UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒��� QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2017June 30, 2023

OR

☐ 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 specified in its charter)

544 Blair Boulevard,2034 West 2^nd Avenue, Eugene, OR 97402

(Address of principal executive offices and zip code)

(541) 683-6293

(Registrant’s telephone number, including area code)

N/ASecurities registered pursuant to Section 12(b) of the Act:

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).Yes. Yes ☒ No ☐  No  ☒

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

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

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

As of November 8, 2017,August 9, 2023, there were approximately 15,872,0018,805,897 shares of the registrant’s common stock issued and outstanding.

EXPLANATORY NOTE

Arcimoto, Inc. (the “Company”) became subject to the filing requirements of Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) when its Registration Statement on Form 8-A became effective on September 21, 2017 (the “Effective Date”). The Company’s Post-Qualification Offering Statement on Form 1-A (File No. 024-10710), filed with the Securities and Exchange Commission (the “SEC”) on September 18, 2017, as amended (“Form 1-A”), included financial statements for the fiscal years ended December 31, 2015 and December 31, 2016. This Quarterly Report on Form 10-Q is being filed pursuant to Rule 13a-13 of the Exchange Act, in order to file financial statements for the first fiscal quarter subsequent to the most recent periods reported in the Form 1-A.

Arcimoto, Inc.ARCIMOTO, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2017June 30, 2023

TABLE OF CONTENTS

ARCIMOTO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ARCIMOTO, INC.

BALANCE SHEETS

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY

FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2023 and 2022

(Unaudited)

See accompanying notes to condensed consolidated financial statements.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2023 and 2022

(Unaudited)

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: NATURE OF OPERATIONS

Arcimoto, Inc. (the “Company”) was originally formedincorporated in the State of Oregon on November 21, 2007 as WTP Incorporated, an Oregon Corporation, and on December 29, 2011, changed its name2007. The Company’s mission is to Arcimoto, Inc. The Company was founded in order to build products that catalyze the global shift to a sustainable transportation system. The first step in this shift has been developing an affordable, daily utility, pure electric vehicle. Over the past ten16 years, the Company has worked towards developingdeveloped a new vehicle platform designed around the needs of everyday drivers. Its main product isHaving approximately one-third the SRK®,weight and one-third of the first real fossil-free alternative for the vast majorityfootprint of daily trips. Compared to the average car, the Company believes the SRK has dropped 3/4 of the weight and 2/3 of the footprint in orderArcimoto platform’s purpose is to bring the joy of affordable, ultra-efficient, pure electric driving to the masses.

NOTE 2: MANAGEMENT’S PLANS

The accompanying financial 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. However, the Company has experienced recurring operating losses and negative operating cash flows since inception.

To date, the Company currently has not generated revenues fromtwo vehicle products built on this platform that target specific niches in the vehicle market: its flagship product, sales to achieve positive earningsthe Fun Utility Vehicle® (“FUV®”), for everyday consumer trips, and operating cash flows to enablethe Deliverator® for last-mile delivery and general fleet utility.

In February 2023, two wholly-owned subsidiaries of the Company to finance its operations internally. Fundingwere formed, Arcimoto Property Holding Company, LLC and APHC Holdings, LLC. APHC Holdings, LLC is the parent of Arcimoto Property Holding Company, LLC. Arcimoto Property Holding Company, LLC is the borrower in a loan obtained on February 17, 2023 for $6,000,000 that is secured by a guarantee provided by Arcimoto, Inc. and the business to date has come primarily throughreal estate owned by the issuance of equity securities.Company.

Although the Company’s objective is to increase its revenues from the sales of its products within the next few years sufficient to generate positive operating and cash flow levels, there can be no assurance that the Company will be successful in this regard. The Company estimates it will need to raise approximately $10 million in additional capital in order to fund its operations, which it intends to obtain through debt and/or equity offerings. The Company intends to use the proceeds from any such offerings, including its Regulation A Offering (see Note 9) to fund the Company through the end of 2018. Funds on hand and any follow-on capital, if needed, will be used to invest in its business to expand sales and marketing efforts, enhance its current product by continuing research and development to bring the SRK® to retail production, to build out a leased production facility, and fund operations until positive cash flow is achieved. The need for additional capital may be adversely impacted by uncertain market conditions or approval by regulatory bodies.

