per common share – basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

15,754,718

(0.70) $ 

13,554,282
(0.24)

See accompanying notes to ﬁ nancial statements.

F-4

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S

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ARCIMOTO, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

OPERATING ACTIVITIES

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  (11,051,015) $ 

(3,315,327)

2018

2017

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Loss on disposal of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

454,494
39,020
495,605

Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Inventory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other current assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Accrued liabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Customer deposits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Warranty accrual  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

INVESTING ACTIVITIES

Purchase of certiﬁcates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from sale of certiﬁcates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Purchases of property and equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from the disposal of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Security deposits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Net cash inﬂow provided by (used) in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

FINANCING ACTIVITIES

Proceeds from sale of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Payment of offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from the exercise of stock options  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Payment on capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from convertible notes payable to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Repayment of convertible notes payable to related parties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from convertible notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Repayment of convertible notes payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from note payable to related party  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Repayment of note payable to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Proceeds from notes payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Repayment of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Net cash provided by ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

500
(1,509,048)
(1,225,484)
53,378
(9,340)
54,657
25,200
(12,672,033)

(5,250,000)
11,496,850
(1,717,038)
250
(41,988)
4,488,074

3,014,700
(526,011)
29,259
(255,079)
—
—
—
—
—
—
3,000,000
—
5,262,869

20,107
—
203,734

83
(167,699)
(372,954)
97,838
175,849
13,932
—
(3,344,437)

(6,246,850)
—
(1,960,438)
—
—
(8,207,288)

20,372,271
(1,285,842)
—
—
170,000
(70,000)
100,000
(75,000)
5,000
(5,000)
—
(250,000)
18,961,429

Net cash increase (decrease) for year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

(2,921,090)

7,409,704

Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

7,824,109
4,903,019

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the year for interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Cash paid during the year for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

100,946
150

414,405
7,824,109

14,841
150

$ 

$ 
$ 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING 

ACTIVITIES:
Conversion of series A-1 preferred stock to common stock  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Notes payable and accrued interest converted to common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Notes payable to related parties and accrued interest converted to common stock . . . . . . . . . . . . . . .  $ 
Fixed asset purchases in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Portion of equipment acquired through capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Warrants issued to underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Warrants issued to investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

— $ 
— $ 
— $ 
— $ 

2,152,474

— $ 
$ 

111,374

1,225,500
316,701
156,166
484,890
—
29,820
—

See accompanying notes to ﬁ nancial statements.

F-6

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1: NATURE OF OPERATIONS

Arcimoto,  Inc.  (the  “Company”)  was  originally  formed  on  November  21,  2007  as WTP  Incorporated,  an  Oregon 
Corporation, and later changed its name to Arcimoto, Inc. The Company was founded in order to build products that 
catalyze the shift to a sustainable transportation system. The ﬁ rst step in this shift has been developing an aff ordable, 
daily utility, pure electric vehicle. Over the past eleven years, the Company has developed a revolutionary new vehicle 
platform designed around the needs of everyday drivers. Its main product is the Fun Utility Vehicle® (“FUV”), the 
ﬁ rst real, aff ordable, and fossil-free alternative for the vast majority of daily trips. Compared to the average car, the 
FUV has dropped 3/4 of the weight and 2/3 of the footprint, in order to bring the joy of ultra-effi  cient, pure electric 
driving to the masses.

Risks and Uncertainties

The Company currently has limited production and distribution capabilities. Facilities to manufacture vehicles on a 
scale of up to 10,000 vehicles per year are substantially complete. Arcimoto also does not have a history of higher-scale 
production and may encounter delays, ﬂ aws, or ineffi  ciencies in the manufacturing process, which may prevent or 
delay achieving higher-scale production within the anticipated timeline. The Company believes that small scale Retail 
Series production will commence by the second quarter 2019; however, delays in ﬁ nalizing the FUV testing, design, 
availability of inventory, and machinery tooling customization could delay such estimates.

At the end of October 2018, Arcimoto opened its ﬁ rst vehicle rental location in Eugene, Oregon. The Company used 
this  location  primarily  as  a  test  bed  for  developing  the  rental  operations.  Part  of  the  Company’s  strategy  is  to  use 
vehicle rentals to generate a positive cash ﬂ ow from customer test drive activities. Arcimoto has faced certain obstacles 
to the rental strategy including the insurance industry’s reluctance to issue rental liability insurance to a manufacturer 
operating a rental business for their own vehicles, auto insurance companies being unwilling to extend their customer’s 
auto coverage to the rental of three wheeled vehicles or to motorcycles, and the reluctance of insurers to off er SLI 
(supplemental liability insurance) for operators of motorcycle rental facilities to sell to their customers. The Company 
has acquired rental liability insurance and is pursuing SLI to off er to rental customers. As with any strategy, there is 
the risk that the rental business will not be successful. Arcimoto learned a great deal from this short-term test that the 
Company believes will help reﬁ ne the rental operations in preparation for a planned reopening of the Oregon rental 
facility and potential launch of the San Diego rental operation after Retail FUV production has commenced.

As of December 31, 2018, the Company has $1,703,573 in inventory and another approximately $1,017,000 in prepaid 
inventory not received yet. Prepaid inventory is included in other current assets. Certain inventory components are 
included in prepaid inventory and have long lead time parts requiring payment in advance.

The Company has limited experience in developing, training and managing a sales force, and will incur substantial 
additional expenses marketing its current and future products and services. Developing a full marketing and sales 
force  is  also  time  consuming  and  could  delay  launch  of  future  products  and  services.  In  addition,  the  Company 
will  compete  with  companies  that  currently  have  extensive  and  well-funded  marketing  and  sales  operations. The 
Company’s marketing and sales eff orts may be unable to compete successfully against these companies.

Further, the Company’s business and operations are sensitive to general governmental policy, business and economic 
conditions  in  the  United  States  and  worldwide.  A  host  of  factors  beyond  the  Company’s  control  could  cause 
ﬂ uctuations  in  these  conditions.  Other  developments,  including  but  not  limited  to  economic  recessions,  trends  in 
vehicle manufacturing, consumer taste, availability of inventory, and changes in government policy related to cars and 
motorcycles, could have a material adverse eff ect on the Company’s ﬁ nancial condition and the results of its operations.

The  Company’s  industry  is  characterized  by  rapid  changes  in  technology  and  customer  demands. As  a  result,  the 
Company’s  products  and  services  may  quickly  become  obsolete  and  unmarketable. The  Company’s  future  success 
will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and 
services and enhance our current products and services on a timely and cost-eff ective basis. Further, the Company’s 
products and services must remain competitive with those of other companies with substantially greater resources. 
The Company may experience technical or other diffi  culties that could delay or prevent the development, introduction 
or marketing of new products and services or enhanced versions of existing products and services. Also, the Company 

F-7

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1: NATURE OF OPERATIONS (cont.)

may not be able to adapt new or enhanced products and services to emerging industry standards, and the Company’s 
new products and services may not be favorably received. In addition, we may not have the capital resources to further 
the development of existing and/or new products.

NOTE 2: GOING CONCERN

The accompanying ﬁ nancial statements have been prepared on a basis that the Company is a going concern, which 
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has 
experienced recurring operating losses and negative operating cash ﬂ ows since inception.

The  Company  has  not  achieved  positive  earnings  and  operating  cash  ﬂ ows  to  enable  the  Company  to  ﬁ nance  its 
operations internally. Funding for the business to date has come primarily through the issuance of debt and equity 
securities. The Company will require additional funding during the fourth quarter of 2019 to continue to operate in the 
normal course of business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going 
concern.

Although the Company’s objective is to increase its revenues from the sales of its products within the next few years 
suffi  cient to generate positive operating and cash ﬂ ow levels, there can be no assurance that the Company will be 
successful in this regard. The Company will need to raise additional capital to fund its operations, which it intends 
to obtain through debt and/or equity off erings. Funds on hand and any follow-on capital, will be used to invest in the 
business to expand sales and marketing eff orts, enhance current product by continuing research and development to 
bring the FUV to retail production, continue to build custom tooling and optimize our production facility, and fund 
operations until positive cash ﬂ ow is achieved. The need for additional capital may be adversely impacted by uncertain 
market conditions or approval by regulatory bodies.

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform with generally accepted accounting principles in the 
United States, (“GAAP”).

Use of Estimates

The  preparation  of  ﬁ nancial  statements  in  conformity  with  GAAP  requires  management  to  make  estimates  and 
assumptions that aff ect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities 
at the date of the ﬁ nancial statements and the reported amounts of revenues and expenses during the reporting period. 
Actual results could diff er from those estimates.

Fair Value Measurements

The  Company’s  ﬁ nancial  instruments  consist  primarily  of  cash  and  cash  equivalents  and  equipment  ﬁ nancing 
obligations. The  carrying  amounts  of  such  ﬁ nancial  instruments  approximate  their  respective  estimated  fair  value 
due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value 
is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future 
earnings or cash ﬂ ows. The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards 
Codiﬁ cation  (“ASC”)  820-10,  Fair Value  Measurements  and  Disclosures,  which  deﬁ nes  fair  value,  establishes  a 
framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a 
consistent deﬁ nition of fair value which focuses on an exit price that would be received upon sale of an asset or paid 
to transfer a liability in an orderly transaction between market participants at the measurement date.

F-8

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity 
speciﬁ c information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs 
used in the valuation of an asset or liability as of the measurement date.

The three-level hierarchy for fair value measurements is deﬁ ned as follows:

• 

• 

• 

Level  1  —  inputs  to  the  valuation  methodology  are  quoted  prices  (unadjusted)  for  identical  assets  or 
liabilities in active markets;

Level  2  —  inputs  to  the  valuation  methodology  include  quoted  prices  for  similar  assets  and  liabilities 
in active markets, and inputs that are observable for the asset or liability other than quoted prices, either 
directly or indirectly, including inputs in markets that are not considered to be active; and

Level  3  —  inputs  to  the  valuation  methodology  are  unobservable  and  signiﬁ cant  to  the  fair  value 
measurement.

Categorization within the valuation hierarchy is based upon the lowest level of input that is signiﬁ cant to the fair value 
measurement. The carrying amounts reported in the accompanying ﬁ nancial statements for current assets and current 
liabilities approximate the fair value because of the immediate or short-term maturities of the ﬁ nancial instruments. As 
of December 31, 2018 and 2017, the Company did not have any level 2 or level 3 instruments.

Cash and Cash Equivalents

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less 
than three months, when purchased, to be cash equivalents. As of December 31, 2018 and 2017, the Company held 
its balance of cash and cash equivalents in ﬁ nancial institutions, which, at times, exceed the federally insured limits.

Accounts Receivable

Accounts receivable are reported net of allowance for probable losses. It represents the amount management expects 
to collect from outstanding balances. Diff erences between the amount due and the amount management expects to 
collect are charged to operations in the year in which those diff erences are determined, with an off setting entry to a 
reserve allowance. As of December 31, 2018, and 2017, the Company had $17,887 and $500, respectively of accounts 
receivable with a $17,887 reserve allowance as of December 31, 2018.

Certiﬁ cates of Deposit

The Company uses certiﬁ cates of deposit for short-term investments. No more than $250,000 is invested in any single 
certiﬁ cate of deposit so that all balances are covered by federally insured limits. As of December 31, 2018 and 2017, $0 
and $6,246,850, respectively, of the Company’s certiﬁ cates of deposit had original maturities greater than three months 
and therefore were not included in cash and cash equivalents.

Inventory

Inventory is stated at the lower of cost (using the ﬁ rst-in, ﬁ rst-out method “FIFO”) or market. Inventories consist of 
purchased electric motors, electrical storage and transmission equipment, and component parts. Inventories consisted 
almost entirely of raw materials and component parts as of December 31, 2018. Work-in-progress as of December 31, 
2018 was $15,683, with no signiﬁ cant amounts as of December 31, 2017. There were $156,858 in Finished Goods at 
December 31, 2018, with no ﬁ nished goods as of December 31, 2017.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for major additions and 
improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. 

F-9

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed 
from  the  accounts  and  any  resulting  gain  or  loss  is  included  in  the  results  of  operations  for  the  respective  period. 
Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for ﬁ nancial 
statement purposes.

The estimated useful lives for signiﬁ cant property and equipment categories are as follows:

Computer Equipment and Software
Furniture and Fixtures
Machinery and Equipment
Leasehold Improvements

Off ering Costs

1 – 3 years
2 – 7 years
5 – 10 years
Shorter of useful or lease life

The Company accounts for off ering costs in accordance with FASB ASC 340, Other Assets and Deferred Costs. Prior 
to the completion of an off ering, off ering costs will be capitalized as deferred off ering costs on the balance sheet. The 
deferred off ering costs will be charged to stockholders’ equity or as a reduction of debt upon the completion of an 
off ering or to expense if the off ering is not completed. As of December 31, 2018, no off ering costs were capitalized, as 
all deferred off ering costs were charged to stockholders’ equity or against debt proceeds upon our fourth quarter 2018 
equity and debt recapitalization further described in Note 6 and 7. As of December 31, 2018 and 2017, off ering costs 
totaled approximately $637,000 and $1,326,000, respectively, which includes the off ering costs for the fourth quarter 
2018 equity and debt recapitalization and the Regulation A off ering, respectively. Of the 2018 amount, approximately 
$526,000  was  cash  based  and  $111,000  was  non-cash  in  the  form  of  warrants  issued  in  the  fourth  quarter  2018 
off ering. Off ering costs in 2018 were allocated between debt and equity off erings.

Impairment of Long-Lived Assets

The Company follows FASB Accounting Standards Codiﬁ cation (“ASC”) 360, Accounting for Impairment or Disposal 
of Long-Lived Assets. ASC 360 requires that if events or changes in circumstances indicate that the carrying value of 
long-lived assets or asset groups may be impaired, an evaluation of recoverability would be performed by comparing 
the estimated future undiscounted cash ﬂ ows associated with the asset to the asset’s carrying value to determine if a 
write-down to market value would be required. Long-lived assets or asset groups that meet the criteria in ASC 360 as 
being held for sale are reﬂ ected at the lower of their carrying amount or fair market value, less costs to sell.

Customer Deposits

Refundable customer deposits are generally held in a separate deposit account. Revenue is not recognized on refundable 
customer deposits until the deposit is applied to a non-refundable vehicle order, the vehicle manufacturing process is 
completed, the vehicle is ready for pickup by or delivery to the customer.

Warranties

During 2018 the Company recorded a warranty reserve for four Signature Series vehicles sold. The Company intends 
to begin recording warranty reserves with the commencement of Retail Series production of the FUV. We intend to 
provide  a  warranty  on  vehicle  and  production  powertrain  components  and  battery  pack  sales,  and  we  will  accrue 
warranty reserves at the time a vehicle or production powertrain component is delivered to the customer. Warranty 
reserves include management’s best estimate of the projected cost to repair or to replace any items under warranty, 
based on actual warranty experience as it becomes available and other known factors that may impact our evaluation 
of historical data. We will review our reserves at least quarterly to ensure that our accruals are adequate in meeting 
expected future warranty obligations, and we will adjust our estimates as needed. Warranty expense will be recorded 
as a component of cost of revenues in the statement of operations. The portion of the warranty provision which is 
expected to be incurred within 12 months from the balance sheet date will be classiﬁ ed as current, while the remaining 
amount will be classiﬁ ed as long-term liabilities.

F-10

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue Recognition

The Company recognizes revenue when the earnings process is complete. This generally occurs when products are 
ready for pickup by or delivery to the customer in accordance with the sales agreement or purchase order, which is 
when control of the vehicle passes to the customer. The Company’s shipping terms are generally F.O.B. shipping point, 
where title is transferred, and revenue is recognized when the products are shipped to or picked up by customers. The 
Company determined that the adoption of Accounting Standards Update No. 2014-09 (ASU 2014-09), “Revenue from 
Contracts with Customers” (“ASC 606”) had no material impact to the Company’s ﬁ nancial statements.

Grant Revenue

Revenue from grant revenue is recognized in the period during which the conditions under the grant have been met 
and the Company has made payment for the related expense. Grant revenue was $0 and $40,580 for the years ended 
December 31, 2018 and 2017, respectively. Management believes the loss of such revenues will not have a material 
eff ect on the Company’s operations.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, Compensation — Stock 
Compensation.  Under  the  fair  value  recognition  provisions  of  FASB ASC  718,  stock-based  compensation  cost  is 
measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite 
service period, which is generally the option or warrant vesting period. The Company uses the Black-Scholes option 
pricing model to determine the fair value of stock options and common stock warrants.

The  Company  measures  compensation  expense  for  its  non-employee  stock-based  compensation  under  FASB ASC 
505-50, Equity-Based Payments to Non-Employees. The fair value of the award issued or committed to be issued is 
used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value 
is  measured  at  the  value  of  the  Company’s  common  stock  and/or  the  calculated  value  based  on  the  inputs  to  the 
Black-Scholes  model  on  the  date  that  the  commitment  for  performance  by  the  counterparty  has  been  reached  or 
the  counterparty’s  performance  is  complete. The  fair  value  of  the  equity  award  is  charged  directly  to  stock-based 
compensation expense and credited to additional paid-in capital.