NOTE 3:2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information1-for-20 Reverse Stock Split

On November 11, 2022, the Board of Directors approved a reverse stock split of 1-for-20. This action enabled the Company to access additional funds for operational needs by maintaining its listing requirements. The 1-for-20 reverse stock split decreased the number of outstanding shares and increased net loss per common share. All per share and share amounts presented have been retroactively adjusted for the effect of this reverse stock split for all periods presented.

Going Concern

The accompanying financial statements have been prepared on the 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 incurred significant losses since inception and management expects losses to continue for the foreseeable future. In addition, the Company does not have sufficient cash on hand to pay obligations as they come due.

On January 14, 2022 the Company entered into an agreement with Canaccord Genuity LLC (“Canaccord”) to raise the at-the-market (“ATM”) offering amount to $100,000,000, and on October 4, 2022, the Company signed an equity line of credit (“ELOC”) agreement with Tumim Stone Capital LLC whereby the investor will provide up to $50,000,000 of financing with certain restrictions. On January 18, 2023, the Company obtained additional funds totaling $12.0 million via a confidentially marketed public equity offering. Due to the terms of this offering, the Company is restricted from variable rate transactions and, thus, unable to utilize the ATM and ELOC to raise additional capital for a period of one year from January 18, 2023, the date the Prospectus Supplement was filed. The terms of this offering also restricted equity transactions for a period of 90 days unless approved by more than 50% of the investors in the offering filed on January 18, 2023. After that 90 day period, the Company became able to offer to sell its securities in a public offering under its S-3 registration. However, this ability to obtain additional financing is dependent on the price and volume of the Company’s common stock and may be further restricted by certain Securities and Exchange Commission (“SEC”) rules that limit the number of shares the Company is able to sell under its Form S-3 registration statement.

During 2023, the Company obtained a loan that is secured by the Company’s land and buildings as disclosed in Note 6 - Mortgage Loan. The principal amount of this loan is $6,000,000 and includes a discount of $600,000. The interest rate on this loan is 20% and the loan was originally due in August 2023 unless an additional six-month extension is granted. The extension can only be granted under certain conditions, which include, in part, payment of all accrued interest and a facility fee of $300,000 and that no event or potential event of a default exists. On July 14, 2023, the Company was granted an additional six-month extension and the loan is now due in February 2024 (see Note 15 Subsequent Events). The Company also received a $500,000 loan from a related party in May 2023 and raised approximately $2,300,000, net of fees, from a registered direct offering in June 2023. Furthermore, the Company’s accounts payable balance is approximately $8,200,000 at August 9, 2023, of which a significant amount is more than 30 days past due.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Management has evaluated these conditions and concluded that they raise substantial doubt about the Company’s ability to continue as a going concern for at least a period of one year from the issuance of these unaudited financial statements. Management has initiated a series of actions to alleviate the Company’s financial situation: (1) reducing headcount significantly via lay-offs and an unpaid furlough program that started at the beginning of the fourth quarter of 2022 and may likely continue into the foreseeable future; (2) temporarily suspending production in the first quarter of 2023 in order to relocate operations to a new facility and focus purchases on the minimum needed to resume production, which was resumed in February 2023; (3) negotiating payment plans with the Company’s vendors that are critical to the Company’s operations; and (4) monetizing assets that may not be critical to the core business. Management also plans to pursue other financing solutions through the credit and equity markets. There can be no assurance that the Company will be able to secure such additional financing or, if available, that it will be on favorable terms or that the Company will be able to sufficiently reduce costs for any such additional financing to meet its needs. Therefore, the plans cannot be deemed probable of being implemented. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensedconsolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q promulgated by the SEC.United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and disclosures required by GAAP for complete financial statement presentation. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of March 31, 2017,June 30, 2023, and the results of its operations for the three and six months ended June 30, 2023 and 2022 and its cash flows for the three-months then ended.six months ended June 30, 2023 and 2022. Results for the three-monthsthree and six months ended March 31, 2017June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2017.2023. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 20162022 included in the Company’s Annual Report on Form 1-A.

ARCIMOTO, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Use of Estimates10-K filed with the SEC on April 14, 2023.

The preparation of financial statements in conformity with U.S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.and its related disclosures. Actual resultsamounts could differ materially from those estimates.

Fair Value MeasurementsThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

The Company’s financial instruments consist primarily of cash and notes payable. The carrying amounts of such financial 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 flows. The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition 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.Inventory

The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific 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 measurementsInventory is defined as follows:

ARCIMOTO, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the accompanying financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments. As of March 31, 2017 and December 31, 2016, the Company did not have any level 2 or level 3 instruments.

Risks and Uncertainties

The Company expects to commence revenue generating activities later this year, with its first delivery of the SPK Fun Utility Vehicle (“FUV”) expected in November 2017.  The Company’s business and operations are sensitive to general business and economic conditions in the United States and worldwide along with governmental policy decisions. Several factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments may also include: economic recessions, trends in car manufacturing, consumer taste, availability of inventory, and changes in government policy related to cars and motorcycles could have a material adverse effect on the Company’s financial condition and the results of its operations.

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

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-effective 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 difficulties 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 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 ones.

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 March 31, 2017 and December 31, 2016, the Company’s cash and cash equivalents were deposited in one financial institution, which at times exceed the federally insured limits.

ARCIMOTO, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Customer Deposits

Customer deposits are generally held in a separate deposit account. Revenue is not recognized on customer deposits until the vehicle is shipped to the customer.

Offering Costs

The Company accounts for offering costs in accordance with FASB ASC 340, “Other Assets and Costs.” Prior to the completion of an equity offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity (deficit) upon the completion of an equity offering or to expense if the offering is not completed. As of March 31, 2017 and December 31, 2016, $42,924 and $40,000 offering costs were capitalized in the accompanying balance sheets, respectively.

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 of $40,580 for the three-month period ended March 31, 2017 and $0 for the three-month period ended March 31, 2016, are recorded as grant revenue in the accompanying financial statements. Grant revenue makes up 100% of revenue in each period. Management believes the loss of such revenues will not have a material effect on the Company’s operations.

Inventories

Inventories are stated at the lower of cost (using the first-in, first-out method “FIFO”(“FIFO”)) or market.net realizable value. Inventories consist mainly of purchased electric motors, electrical storage and transmission equipment, and component parts. Inventories consist entirelyRaw materials include parts that have been sub-assembled and manufactured parts.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company is required to remit partial prepayments for some purchases of raw materialsits inventories acquired from overseas vendors which are included in prepaid inventory. The Company is currently selling vehicles below the base cost of a finished unit. Accordingly, the Company expensed all labor and component partsoverhead as period costs and recorded an allowance to reduce certain inventories to net realizable value of approximately $948,000 and $1,280,000 as of March 31, 2017June 30, 2023 and December 31, 2016.2022, respectively. The amount expensed for all labor and overhead was approximately $3,456,000 and $7,073,000 for the six months ended June 30, 2023 and 2022, respectively, and $1,836,000 and $4,024,000 for the three months ended June 30, 2023 and 2022, respectively.

Intangible Assets

Intangible assets primarily consist of trade names/trademarks, proprietary technology, and customer relationships. They are amortized using the straight-lined method over a period of 10 to 14 years. The Company assesses the recoverability of its finite-lived intangible assets when there are indications of potential impairment.

Net Earnings or Loss per Share

The Company’s computation of earningsloss per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss)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 effect on a per share basis of potential common shares (e.g., Series A-1 Preferred Stock, 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 effect (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 Series A-1 Preferred Stock, common stock warrants and common stock options outstanding were anti-dilutive.

As ofDuring the periodsthree and six months ended March 31, 2017June 30, 2023 and 2016,2022, the Company excluded the outstanding Employee Equity Plans (“EEP”) and other securities summarized below calculated using the Treasury Stock Method for options and other instruments and the If-Converted Method for convertible notes, which entitleentitled the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

All options and warrants were excluded from the table above as they are out of the money.

Convertible Notes, Mortgage Loan and Warrants

We have elected the fair value option under ASC 825-10-25 to account for the $4,500,000 and $10,000,000 convertible notes, as well as the mortgage loan and warrants. We have utilized a binomial lattice methodology in estimating the fair values of the convertible notes. The mortgage loan fair value was estimated using a discounted cash flow model. The warrant fair values were estimated using a Black Scholes model. The fair value measurements are classified as Level 2 under the fair value hierarchy as provided by ASC 820, “Fair Value Measurement”. The fair valuation of these convertible notes, mortgage loan and warrants use inputs other than quoted prices that are observable either directly or indirectly. Under this option, changes in fair value are recorded as unrealized gain/loss on convertible notes, mortgage loan and warrants fair value in the Condensed Consolidated Statements of Operations.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements Recently Adopted