Advertising Costs

Advertising costs are recorded as an expense in the period in which we incur the costs or the ﬁ rst time the advertising 
takes place. Advertising costs expensed were $15,148 and $317,324 for the years ended December 31, 2018 and 2017, 
respectively.

Research and Development

Expenses relating to research and development are expensed as incurred. Vehicle and battery research and development 
expenses  consisted  of  $3,814,844  for  the  year  ended  December  31,  2018,  and  $1,451,394,  for  the  year  ended 
December 31, 2017.

Income Taxes

The Company accounts for income taxes under an asset and liability approach for ﬁ nancial accounting and reporting 
for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities for the expected impact of 
diff erences between the ﬁ nancial statements and the tax basis of assets and liabilities.

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than 
not to be realized. In the event the Company was to determine that it would be able to realize its deferred tax assets in 
the future in excess of its recorded amount, an adjustment to the deferred tax assets would be credited to income tax 
expense in the period such determination was made. Likewise, should the Company determine that it would not be able 

F-11

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged 
to income tax expense in the period such determination was made. The Company has incurred losses for tax purposes 
since inception and has signiﬁ cant tax losses and tax credit carry forwards. These amounts are subject to valuation 
allowances as it is uncertain that they will be realized before they expire.

Net Earnings or Loss per Share

The  Company’s  computation  of  earnings  (loss)  per  share  (“EPS”)  includes  basic  and  diluted  EPS.  Basic  EPS  is 
measured as the income (loss) available to common shareholders divided by the weighted average number of common 
shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive eff ect on a per share 
basis  of  potential  common  shares  (e.g.,  common  stock  warrants  and  common  stock  options)  as  if  they  had  been 
converted  at  the  beginning  of  the  periods  presented,  or  issuance  date,  if  later.  Potential  common  shares  that  have 
an anti-dilutive eff ect (i.e., those that increase income per share or decrease loss per share) are excluded from the 
calculation of diluted EPS.

Loss  per  common  share  is  computed  by  dividing  net  loss  by  the  weighted  average  number  of  shares  of  common 
stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods 
presented because all common stock warrants and common stock options outstanding were anti-dilutive.

At December 31, 2018 and 2017, the Company excluded the outstanding securities summarized below, which entitled 
the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their 
eff ect would have been anti-dilutive.

December 31, 
2018

December 31, 
2017

Warrants to purchase common stock  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Stock options to purchase common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Underwriters and investor warrants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Warrants issued to vendors outside of employee plans . . . . . . . . . . . . . . . . . . . . . 
Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

893,004
1,348,223
1,065,095
47,000
3,353,322

973,004
984,200
122,238
47,000
2,126,442

Recent Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is 
determined that a new accounting pronouncement aff ects the Company’s ﬁ nancial reporting, the Company undertakes 
a  study  to  determine  the  consequences  of  the  change  to  its  ﬁ nancial  statements  and  assures  that  there  are  proper 
controls in place to ascertain that the Company’s ﬁ nancial statements properly reﬂ ect the change.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes ASC 
Topic 840, Leases. ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance 
sheets for all the leases with terms greater than twelve months. Based on certain criteria, leases will be classiﬁ ed as 
either ﬁ nancing or operating, with classiﬁ cation aff ecting the pattern of expense recognition in the income statement. 
For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of 
underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize 
lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is eff ective for ﬁ scal 
years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. In 
transition,  lessees  and  lessors  are  required  to  recognize  and  measure  leases  at  the  beginning  of  the  earliest  period 
presented using a modiﬁ ed retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 
842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the eff ective date (e.g. 
January  1,  2019),  as  opposed  to  the  earliest  period  presented  under  the  modiﬁ ed  retrospective  transition  approach 
(January 1, 2017) and recognize a cumulative-eff ect adjustment to the opening balance of retained earnings in the 

F-12

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

period of adoption. The modiﬁ ed retrospective approach includes a number of optional practical expedients primarily 
focused on leases that commenced before the eff ective date of Topic 842, including continuing to account for leases 
that  commence  before  the  eff ective  date  in  accordance  with  previous  guidance,  unless  the  lease  is  modiﬁ ed. The 
Company  currently  expects  that  most  of  its  operating  lease  commitments  will  be  subject  to  the  new  standard  and 
recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the 
total assets and total liabilities that the Company reports relative to such amounts prior to adoption.

On August 17, 2018, the SEC issued Rule 33-10532 which requires registrants, including smaller reporting companies, 
to disclose in interim periods on Form 10-Q (1) the changes in each caption of stockholders’ equity and noncontrolling 
interests for the “current and comparative year-to-date periods, with subtotals for each interim period” and (2) the 
amount of dividends per share for each class of shares. Rule 33-10532 became eff ective 30 days after its publication 
on November 5, 2018. On September 25, 2018 the SEC released guidance advising it will not object to a registrant 
adopting the requirement to include changes in stockholders’ equity in the Form 10-Q for the ﬁ rst quarter beginning 
after the eff ective date of the rule. The Company adopted Rule 33-10532 on its eff ective date and will issue the required 
statement of stockholders’ equity beginning in its ﬁ rst quarterly Form 10-Q ﬁ ling in 2019.

In  June  2018,  the  FASB  issued ASU  2018-07,  Improvements  to  Nonemployee  Share-Based  Payment Accounting, 
which simpliﬁ es the accounting for share-based payments granted to nonemployees for goods and services. Under the 
ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based 
payments granted to employees. The amendments are eff ective for ﬁ scal years beginning after December 15, 2019, 
and interim periods within ﬁ scal years beginning after December 15, 2020. Early adoption is permitted, but no earlier 
than an entity’s adoption date of Topic 606. The Company expects to adopt the new standard on January 1, 2020. The 
Company anticipates the adoption will not have a material impact on its ﬁ nancial statements.

Adoption of Recent Accounting Pronouncements

In  May  2014,  the  FASB  issued  Accounting  Standards  Update  (“ASU”)  2014-09,  Revenue  from  Contracts  with 
Customers (Topic 606), as modiﬁ ed by ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral 
of the Eff ective Date, ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent 
Considerations  (Reporting  Revenue  Gross  versus  Net),  ASU  2016-10,  Revenue  from  Contracts  with  Customers 
(Topic 606): Identifying Performance Obligations and Licensing, and ASU 2016-12, Revenue from Contracts with 
Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The revenue recognition principle in 
ASU 2014-09 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an 
amount that reﬂ ects the consideration to which the entity expects to be entitled in exchange for those goods or services. 
In addition, new and enhanced disclosures will be required.

Companies may adopt the new standard either using the full retrospective approach, a modiﬁ ed retrospective approach 
with practical expedients, or a cumulative eff ect upon adoption approach. The Company adopted the new standard on 
January 1, 2018, using the modiﬁ ed retrospective approach. The adoption of ASU 2014-09 did not have a material 
impact on the Company’s ﬁ nancial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modiﬁ cation 
Accounting. ASU  2017-09  provides  clarity  and  reduces  both  (1)  diversity  in  practice  and  (2)  cost  and  complexity 
when applying the guidance in Topic 718, to a change to the terms or conditions of a share-based payment award. The 
amendments in ASU 2017-09 should be applied prospectively to an award modiﬁ ed on or after the adoption date. This 
ASU is eff ective for ﬁ scal years beginning after December 15, 2017, including interim periods within those years. 
The Company adopted the new standard on January 1, 2018 and the adoption of ASU 2017-09 did not have a material 
impact on the Company’s ﬁ nancial statements.

F-13

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 4: PROPERTY AND EQUIPMENT

As of December 31, 2018 and 2017, our property and equipment consisted of the following:

December 31, 
2018

December 31, 
2017

Computer equipment and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Furniture and ﬁxtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Machinery and equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
FUV rental ﬂeet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Leasehold improvements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Fixed assets in process  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Less: accumulated depreciation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

51,594 $ 
46,839
4,683,529
71,998
349,008
1,082,345
6,285,314
(475,539)
5,809,774 $ 

60,696
50,996
1,658,976
—
297,025
462,531
2,530,224
(96,198)
2,434,026

Fixed  assets  in  process  is  comprised  primarily  of  Beta  FUVs  being  reworked  for  deployment  into  the  rental  ﬂ eet, 
leasehold improvements, tooling and equipment related to the manufacturing of our vehicles. Completed assets are 
transferred to their respective asset class and depreciation begins when the asset is ready for its intended use.

Depreciation expense was $454,494 and $20,107 during the years ended December 31, 2018 and 2017, respectively.