In July 2017,June 2016, the FASB issued ASU No. 2017-11, I “Accounting for Certain2016-13, Financial Instruments With Down Round Features” and II “Replacement– Credit Losses (Topic 326): Measurement of the Indefinite Deferral for Mandatorily RedeemableCredit Losses on Financial Instruments (“ASU 2016-13”) which replaces the current incurred loss methodology with an expected loss methodology which is referred to as the current expected credit loss (“CECL”) methodology. The measurement of Certain Nonpublic Entitiescredit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans receivables and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception.” The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would betrade accounts receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees and other similar instruments) and net investment in leases recognized by a derivative liability at fair valuelessor in accordance with Accounting Standards Codification (“ASC”) Topic 842 – Leases. ASU 2016-13 also made changes to the accounting for available-for-sale debt securities and requires credit losses to be presented as an allowance rather than as a result ofwrite-down on such securities management does not intend to sell or believes that it is more likely than not they will be required to sell. The Company adopted the existence of a down round feature. The amendments in Part IIprovisions of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments doASU effective January 1, 2023. The adoption did not have an accounting effect. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures.

In May 2017, FASB issued ASU-2017-09, “Compensation-Stock Compensation (Topic 718) –Modification Accounting” to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2017-09 on the Company’s financial statements.

Management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s condensed consolidated financial statement presentation or disclosures.statements.

NOTE 3: PROPERTY AND EQUIPMENT

NOTE 4: NOTES PAYABLE

Notes payable and accrued interest asAs of March 31, 2017June 30, 2023 and December 31, 20162022, the Company’s property and equipment consisted of the following:

Fixed assets in process are primarily comprised of building improvements that have not yet been completed and machinery and equipment not yet placed into service. Completed assets are transferred to their respective asset class and depreciation begins when the asset is placed in service. FUV fleet consists of marketing and other non-revenue generating vehicles. FUV rental fleet consists of rental revenue generating vehicles.

Depreciation expense was approximately $677,000 and $1,381,000 during the three and six months ended June 30, 2023 and $810,000 and $1,307,000 during the three and six months ended June 30, 2022, respectively.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 4: INTANGIBLE ASSETS

The following table summarizes the Company’s intangible assets:

Amortization expense was approximately $211,000 and $422,000 during the three and six months ended June 30, 2023 and approximately $210,000 and $421,000 during the three and six months ended June 30, 2022, respectively.

NOTE 5: CUSTOMER DEPOSITS

The Company has received refundable customer pre-orders ranging from $100 to $500 per vehicle for purposes of securing a place in a line to order its utility vehicle. As of June 30, 2023 and December 31, 2022, these refundable pre-orders total $402,100 and $410,000, respectively. In addition, the Company also received non-refundable customer deposits of $2,500, which was reduced to $500 during the quarter ended June 30, 2022, that are required for the Company to start production of their vehicles. When a customer’s order is ready to enter the production process, the customer is notified that if they would like to proceed with the purchase of a vehicle, their pre-orders will no longer be refundable and additional deposit required must be paid prior to the start of the manufacturing process. As of June 30, 2023 and December 31, 2022, these non-refundable deposits total $170,100 and $268,300, respectively and are presented as Customer Deposits on the Company’s Condensed Consolidated Balance Sheets.

The Company has also received approximately $68,000 and $112,000 of refundable deposits related to its TMW product line as of June 30, 2023 and December 31, 2022, respectively. The Company also receives non-refundable deposits as final payment prior to delivery of the final product. These non-refundable deposits total approximately $28,200 and $51,400 as of June 30, 2023 and December 31, 2022, respectively, and are presented as Customer Deposits on the Company’s Condensed Consolidated Balance Sheets.

During the second quarter of 2022, the Company began to receive refundable deposits of $100 per unit for the recently announced Mean-Lean-Machine (“MLM”), the electric tilting trike. As of June 30, 2023 and December 31, 2022, the balance of such deposits was $121,400 and $120,600, respectively and are included as part of Customer Deposits on the Company’s Condensed Consolidated Balance Sheets.

As of June 30, 2023 and December 31, 2022, the Company’s balance of deposits received was approximately $789,800 and $962,300, respectively. Deposits are included in current liabilities in the accompanying Condensed Consolidated Balance Sheets. The Company also has customer deposits from its employees. However, the balances of these deposits as of June 30, 2023 and December 31, 2022 are not material.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 6: MORTGAGE LOAN

On February 17, 2023, the Company’s wholly-owned subsidiary, Arcimoto Property Holding Company, LLC (“Borrower”) entered into a loan (“Mortgage Loan”) with HRE FUV Lending, LLC (the “Lender”) and issued a related Promissory Note (the “Note”) payable to the Lender. Pursuant to the Mortgage Loan and the Note, the Borrower is receiving a $6,000,000 loan secured by all the real properties of the Borrower and all equity interests of Borrower. The loan (i) has an initial term of six months with the possibility of a further six month extension upon the satisfaction of certain conditions; (ii) has an interest rate equal to 20% per annum of the first six months (with the possibility of retroactive reduction to 10% if repaid in full within such six (6) months without an event of default having occurred) and zero percent (0%) per annum for the six (6) month extension period; (iii) requires an upfront fee to Lender of $600,000 on the date the loan is made (and an additional facility fee to Lender of $300,000 if the loan is not repaid in full within the first six (6) months or if an event of default occurs); (iv) requires that, in the event of prepayment, a minimum of $600,000 in interest must have been paid (with the possibility of reduction to $300,000 if repaid in full within the first six (6) months if no event of default has occurred); (v) provides that $500,000 of the loan amount is retained as a holdback by Lender for disbursement to Borrower only after certain construction is completed at the real property and the cost of such construction is paid in full by Borrower; (vi) contemplates an increase in the interest rate if an event of default occurs; (vii) is fully guaranteed by Holdings and is subject to a limited recourse guaranty by the Company. The $500,000 holdback was received by the Company during the quarter ended June 30, 2023. On July 14, 2023, the Company extended the maturity date of the loan six months to February 2024.

The Company elected to account for this mortgage loan using the fair value option. In estimating the fair value of this debt, a discounted cash flows model was used. The note’s fair value measurement is classified as Level 2 under the fair value hierarchy as provided by ASC 820, “Fair Value Measurement.” The fair valuation of this mortgage loan uses inputs other than quoted prices that are observable either directly or indirectly in a discounted cash flows model. Under this option, changes in fair value of the debt are recorded as an unrealized loss on mortgage loan fair value in the Condensed Consolidated Statements of Operations at inception of $336,194. For the three and six months ended June 30, 2023 the Company recorded an unrealized loss of $1,367,125 and $1,590,085, respectively. The fair value of the loan was $7,590,085 as of June 30, 2023. The Company recorded the $600,000 upfront fee to lender as financing costs in the Statement of Operations.

NOTE 7: EQUIPMENT NOTES PAYABLE

As of June 30, 2023, the Company has financed a total of approximately $1,936,000 of its capital equipment purchases with notes payable having monthly payments ranging from approximately $300 to $12,000, repayment terms ranging from 60 to 72 months, and effective interest rates ranging from 1.99% to 9.90%. Monthly payments for all equipment financing notes payable as of June 30, 2023 are approximately $36,300. These equipment notes mature ranging from November 2023 through May 2028. The balance of equipment financing notes payable was approximately $1,140,000 and $1,351,000 as of June 30, 2023 and December 31, 2022, respectively.

NOTE 8: LEASES

Operating Leases

The Company has active operating lease arrangements for office space and production facilities. The Company is typically required to make fixed minimum rent payments relating to its right to use the underlying leased asset. In accordance with the adoption of ASC 842, the Company recorded right-of-use assets and related lease liabilities for these leases as of January 1, 2022.

The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component when the payments are fixed. As such, variable lease payments not dependent on an index or rate, such as real estate taxes, common area maintenance, and other costs that are subject to fluctuation from period to period are not included in lease measurement. The Company includes extensions in the determination of the lease term when it is reasonably certain that such options will be exercised.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Company’s lease agreements do not provide an implicit borrowing rate. Therefore, the Company used a benchmark approach to derive an appropriate incremental borrowing rate. The Company benchmarked itself against other companies of similar credit ratings and comparable credit quality and derived an incremental borrowing rate to discount each of its lease liabilities based on the remaining lease term.

The components of operating lease expense recorded in the condensed consolidated statements of operations were as follows:

Variable lease cost for the three and six months ended June 30, 2023 and 2022 was not material.

Right of use assets and lease liabilities for operating leases were recorded in the condensed consolidated balance sheets as follows:

The weighted-average remaining lease term for operating leases was 2.02 years and the weighted-average incremental borrowing rate was 8.7% as of June 30, 2023.