NOTE 5: CAPITAL LEASE OBLIGATIONS

As of December 31, 2018, the Company has ﬁ nanced a total of $2,143,243 of its capital equipment purchases with 
monthly payments ranging from $437 to $8,582, repayment terms ranging from 48 to 60 months, and eff ective interest 
rates  ranging  from  4.52%  to  9.86%. Total  monthly  capital  lease  payments  as  of  December  31,  2018  are  $43,728. 
These lease obligations mature ranging from December 2021 through October 2023 and are secured by approximately 
$2,719,557  in  underlying  assets  which  have  $127,717  in  accumulated  depreciation  as  of  December  31,  2018. The 
balance of capital lease obligations was $1,897,395 and $0 as of December 31, 2018 and 2017, respectively.

See the following table for future minimum payments by year.

Years ending December 31:

2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total payments including interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
Less amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of future payments on principal balances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion of capital lease obligations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term capital lease obligations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 

524,734
524,734
524,734
524,557
155,424
2,254,183
(356,788)
1,897,395
(383,800)
1,513,595

NOTE 6: NOTES PAYABLE

On  December  4,  2015,  the  Company  entered  into  a  $250,000  loan  agreement  with  the  City  of  Eugene  Business 
Development Fund; however, the funds for the loan were not received until April 1, 2016. This loan was secured by 
substantially all assets of the Company and had an interest rate of 5% per annum. Interest only payments were due 
monthly from the date of disbursement. The entire unpaid principal balance of the loan, plus accrued interest, was due 
and payable upon the earlier of the occurrence of a Regulation A off ering or October 1, 2017. The note was repaid on 
September 21, 2017 in full, after the ﬁ rst closing of the Regulation A off ering.

F-14

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 6: NOTES PAYABLE (cont.)

During the year ended December 31, 2017, the Company issued a series of convertible notes with original principal 
balances of $200,000, all with the same terms as disclosed below. Of these notes $100,000 were to related parties. 
The notes and all accrued interest were due on March 31, 2018. Similar notes were issued in 2016 for total convertible 
notes of $525,000. The notes were secured by substantially all assets of the Company and had a stated interest rate of 
6% per annum. The notes were convertible on demand at the greater of $5.00 per share or 90% of the active selling 
price of the Series A-1 Preferred Stock at the time of conversion. Notes totaling $450,000, of which $150,000 was for 
related parties, with accrued interest thereon of approximately $23,000 were converted to 80,832 shares of common 
stock on August 31, 2017, at a price of $5.85 per share, which represented 90% of the $6.50 per share price in the 
Regulation A off ering. Notes totaling $75,000 were repaid in cash along with accrued interest thereon of $354.

During September 2017, the Company issued two convertible notes to related parties in the total principal amount of 
$70,000. The notes and all accrued interest were due on March 31, 2018. These notes were secured by substantially 
all assets of the Company and had a stated interest rate of 6% per annum. The notes were convertible on demand at 
the greater of $6.50 per share of common stock or 90% of the active selling price of the common stock at the time of 
conversion. The notes principal balance of $70,000 and accrued interest of $232 was repaid in cash on September 29, 
2017.

On September 11, 2017, the Company borrowed $5,000 from a related party, no security was issued for the loan. The 
loan was meant to be a short-term advance and due on demand. The loan was repaid on October 26, 2017 and there is 
no interest associated with this advance.

On December 27, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with 
FOD Capital, LLC, a Florida limited liability company (the “Investor”), pursuant to which the Company issued to the 
Investor (i) 500,000 shares of its common stock, no par value per share at a purchase price of $3.00 per share (the 
“Shares”), (ii) a warrant to purchase up to 942,857 shares of common stock at $3.50 per share (the “Warrant”), and 
(iii) a senior secured note in the principal amount of $3,000,000 (the “Note”). (see Note 7)

NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT)

Stock-Split

On July 21, 2017, the Board and a majority of common stockholders voted to enact a two-for-one common stock split 
and increase the authorized common shares to 20,000,000. On July 25, 2017, a majority of the Series A-1 Preferred 
stockholders voted to convert all 1,434,891 Series A-1 Preferred shares to 2,869,782 common shares. The July 21, 
2017, two-for-one common stock split resulted in a conversion rate of two shares of common stock for each share of 
Series A-1 Preferred stock. In accordance with SEC reporting guidelines, the retrospective application of the stock 
split has been applied to historical ﬁ nancial information, and the Series A-1 Preferred to common stock conversion 
was reﬂ ected in the accompanying ﬁ nancial statements as if it occurred as of December 31, 2016.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, no par value, of which 1,500,000 shares were 
designated as Series A-1 Preferred Stock and 2,000,000 are designated as Class C Preferred Stock.

The  Series A-1  Preferred  Stock  is  convertible  at  any  time  after  issuance  at  the  option  of  the  holder  into  shares  of 
common stock at the original issue price of the Series A-1 Preferred Stock. The Series A-1 Preferred Stock is also 
subject  to  mandatory  conversion  provisions  upon  an  initial  public  off ering  raising  $15  million  or  more  and  is  not 
redeemable. To  prevent  dilution,  the  conversion  price  of  the  Series A-1  Preferred  Stock  is  to  be  adjusted  for  any 
issuance of securities, excluding exempt securities, which change the number of shares of common stock outstanding. 
The Series A-1 Preferred Stockholders are entitled to equal voting rights to common stockholders on an as-converted 
basis  and  receive  preference  to  the  common  stockholders  upon  liquidation.  During  the  ﬁ rst  two  quarters  of  2017, 
245,100 shares of Series A-1 Preferred Stock were sold for cash proceeds of $1,225,500 under a Regulation D off ering. 
Of these shares, 10,000 were issued to a related party. The Series A-1 Preferred Stock was converted to common stock 
as noted above.

F-15

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT) (cont.)

As  a  result  of  the  share  exchange  agreement  described  below,  the  Company  was  authorized  to  issue  2,000,000  of 
Class C Preferred Stock. On November 15, 2018, all 2,000,000 were issued in the exchange noted below.

Except as otherwise required by law or expressly provided in the Related Articles, each share of Class C Preferred 
Stock has one vote for the election of directors and on all matters submitted to a vote of shareholders of the Company. 
The  Company  is  not  obligated  to  redeem  or  repurchase  any  shares  of  Class  C  Preferred  Stock.  Shares  of  Class  C 
Preferred Stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund 
provisions.

Common Stock

The Company is authorized to issue 20,000,000 shares of common stock, no par value, as of December 31, 2018 and 
2017.

The Company has reserved a total of 2,850,744 shares of its common stock pursuant to the equity incentive plans (see 
Note 8). The Company has 2,236,893 and 1,957,204 stock options and warrants outstanding under these plans as of 
December 31, 2018 and 2017, respectively.

As of December 31, 2018, the Company has reserved an additional 942,857 shares of its common stock for warrants 
pursuant to the Subscription Agreement discussed above. As of December 31, 2018, these warrants were vested on 
issuance.

Common Stock Issued for Compensation

On October 4, 2017, we issued 4,000 shares of common shares at a cost of $5.25 per share were issued to a vendor 
in exchange for video production services. The price per share was based on the closing quote for the Company’s 
common stock on the Nasdaq Capital Market the day before the Board of Directors approved the payment. The total 
cost of $21,000 is included in sales and marketing expenses on the Company’s Statement of Operations.

During the year ended December 31, 2018, the Company issued 55,000 restricted common shares for services with a 
fair value of $195,450. The shares were valued based on the stock price at the time of the grant.

Exercise of Stock Options and Warrants

On January 31, 2018, 14,200 employee options were exercised at a price per share of $2.0605 for total proceeds to the 
Company of $29,259.

During  the  year  ended  December  31,  2018,  a  total  of  80,000  employee  warrants  with  an  exercise  price  of  $0.50 
per  share  per  share  were  exercised  in  cashless  transactions  at  a  market  prices  ranging  from  $3.7776  per  share  to 
$4.4030 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction 
dates amounting to the issuance of a total of 70,273 shares of the Company’s common stock. These shares meet the 
requirements for not being restricted from trading.

During the year ended December 31, 2018, 40,056 employee options with an exercise price ranging from $2.0605 
per share to $2.50 per share were exercised in cashless transactions at market prices ranging from $3.658 per share to 
$4.202 per share each of which was based on ranges of the Company’s daily closing price near the transaction dates. 
The exercises resulted in the issuance of a total of 20,814 shares of the Company’s common stock. These shares meet 
the requirements for not being restricted from trading.

Share Exchange Agreement

On  November  15,  2018,  the  Company  entered  into  a  Share  Exchange  Agreement  with  the  President,  CEO  and 
Chairman of the Board of Directors of the Company (the “CEO”). Pursuant to the Agreement, the CEO exchanged 
2 million of his shares of company common stock for 2 million shares of newly designated Class C preferred stock. 

F-16

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT) (cont.)