Supplemental cash flow information related to the Company’s operating leases was as follows:

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2023, future minimum lease payments required under operating leases are as follows:

Finance Leases

As of June 30, 2023, the Company has financed through lease agreements a total of approximately $2,211,000 of its capital equipment purchases with monthly payments ranging from approximately $1,500 to $14,000, repayment terms ranging from 48 to 60 months, and effective interest rates ranging from 2.67% to 8.51%. Monthly lease payments for all finance leases as of June 30, 2023, are approximately $61,000. These lease obligations mature ranging from August 2023 through February 2028 and are secured by approximately $3,901,000 in underlying assets which have approximately $879,000 in accumulated depreciation as of June 30, 2023. The balance of finance lease obligations was approximately $1,463,474 and $1,300,011 as of June 30, 2023, and December 31, 2022, respectively.

Right of use assets and lease liabilities for finance leases were recorded in the condensed consolidated balance sheets as follows:

The weighted-average remaining lease term for finance leases was 3.56 years and the weighted-average incremental borrowing rate was 4.55% as of June 30, 2023.

Supplemental cash flow information related to the Company’s finance leases was as follows:

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Amortization and interest expense information related to the Company’s finance leases was as follows:

(Unaudited)

As of June 30, 2023, future minimum lease payments required under finance leases are as follows:

NOTE 9: CONVERTIBLE NOTES

$4,500,000 Convertible Promissory Note (“April 2022 Note”)

On December 4, 2015,April 25, 2022, the Company (“Debtor”) entered into a $250,000 loan$4,500,000 convertible promissory note agreement with Ducera Investments LLC - 2022 Series A (“Creditor”) whereby the CityDebtor agrees to pay the Creditor the amount borrowed plus interest accrued at an annual rate of Eugene Business Development Fund; however,10% compounded quarterly. Subject to certain conditions, interest on the funds for the loan were not received until April 1, 2016, and accordingly no debt was owedpromissory note accrues as of December 31, 2015. This loan was secured by substantially all assetsadditional principal. The term of the Company and had an interest rate of 5% per annum. Interest only payments were due monthly fromApril 2022 Note is five years unless conversion privileges are exercised. Conversion can occur at the date of disbursement. The entire unpaid principal balanceoption of the loan, plus accrued interest, was dueCreditor, the Debtor or upon maturity and payable uponis described below:

(i) The Creditor has the earlier of closing of a Regulation A offering or October 1, 2017. Theoption to convert the promissory note was repaid on September 21, 2017at any time prior to the maturity date, in full afteror in part, into the initial closingnumber of the Regulation A Offering.

Through September 30, 2017 and the year ended December 31, 2016, the Company issued a series of convertible notes with original principal balances of $200,000 and $325,000, respectively, all with the same terms as disclosed below. Of these notes $100,000 and $50,000, respectively, were issued to related parties. The notes and all accrued interest were due on March 31, 2018. 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 were to related parties, with accrued interest thereon of approximately $23,000 were converted to 80,832 shares of common stock on August 31, 2017,(“Common Stock”), no par value, of the Company equal to the amount determined by dividing the principal amount of this note plus the accrued interest by $140.00 ($7.00 - pre reverse split), subject to adjustment (as adjusted, the “Conversion Price”); (ii) at aany time prior to the maturity date, the Debtor may convert the note, in full or in part, at the Conversion Price provided that, in order to exercise the conversion, the closing share price of $5.85 per share, which represented 90% of the $6.50Common Stock on the Nasdaq Stock Market LLC (the “Closing Share Price”) for the thirty (30) consecutive trading days prior to, and including, the conversion date exceeds the per share price inrequired to provide the Regulation A Offering. Notes totaling $75,000 were repaid in cash alongCreditor with shares having a market value of at least 4.5 times $4,500,000 upon conversion; and (iii) if none of a Creditor’s election to convert shares or the Company’s election to convert shares has occurred, then upon the maturity date, the outstanding principal plus accrued interest thereon of $354 subsequent to March 31, 2017.

During September 2017,on 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 pricenote shall convert into shares of the common stock at the timelesser of conversion.the Conversion Price and the greater of (x) the per share price required to provide the Creditor with shares having a market value of at least 4 times $4,500,000, and (y) $86.60 (the “Floor Conversion Price”) ($4.33 pre reverse split). In the event that the notes are converted at the Floor Conversion Price, the Company shall also pay to the Creditor on the maturity date a cash payment equal to (x) the principal amount of the note at the maturity date minus (y) the Converted Equity Market Value (as defined below) divided by 4. “Converted Equity Market Value” means the value of the shares of common stock delivered to the Creditor based on a share price equal to the lower of: (i) 10-day volume weighted average price of the common stock for the 10-days immediately prior to, but excluding, the maturity date and (ii) the Closing Share Price on the day immediately prior to the maturity date.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Arcimoto has elected to measure the note at fair value. In estimating the fair value of this debt, a binomial lattice model was used. The required inputs include the risk-free rate, the Company’s stock volatility, stock price on valuation date, and a risk premium. The note’s fair value measurement is classified as Level 2 under the fair value hierarchy as provided by ASC 820, “Fair Value Measurement.” The fair valuation of this convertible note uses inputs other than quoted prices that are observable either directly or indirectly. Under this option, changes in fair value of the convertible debt are recorded as an unrealized gain or loss on convertible note fair value in the Condensed Consolidated Statements of Operations. As a result, the Company recorded an unrealized (loss) gain of $(534,030) and $283,560 for the three and six months ended June 30, 2023, and $(2,145,540) for both the three and six months ended June 30, 2022, respectively. The balance on this note is $4,604,130 and $4,887,690 at June 30, 2023 and December 31, 2022, respectively, and is classified as a long-term liability on the Company’s Condensed Consolidated Balance Sheets.

$10,000,000 Senior Secured Convertible Note ( “September 2022 Note”)

On August 31, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with a third-party investor (the “Buyer” or the “Holder”). Under the terms of the SPA, the Company will issue to the Buyer the notes and warrants pursuant to a currently effective shelf registration statement on Form S-3, which has sufficient availability for the issuance of the securities on each closing date.

Under the SPA, the Company authorized the issuance of one or more series of senior secured convertible notes of the Company, in the aggregate original principal amount of $20,000,000. Such notes shall be convertible into shares of common stock, no par value per share, of the Company. Further, the Company authorized the issuance of warrants to acquire up to an aggregate of 25,000 shares of common stock. The notes principal balancewill rank senior to all outstanding and future indebtedness of $70,000the Company and accruedits subsidiaries and will be secured by a second priority perfected security interest in all of $232 was repaid in cash on September 29, 2017.the existing and future assets of the Company and its direct and indirect subsidiaries, if any, including a pledge of all of the capital stock of each of the subsidiaries.

On September 11, 2017,1, 2022 (the “Issuance Date”), one note (the “September 2022 Note”) in the amount of $10,000,000 with 25,000 accompanying warrants (the “Warrants”) were issued to the Buyer. The issuance of the remaining $10,000,000 requires shareholder approval in accordance with NASDAQ listing requirements. The September 2022 Note was issued with a principal amount of $10,000,000 and an original issue discount of $600,000, payable in 24 periodic installments with a coupon rate of 6%, and with a maturity date of September 1, 2024. At the option of the Company, borrowed $5,000 fromperiodic installments can be paid in either cash or common stock (at an 8% discount) to the Holder. Payments in cash are subject to an additional premium and are recorded as additional interest expense. In the event of a related party. No security was issued fordefault, the loan. The loan was meantinterest rate is increased to be15%, which is the default rate. At any time on or after the Issuance Date, the Holder is entitled to convert any unpaid principal plus accrued interest at 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.

None of the above convertible notes contained a beneficial conversion feature due to the conversion price of $5.00 per share. The SPA also provides for the notes beingHolder to require payment of principal and unpaid interest up to four times per period. This provision allows the September 2022 Note to be settled in full over a six-month period at the Holder’s option. In addition, a certain percentage of cash received from issuances of shares in conjunction with the ATM discussed in Note 2 - Summary of Significant Accounting Policies will be used to pay down the principal of the September 2022 Note.

The Warrants are exercisable at any time or abovetimes on or after the six month and one day anniversary of the Issuance Date. The Warrants expire on the fifth anniversary of the Issuance Date. The exercise price of each Warrant which is convertible to a share of common stock is $200.00.