These shares will automatically convert back to 2 million shares of common stock upon the ﬁ ling of an amendment to 
the Restated Articles of the Company that increases the number of authorized shares of common stock. There was no 
accounting impact as a result of this exchange.

Public Off ering of Common Stock

During  September  and  October  2017,  the  Company  issued  2,945,657  shares  of  common  stock  in  a  Regulation 
A  off ering  at  a  public  off ering  price  of  $6.50  per  share. We  received  net  proceeds  of  $18,087,640  after  deducting 
underwriter commissions of $1,051,131 and escrow closing fees of $8,000.

On November 19, 2018, the Company entered into Subscription Agreements with certain investors relating to a public 
off ering  of  504,900  shares  of  common  stock  directly  to  investors,  for  an  off ering  price  of  $3.00  a  share. With  the 
proceeds of $1,514,700 from the off ering, the Company plans utilize these funds for operating expenses, inventory 
costs, and off ering costs, amongst other general corporate purposes.

The November 2018 Off ering was made pursuant to the Company’s registration statement on Form S-3, previously 
ﬁ led with the Securities and Exchange Commission (the “SEC”) on October 3, 2018, and declared eff ective by the 
SEC  on  October  17,  2018,  a  base  prospectus  forming  a  part  of  the  eff ective  registration  statement,  a  preliminary 
prospectus supplement dated November 16, 2018 and a prospectus supplement dated November 20, 2018.

Entry into a Material Deﬁ nitive Agreement

On December 27, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with 
FOD Capital, LLC, a Florida limited liability company (the “Investor”), pursuant to which the Company issued to the 
Investor (i) 500,000 shares of its common stock, no par value per share at a purchase price of $3.00 per share (the 
“Shares”), (ii) a warrant to purchase up to 942,857 shares of common stock at $3.50 per share (the “Warrant”), and 
(iii) a senior secured note in the principal amount of $3,000,000 (the “Note”). The Shares, Warrant and Note were 
purchased together by the Investor for an aggregate amount of $4.5 million but were issued separately (collectively, 
the “Transaction”).

The Company off ered the Shares and Warrant in a public off ering pursuant to the Company’s registration statement 
ﬁ led with the SEC that was declared eff ective on October 17, 2018, as well as the prospectus supplement ﬁ led on 
December  27,  2018  (the  “Shelf  Registration  Statement”).  The  Note  was  issued  pursuant  to  an  exemption  from 
registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

The Shares were issued for an aggregate purchase price of $1,500,000. In connection with the Share issuance, the 
Company granted the Investor with franchise rights for the lower Florida Keys, subject to the terms contained in the 
Company’s standard franchise agreement.

The Warrant has a 3-year term. The Company reserved 942,857 shares of common stock for issuance pursuant to the 
potential exercise of the Warrant and, so long as the Warrant remains outstanding, the Company will keep reserved for 
issuance under the Warrant that number of shares of Common Stock at least equal to the maximum number of shares 
of common stock as shall be necessary to satisfy the Company’s obligation to issue shares of common stock under 
the Warrant then outstanding (without regard to any limitations on exercise). The warrant was valued based on the 
Black-Scholes option pricing model using similar inputs to those described in Note 8, other than the contractual life 
which was based on the term of the warrant. The relative fair value of the warrant in relation to the debt and equity 
component of the Transaction was $111,374.

The Note is secured by a perfected ﬁ rst secured lien on all the Company’s assets except for equipment assets securing 
existing or future leases. Interest will accrue at 10% per annum and will be paid at maturity or payoff  of the note, with 
a minimum of one year of interest paid at such time. The Note matures on December 27, 2019 and, subject to certain 
conditions, can be extended for an additional six months upon payment of $300,000 to the Investor by the Company. 
In  connection  with  the  Note,  the  Company  entered  into  a  Security  Agreement,  an  Intellectual  Property  Security 

F-17

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 7: STOCKHOLDERS’ EQUITY (DEFICIT) (cont.)

Agreement and a Collateral Assignment of Lease Agreement, each dated as of December 27, 2018 (collectively, the 
“Collateral Documents”). The short-term note was recorded with an original issue discount of $322,942 which will be 
amortized as interest expense over the Note’s twelve-month term. The discount is based on the allocation of costs and 
warrants associated with the Transaction. The discount will be amortized in 2019 through the date of maturity.

NOTE 8: STOCK-BASED COMPENSATION

The Company grants stock options and warrants pursuant to the 2018 Omnibus Stock Incentive Plan (“2018 Plan”), 
Amended  and  Restated  2015  Stock  Incentive  Plan  (“2015  Plan”)  and  the  Second  Amended  and  Restated  2012 
Employee Stock Beneﬁ t Plan (“2012 Plan”).

The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation 
expense on a straight-line basis over the vesting period of the award. Grants to non-employees are expensed at the 
earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is 
reached and (ii) the date at which the counterparty’s performance is complete

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including 
the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected 
stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. 
The  assumptions  used  in  calculating  the  fair  value  of  stock-based  awards  represent  management’s  best  estimates 
and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and 
management uses diff erent assumptions, stock-based compensation expense could be materially diff erent for future 
awards.

The  Company  uses  the  following  inputs  when  valuating  stock-based  awards. The  expected  life  of  employee  stock 
options  was  estimated  using  the  “simpliﬁ ed  method,”  as  the  Company  has  no  historical  information  to  develop 
reasonable  expectations  about  future  exercise  patterns  and  employment  duration  for  its  stock  option  grants.  The 
simpliﬁ ed method is based on the average of the vesting tranches and the contractual life of each grant. The expected 
life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price 
volatility,  the  Company  uses  public  company  compatibles  and  historical  private  placement  data  as  a  basis  for  its 
expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes 
with a term approximating the expected life of the option at the grant-date.

Stock-based compensation, including stock-options, warrants and stock issued for compensation is included in the 
statement of operations as follows:

Year ended December 31,
2017
2018

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Sales and marketing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

106,066 $ 
237,107
152,432
495,605 $ 

24,000
27,000
152,734
203,734

2018 Omnibus Stock Incentive Plan

The 2018 Plan was approved by the Board of Directors and then the Company’s shareholders at the Company’s 2018 
annual meeting of shareholders held on June 9, 2018. The 2018 Plan provides the Company the ability to grant to 
employees, directors, consultants or advisors shares of common stock of the Company through the grant of equity 
awards, including, but not limited to, options that are incentive stock options or non-qualiﬁ ed stock options (“NQSOs”) 
and restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with 
IRS  guidelines. The  Company  reserved  1,000,000  shares  of  common  stock  under  the  2018  Plan. Awards  that  are 
forfeited generally become available for grant under the 2018 Plan.

F-18

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 8: STOCK-BASED COMPENSATION (cont.)

On September 1, 2018, 617,000 options were issued under the 2018 Plan, 84,000 of those grants were forfeited, leaving 
533,000 grants outstanding. No employee options were vested as of December 31, 2018. See below for the range of 
variables used in assessing the fair value at the grant date for the options issued during the year ended December 31, 2018:

Annual dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 
2018

—
6 – 10

2.78 – 2.86%
36.2%

Employee stock-based compensation expense included in operating expenses for the year ended December 31, 2018 
was $106,404.

For options issued to a non-employee contractor for the year ended December 31, 2018, vesting was completed on the 
date of issue. The fair value of these non-employee awards was $1,112 for the year ended December 31, 2018.

Total  compensation  cost  related  to  non-vested  awards  issued  on  September  1,  2018  under  the  2018  Plan  not  yet 
recognized as of December 31, 2018 is approximately $810,900 and will be recognized on a straight-line basis through 
the end of the vesting periods which is September 30, 2021. The amount of future stock option compensation expense 
could be aff ected by any future option grants or by any forfeitures.

2015 Stock Incentive Plan

The 2015 Plan provides the Company the ability to grant to employees, directors, consultants or advisors shares of 
common stock of the Company through the grant of options that are incentive stock options or NQSOs and/or the grant 
of restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS 
guidelines. The Company reserved 1,000,000 shares of common stock for delivery under the 2015 Plan. Awards that 
are forfeited generally become available for grant under the 2015 Plan.

There were no grants made under the 2015 Plan during the year ended December 31, 2018. The range of variables 
used in assessing the fair value at the grant date for the options issued during the year ended December 31, 2017 is 
presented below:

Annual dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 
2017

—
6.0 – 10.0
1.71 – 2.46%
21.3 – 22.1%

Employee stock-based compensation expense included in operating expenses for the year ended December 31, 2018 
and 2017 was $185,673 and $136,002, respectively.

For the NQSOs issued for the year ended December 31, 2017, vesting was completed on the date of issue. The fair 
value of these non-employee awards was $22,445 for the year ended December 31, 2017.

Total compensation cost related to non-vested awards not yet recognized as of December 31, 2018 was $171,981 and 
will be recognized on a straight-line basis through the end of the vesting periods or December 31, 2020. The amount 
of future stock option compensation expense could be aff ected by any future option grants or by any forfeitures.

F-19

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 8: STOCK-BASED COMPENSATION (cont.)

As of December 31, 2018, 130,521 options are still issuable under the 2015 Plan.

A summary of activity under the 2015 Plan for the years ended December 31, 2018 and 2017 is presented below:

Options outstanding at December 31, 2016 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2018 . . . . . . . . . . . . . . . . . . . .

2012 Employee Stock Beneﬁ t Plan

Number of 
Shares

Weighted 
Average 
Exercise Price
2.06
2.70
—
2.50
2.71
—
2.25
2.66
2.53

267,700 $ 
756,500
—
(40,000)
984,200 $ 
—
(54,256)
(114,721)
815,223 $ 

Weighted 
Average 
Remaining 
Contractual 
Life 
(in Years)

8.76
9.42
—
—
8.97
—
7.37
8.23
7.72

A summary of activity under the 2012 Plan for the years ended December 31, 2018 and 2017 is presented below:

Warrants outstanding at December 31, 2016  . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants outstanding at December 31, 2017  . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants outstanding at December 31, 2018  . . . . . . . . . . . . . . . . . . .

Number of 
Shares

Weighted 
Average 
Exercise Price
0.58
2.50
0.50
—
0.59

0.50
—
0.60

980,004 $ 
8,000
(15,000)
—
973,004 $ 
—
(80,000)
—
893,004 $ 

Weighted 
Average 
Remaining 
Contractual 
Life 
(in Years)

7.36
4.33
5.00
—
6.37

4.00
—
5.33

The 2012 Plan provides the Company the ability to grant to directors, employees, consultants, advisors or independent 
contractors shares of common stock of the Company through the grant of warrants and/or the grant of common stock. 
The Company reserved 1,000,000 shares of common stock for delivery under the 2012 Plan. Warrants expire 10 to 15 
years from the grant date and were vested when issued.

As of December 31, 2018, 11,996 warrants are still issuable under the 2012 Plan.

The  Company  recorded  $6,966  in  stock  compensation  expense  on  warrants  that  vested  during  the  year  ended 
December 31, 2018 issued outside the 2012 Plan in the prior year.

F-20

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 8: STOCK-BASED COMPENSATION (cont.)

Warrants

The following warrants were issued outside of the 2012 Plan.

Warrants issued to vendors to purchase common stock
Investor warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
Reg A Underwriter warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
Warrants issued to vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercise Price
3.50
7.475
3.20

Vested as of 
December 31, 
2018
942,857
122,238
47,000
1,112,095

Issued

942,857
122,238
47,000
1,112,095

In connection with our Regulation A off ering, the Company issued 122,238 warrants to the underwriter with a strike 
price of $7.475 per share and a ﬁ ve-year life from the off ering qualiﬁ cation date. The variables used in the Black-Scholes 
calculation were similar to those disclosed under the 2015 Plan and 2012 Plan disclosed above, with the exception that 
the contractual date was used for expected life. The value of the warrants is both an increase and decrease to common 
stock as a cost of equity, for a net zero eff ect within the statement of stockholders’ equity.

In December 2017, 47,000 warrants were issued to two service providers with strike prices of $3.20 per share and a 
ten-year life. Of these, 11,000 warrants vest as follows: 5,000 immediately and 1,500 per month over four months. 
As of December 31, 2018, all 11,000 warrants were fully vested. The fair value per warrant at the time of issuance 
was $1.161 based on inputs to the Black-Scholes model, similar to those disclosed under the 2015 Plan and 2012 
Plan above.

As described in Note 7, on December 27, 2018, the Company granted 942,857 warrants with a strike price of $3.50

NOTE 9: CUSTOMER DEPOSITS

The Company has received customer deposits ranging from $100 to $10,100 per vehicle for Retail Series production 
vehicles and $42,000 per vehicle for Signature Series vehicles for purposes of securing a vehicle production slot. As of 
December 31, 2018 and 2017, the Company’s balance of deposits received was $454,624 and $399,967, respectively. 
As of December 31, 2018 and 2017, $370,624 and $231,967, respectively, of these deposits were refundable upon 
demand. Deposits are included in current liabilities in the accompanying balance sheets. When a customer’s order is 
ready to enter the production process, the customer is notiﬁ ed that if they would like to proceed with the purchase 
of a vehicle, their deposit will no longer be refundable, and any additional deposit required must be paid prior to the 
start of the manufacturing process. Customer deposits from related parties total $1,700 as of December 31, 2018 and 
2017, respectively.

NOTE 10: CONCENTRATIONS AND CREDIT RISKS

Revenues

For the years ended December 31, 2018 and 2017 the Company had two signiﬁ cant customers, that accounted for more 
than 10% of the Company’s total revenues. The Company does not believe the loss of these customers would have a 
material impact on the Company’s business or operations.

Accounts Payable

For the years ended December 31, 2018 and 2017 the Company had 65% and 80% of its accounts payable balances 
held by its top ﬁ ve vendors, respectively. During each of these same periods, the Company had two and three of its 
vendors accounting for more than 10% each of the Company’s accounts payables balances, respectively. Management 
believes the loss of one of the three vendors from 2017 could have an adverse impact on the Company’s operations. 
Loss of the other vendors would not have an adverse impact on the Company’s operations.

F-21

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 11: COMMITMENTS AND CONTINGENCIES

On September 3, 2017, the Company entered into a lease on approximately 30,000 square feet of commercial industrial 
offi  ce and manufacturing space in Eugene, Oregon. The lease began on October 1, 2017 and will terminate on March 31, 
2021. Rent was $25,000 for the ﬁ rst month, then is $12,500 per month for months two through forty-one, and one 
dollar for month forty-two. Starting April 1, 2018, the lease was modiﬁ ed to include an additional approximately 1,000 
square feet attached to the main building, and the monthly rent payment was increased to $12,948.

On  October  5,  2018,  the  Company  converted  a  month  to  month  lease  previously  signed  on  June  11,  2018,  into  a 
60-month lease on approximately 5,000 square feet of commercial industrial offi  ce and manufacturing space in Eugene, 
Oregon. The lease began in October 2018 and will terminate in October 2023. Rent is $4,500 per month increasing by 
3% on each annual anniversary of the signing.

On October 3, 2018, the Company entered into a lease on approximately 4,491 square feet of retail space in San 
Diego,  California. The  lease  began  on  November  1,  2018  and  will  terminate  on  October  31,  2023.  Initial  base 
rent is $8,982 per month increasing by 3% on each annual anniversary of the signing. In addition to the base rent 
there is a management fee of 5% of the base rent per month and an additional monthly fee of $377.09, subject to 
change, for the lessor’s property taxes and insurance. A portion of the space will be used for Arcimoto’s California 
dealer showroom. On October 18, 2018, we sublet 65% of the premises to Hula Holdings, Inc. (“Hula”) which it 
expects to use as a rental center for FUVs, among other general retail, dispatching, parking and charging services 
for electric vehicles. Hula has agreed to pay the landlord 65% of the annual base rent and associated costs under 
the lease.

See the following table for future minimum rent payments by year.

Years ending December 31:

2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 
2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 

328,045
333,089
208,806
188,261
155,502
1,213,703

Rent expense is recognized on a straight-line basis. Total rent expense for the years ended December 31, 2018 and 
2017 was $199,769 and $107,645, of these amounts $0 and $62,405 was to related parties, respectively.

Litigation

On March 11, 2018, the Company was served with a lawsuit entitled John R Switzer vs W.R. Hambrecht & Co. LLC 
et al., Case Number: CGC-18-564904, ﬁ led in San Francisco County Superior Court in the State of California. In 
this action, the Company was named as a defendant along with ﬁ ve individuals who were directors and/or executive 
offi  cers at the time of the completion of the Company’s Regulation A off ering on September 21, 2017. The action 
was styled as a putative class action, alleged on behalf of all those who purchased the Company’s common stock in 
its Regulation A off ering. The plaintiff  alleged violations of Section 12(a)(2) and Section 15 of the Securities Act of 
1933, as amended, and is seeking damages in an unspeciﬁ ed amount to be proven at trial. In addition, on March 28, 
2018, the Company was served with another lawsuit entitled Jay Mendelson v. Arcimoto, Inc. et al., Case Number 
CGC-18-565324, ﬁ led in San Francisco County Superior Court in the State of California. In that action, which was 
styled as a putative class action, the Company was also named as a defendant along with the same individuals who 

F-22

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 11: COMMITMENTS AND CONTINGENCIES (cont.)

were directors and/or executive offi  cers at the time of the completion of our Regulation A off ering on September 21, 
2017. The  allegations  and  claims  made  in  the  Mendelson  action  were  substantially  similar  to  those  of  the  Switzer 
action and the plaintiff  was also seeking damages in an unspeciﬁ ed amount to be proven at trial. The two actions were 
consolidated into a single lawsuit on May 28, 2018. The Company believes that the consolidated lawsuit was without 
merit and vigorously defended itself against these claims in court. On July 30, 2018, counsel for the Company ﬁ led a 
demurrer to the consolidated complaint, seeking its dismissal. By Order dated September 19, 2018, the San Francisco 
Court sustained in part and denied in part the demurrer. On September 28, 2018, plaintiff s in that case ﬁ led a First 
Amended Consolidated Complaint. The Company denied the substantive claims and allegations made in that amended 
pleading and continued to assert a vigorous defense. On January 25, 2019, the parties reached a settlement agreement 
in the consolidated cases, subject to court approval. By its terms, the settlement agreement resolves this litigation in 
its entirety.

NOTE 12: INCOME TAXES

The  2017 Tax Act,  which  was  signed  into  law  on  December  22,  2017,  has  resulted  in  signiﬁ cant  changes  to  the 
U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the 
elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest 
expense  and  executive  compensation. The  2017 Tax Act  also  transitions  international  taxation  from  a  worldwide 
system to a modiﬁ ed territorial system. These changes are eff ective beginning in 2018.

Deferred income taxes reﬂ ect the net tax eff ects of temporary diff erences between the carrying amounts of assets and 
liabilities for ﬁ nancial reporting purposes and the amounts used for income tax purposes. Signiﬁ cant components of 
the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 are summarized below:

For the Year Ended 
December 31,

2018

2017

Deferred tax assets:

Share-based compensation expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 
Net operating loss carry forward  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

225,022 $ 

5,260,576

88,211
2,434,289

Deferred tax liabilities:

Property and equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Federal research and development credit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Oregon research and development credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Total deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Net deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 

(114,003)
366,085
176,338
5,914,018
(5,914,018)

— $ 

(24,878)
259,615
129,675
2,886,912
(2,886,912)
—

In  assessing  the  potential  realization  of  these  deferred  tax  assets,  management  considers  whether  it  is  more  likely 
than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax 
assets is dependent upon the Company attaining future taxable income during the periods in which those temporary 
diff erences  become  deductible. As  of  December  31,  2018  and  2017,  management  was  unable  to  determine  if  it  is 
more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded an appropriate 
valuation allowance against deferred tax assets at such dates. The valuation allowance for deferred tax assets increased 
$3,027,106 and $485,419 during the years ended December 31, 2018 and 2017, respectively.

F-23

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 12: INCOME TAXES (cont.)

No federal tax provision has been provided for the years ended December 31, 2018 and 2017 due to the losses incurred 
during  such  periods. The  Company’s  eff ective  tax  rate  is  diff erent  from  the  federal  statutory  rate  due  primarily  to 
operating losses that receive no tax beneﬁ t as a result of a valuation allowance recorded for such losses.

Statutory U.S. Federal tax rate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Effect of U.S. tax law change(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
State and local income taxes – net of Federal beneﬁt . . . . . . . . . . . . . . . . . . . . . . 
Nondeductible expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Effective rate tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

For the Year Ended 
December 31,

2018

2017

21.0%
—%
6.6%
0.9%
(28.5)%
0.0%

34.0%
(30.0)%
6.6%
4.0%
(14.6)%
0.0%

(1)  Due to the Tax Act, our U.S. deferred tax assets and liabilities as of December 31, 2017 were re-measured from 34% to 21%. 
The change in tax rate resulted in a decrease to our gross U.S. deferred tax assets which is off set by a corresponding decrease 
to our valuation allowance. This resulted in an adjustment to the Company’s deferred tax assets of $676,000 from the prior 
period

As of December 31, 2018, the Company had net operating loss carry forwards of $10,373,153 which will expire at 
various dates from 2029 through 2039. The Federal R&D tax credits will expire at various dates from 2032 through 
2039, and the Oregon R&D tax credits will expire at various dates from 2018 through 2022.

The  Company  has  evaluated  its  income  tax  positions  and  has  determined  that  it  does  not  have  any  uncertain  tax 
positions. The Company policy is to record interest and penalties on uncertain tax positions as income tax expense. 
The Company may in the future become subject to federal, state and local income taxation though it has not been since 
its inception. The Company is not presently subject to any income tax audit in any taxing jurisdiction.

The Company has identiﬁ ed the United States Federal and Oregon State tax returns as its “major” tax jurisdiction. 
The United States Federal and Oregon State return years 2015 through 2018 are still subject to tax examination by the 
United States Internal Revenue Service; however, we do not currently have any ongoing tax examinations.

NOTE 13: SUBSEQUENT EVENTS

During January and February 2019, 117,192 employee options with an exercise price ranging from $2.0605 per share 
to $3.10 per share were exercised in cashless transactions at market prices ranging from $2.864 per share to $5.212 
per share each of which was based on ranges of the Company’s daily closing price near the transaction dates. The 
exercises resulted in the issuance of a total of 53,513 shares of the Company’s common stock. These shares meet the 
requirements for not being restricted from trading.

On February 22, 2019, a total of 200,000 employee warrants, 30,000 with an exercise price of $0.50 per share and 
170,000  with  an  exercise  price  of  $0.9375  per  share  were  exercised  in  cashless  transactions  at  a  market  price  of 
$5.212 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction 
dates amounting to the issuance of a total of 164,578 shares of the Company’s common stock. These shares meet the 
requirements for not being restricted from trading.

During  January  and  February  2019,  the  Company  entered  into  unregistered  Subscription Agreements  under  SEC 
series  4(a)(2)  off ering  regulations,  with  four  independent  investors,  pursuant  to  which  the  Company  issued  to  the 
Investors 288,333 shares of its common stock, no par value per share at a purchase price of $3.00 per share.

On February 11, 2019, the Company secured $88,850 in equipment ﬁ nancing secured by $94,850 in equipment for 
60 months at 9.72% interest for a monthly payment of $1,867.

F-24

ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 13: SUBSEQUENT EVENTS (cont.)

On March 25, 2019, the Company issued 800,000 shares of common stock at a purchase price of $4.25 per share for 
$3,400,000. The Company expects to net $3,122,000 after deducting $278,000 in various legal and transaction fees.

On March 28, 2019, 1,613 employee options were exercised at a price per share of $3.10 for total proceeds to the 
Company of $5,000.

If a majority of the Stockholders approve the resolution at the May 11, 2019, annual meeting, the number of authorized 
common shares will increase from 20,000,000 to 60,000,000 and the 2,000,000 shares of Class C preferred stock will 
automatically convert to common stock.

F-25

Exhibit
Number
1.1
3.1(a)

3.1(b)

3.2

10.1

10.2

10.3

10.4
10.5

10.6
10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

23.1

31.1

31.2

EXHIBIT INDEX

Incorporated by Reference 
(Unless Otherwise Indicated)

Exhibit Description
Underwriting Agreement
Second Amended and Restated Certiﬁcate of 
Incorporation of Arcimoto, Inc.
Articles of Amendment to Second Amended 
and Restated Articles of Incorporation of 
Arcimoto, Inc.
Second Amended and Restated Bylaws of 
Arcimoto, Inc.
Industrial Lease dated September 3, 2017 by 
and between Arcimoto, Inc. and 2034 LLC
Arcimoto, Inc. Second Amended and Restated 
Stock Incentive Plan #
Arcimoto, Inc. Amended and Restated 2015 
Stock Incentive Plan #
Arcimoto 2018 Omnibus Stock Incentive Plan
Form of Notice of Stock Option Grant and 
Award Agreement
Form of Restricted Stock Award Agreement
Industrial Lease dated October 18, 2018 by and 
between Arcimoto, Inc. and TEJ Enterprises
Amendment to Industrial Lease dated 
October 18, 2018 by and between Arcimoto, 
Inc. and TEJ Enterprises
Exchange Agreement by and between 
Arcimoto, Inc. and Mark Frohnmayer
Form of Subscription Agreement for securities 
offered in registered offering
Subscription Agreement with FOD Capital, 
LLC for shares and warrants and a senior 
secured note
Warrant to purchase common stock issued to 
FOD Capital, LLC
Senior Secured Note issued in favor of FOD 
Capital, LLC
Security Agreement dated December 27, 2018 
in favor of FOD Capital, LLC
Intellectual Property Security Agreement 
dated December 27, 2018 in favor of FOD 
Capital, LLC
Collateral Assignment of Lease dated 
December 27, 2018 in favor of
FOD Capital, LLC
Consent of dbbmckennon, Independent 
Registered Public Accounting Firm
Certiﬁcation of Chief Executive Officer 
pursuant to Section 302 of the Sarbanes-Oxley 
Act of 2002.
Certiﬁcation of Chief Financial Officer 
pursuant to Section 302 of the Sarbanes-Oxley 
Act of 2002.

Form

File No.

Exhibit

Filing Date
Filed herewith
Filed herewith

Filed herewith

1-A

024-10710

2.2

August 8, 2017

8-K

024-10710

10.1

October 4, 2017

1-A

024-10710

1-A

024-10710

8-K
8-K

001-38213
001-38213

2.2

2.2

10.4
10.5

8-K

001-38213

10.6

August 8, 2017

August 8, 2017

June 13, 2018
June 13, 2018

June 13, 2018
Filed herewith

Filed herewith

8-K

001-38213

10.7

November 21, 2018

8-K

001-38213

10.8

November 21, 2018

8-K

001-38213

4.1

December 28, 2018

8-K

001-38213

4.2

December 28, 2018

8-K

001-38213

10.1

December 28, 2018

8-K

001-38213

10.2

December 28, 2018

8-K

001-38213

10.3

December 28, 2018

8-K

001-38213

10.4

December 28, 2018

—

—

—

—

—

—

Filed herewith

Filed herewith

Filed herewith

32

Incorporated by Reference 
(Unless Otherwise Indicated)

Form
—

File No.
—

Exhibit
—

Filing Date
Filed herewith

—
—
—

—

—

—

—
—
—

—

—

—

Filed herewith
Filed herewith
Filed herewith

Filed herewith

Filed herewith

Filed herewith

Exhibit
Number
32.1

Exhibit Description
Certiﬁcation of Chief Executive Officer and 
Chief Financial Officer pursuant to Section 
906 of the Sarbanes-Oxley Act of 2002.
XBRL Instance Document.

—
101.INS
101.SCH XBRL Taxonomy Extension Schema Document. —
—
101.CAL XBRL Taxonomy Extension Calculation 

101.DEF

Linkbase Document.
XBRL Taxonomy Extension Deﬁnition 
Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase 

101.PRE

Document.
XBRL Taxonomy Extension Presentation 
Linkbase Document.

—

—

—

33

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

Date: March 29, 2019

ARCIMOTO, INC.

By:

/s/ Mark Frohnmayer
Mark Frohnmayer
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following 
persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

/s/ Mark Frohnmayer
Mark Frohnmayer

Capacity

President, Chief Executive Officer and
Chairman of the Board of Directors
(principal executive officer)

Date

March 29, 2019

/s/ Douglas M. Campoli
Douglas M. Campoli

Chief Financial Officer
(principal ﬁnancial and accounting officer)

March 29, 2019

/s/ Terry Becker
Terry Becker

/s/ Thomas Thurston
Thomas Thurston

/s/ Jeff Curl
Jeff Curl

/s/ Joshua S. Scherer
Joshua S. Scherer

/s/ Jesse G. Eisler
Jesse G. Eisler

Chief Operating Officer and Director

March 29, 2019

Director

Director

Director

Director

March 29, 2019

March 29, 2019

March 29, 2019

March 29, 2019

34

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Mark Frohnmayer, certify that:

EXHIBIT 31.1

1. 

2. 

3. 

4. 

I have reviewed this Annual Report on Form 10-K of Arcimoto, Inc. (the registrant);

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to 
state a material fact necessary to make the statements made, in light of the circumstances under which 
such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the ﬁ nancial statements, and other ﬁ nancial information included in this report, 
fairly present in all material respects the ﬁ nancial condition, results of operations and cash ﬂ ows of the 
registrant as of, and for, the periods presented in this report;

The registrant’s other certifying offi  cer(s) and I are responsible for establishing and maintaining disclosure 
controls and procedures (as deﬁ ned in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and 
have:

(a)  Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and 
procedures  to  be  designed  under  our  supervision,  to  ensure  that  material  information  relating  to 
the registrant, including its consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this report is being prepared;

(b) 

(Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(c)  Evaluated the eff ectiveness of the registrant’s disclosure controls and procedures and presented in 
this report our conclusions about the eff ectiveness of the disclosure controls and procedures, as of 
the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over ﬁ nancial reporting that 
occurred during the registrant’s most recent ﬁ scal quarter (the registrant’s fourth ﬁ scal quarter in the 
case of an annual report) that has materially aff ected, or is reasonably likely to materially aff ect, the 
registrant’s internal control over ﬁ nancial reporting; and

5. 

The  registrant’s  other  certifying  offi  cer(s)  and  I  have  disclosed,  based  on  our  most  recent  evaluation 
of  internal  control  over  ﬁ nancial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the 
registrant’s board of directors (or persons performing the equivalent functions):

(a)  All signiﬁ cant deﬁ ciencies and material weaknesses in the design or operation of internal control 
over  ﬁ nancial  reporting  which  are  reasonably  likely  to  adversely  aff ect  the  registrant’s  ability  to 
record, process, summarize and report ﬁ nancial information; and

(b)  Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who  have  a 

signiﬁ cant role in the registrant’s internal control over ﬁ nancial reporting.

Date: March 29, 2019

By:

/s/ Mark Frohnmayer
Mark Frohnmayer
President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Douglas M. Campoli, certify that:

EXHIBIT 31.2

1. 

2. 

3. 

4. 

I have reviewed this Annual Report on Form 10-K of Arcimoto, Inc. (the registrant);

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to 
state a material fact necessary to make the statements made, in light of the circumstances under which 
such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the ﬁ nancial statements, and other ﬁ nancial information included in this report, 
fairly present in all material respects the ﬁ nancial condition, results of operations and cash ﬂ ows of the 
registrant as of, and for, the periods presented in this report;

The registrant’s other certifying offi  cer(s) and I are responsible for establishing and maintaining disclosure 
controls and procedures (as deﬁ ned in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and 
have:

(a)  Designed  such  disclosure  controls  and  procedures,  or  caused  such  disclosure  controls  and 
procedures  to  be  designed  under  our  supervision,  to  ensure  that  material  information  relating  to 
the registrant, including its consolidated subsidiaries, is made known to us by others within those 
entities, particularly during the period in which this report is being prepared;

(b) 

(Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(c)  Evaluated the eff ectiveness of the registrant’s disclosure controls and procedures and presented in 
this report our conclusions about the eff ectiveness of the disclosure controls and procedures, as of 
the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over ﬁ nancial reporting that 
occurred during the registrant’s most recent ﬁ scal quarter (the registrant’s fourth ﬁ scal quarter in the 
case of an annual report) that has materially aff ected, or is reasonably likely to materially aff ect, the 
registrant’s internal control over ﬁ nancial reporting; and

5. 

The  registrant’s  other  certifying  offi  cer(s)  and  I  have  disclosed,  based  on  our  most  recent  evaluation 
of  internal  control  over  ﬁ nancial  reporting,  to  the  registrant’s  auditors  and  the  audit  committee  of  the 
registrant’s board of directors (or persons performing the equivalent functions):

(a)  All signiﬁ cant deﬁ ciencies and material weaknesses in the design or operation of internal control 
over  ﬁ nancial  reporting  which  are  reasonably  likely  to  adversely  aff ect  the  registrant’s  ability  to 
record, process, summarize and report ﬁ nancial information; and

(b)  Any  fraud,  whether  or  not  material,  that  involves  management  or  other  employees  who  have  a 

signiﬁ cant role in the registrant’s internal control over ﬁ nancial reporting.

Date: March 29, 2019

By:

/s/ Douglas M. Campoli
Douglas M. Campoli
Chief Financial Officer

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

In accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 
Mark Frohnmayer, President and Chief Executive Offi  cer of Arcimoto, Inc. (the “registrant”), and Douglas M. Campoli, 
Chief Financial Offi  cer of the registrant, each hereby certiﬁ es that, to the best of their knowledge:

1. 

2. 

The  registrant’s  Annual  Report  on  Form  10-K  for  the  period  ended  December  31,  2018,  to  which 
this  Certiﬁ cation  is  attached  as  Exhibit  32.1  (the  “Report”),  fully  complies  with  the  requirements  of 
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Report fairly presents, in all material respects, the ﬁ nancial condition of 
the registrant at the end of the period covered by the Report and results of operations of the registrant for 
the periods covered by the Report.

Date: March 29, 2019

By:

/s/ Mark Frohnmayer
Mark Frohnmayer
President and Chief Executive Officer

/s/ Douglas M. Campoli
Douglas M. Campoli
Chief Financial Officer

[THIS PAGE INTENTIONALLY LEFT BLANK.]

2034 West 2nd Avenue
Eugene, Oregon 97402
Phone: (541) 683-6293
www.arcimoto.com