The net proceeds of $9,400,000 (after discount) are bifurcated between the Warrants and the September 2022 Note. The amount allocated to the Warrants is $598,670, which is the fair value on the Issuance Date. The remaining amount (before debt issuance costs) of $8,801,330 is allocated to the September 2022 Note on the Issuance Date. The Company has elected to measure the note at fair value. In estimating the fair value of this debt, a binomial lattice model was used. The required inputs include the Series A-1 Preferred Stockrisk-free rate, the Company’s stock volatility, stock price on valuation date, and a risk premium. The note’s fair value measurement is classified as Level 2 under the fair value hierarchy as provided by ASC 820, “Fair Value Measurement.” Under this option, changes in fair value of the convertible debt are recorded as an unrealized gain or common stock, as applicable,loss on convertible note fair value in the Condensed Consolidated Statements of Operations. As a result of this election, debt issuance costs incurred were approximately $232,669 and are expensed in Other expense/(income) on the issuance date.

Condensed Consolidated Statements of Operations. The Company also recorded an unrealized loss of zero and $15,820 for the three and six months ended June 30, 2023, respectively. The note was repaid in full on January 23, 2023 with a loss on extinguishment of $2,925,610 recognized for the difference between the carrying value of the note and unamortized discount and the payment made to satisfy the note. The balance of the September 2022 Note was $5,639,231 at December 31, 2022.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Warrants were recorded at fair value on the September 1, 2022 issuance date at $598,670 and are remeasured at fair value quarterly and are classified as a current liability on the Condensed Consolidated Balance Sheet. The Warrants were valued at June 30, 2023 using the Black-Scholes model with approximately a 4.67 year expected term, risk free interest rate of 4.15%, a dividend yield of 0%, and an annualized standard deviation of stock price volatility of 116.5%. As a result, the Company recorded an unrealized (loss) gain of $(33,046) and $249,452 for the three and six months ended June 30, 2023, respectively. The balance of the Warrants at June 30, 2023 and December 31, 2022 is $125,022 and $374,474, respectively, and is recorded as Warrant liabilities in the current liabilities section of the Company’s Condensed Consolidated Balance Sheets.

NOTE 10: STOCKHOLDERS’ EQUITY

NOTE 5: STOCKHOLDERS’ DEFICIT

Stock-Split

On July 21, 2017, the Company’s board of directors and a majority of its 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 shares of 1,434,891 Series A-1 Preferred Stock to 2,869,782 common shares. The July 21, 2017, the 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 financial information, and the Series A-1 Preferred to common stock conversion was reflected in the accompanying financial 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. As of March 31, 2017 and December 31, 2016, there were no shares of Series A-1Stock, 2,000,000 are designated as Class C Preferred Stock, issued and outstanding.1,500,000 are undesignated 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 iswas also subject to mandatory conversion provisions upon an initial public offering 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

Except as otherwise required by law or expressly provided in the first quarterCompany’s Second Amended and Restated Articles of 2017, 87,400 sharesIncorporation, as amended, each share of Series A-1Class C Preferred Stock were soldhas one vote for cash proceedsthe election of $437,000 in a Regulation D offering. Of these shares, 10,000 were issueddirectors and on all matters submitted to a related party. The Series A-1 Preferred Stock was converted to common stock as noted above.

Common Stock

vote of shareholders of the Company. The Company is authorizednot obligated to issue 20,000,000redeem or repurchase any shares of common stock, no par value, asClass C Preferred Stock. Shares of March 31, 2017Class C Preferred Stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.

As of June 30, 2023 and December 31, 2016.2022, there were no shares of preferred stock issued or outstanding.

Common Stock

The Company has reserved a total of 2,000,000363,577 and 378,296 shares of its common stock pursuant to itsthe equity incentive plans (see Note 6).11 – Stock-Based Payments) as of June 30, 2023 and December 31, 2022, respectively. The Company has 1,722,704363,577 and 1,247,704278,296 stock units, options and warrants outstanding under these plans as of March 31, 2017June 30, 2023 and December 31, 2016,2022, respectively.

NOTE 6: SHARE-BASED PAYMENTS

2015 Stock Incentive Plan

On March 1, 2017, pursuant to the Company’s Amended and Restated 2015 Stock Incentive Plan, the Compensation Committee of the Company’s board of directors authorized the grant of 430,000 employee incentive stock options (“ESOPs”) at a strike price of $2.50 per share, 20,000 employee stock options at a strike price of $2.75 per share and 25,000 non-qualified stock options (“NQSOs”) at a strike price of $2.50 per share.

The Company measures employee stock-based awards at grant-date fair valuehas 7,033,825 shares and recognizes employee compensation expense on a straight-line basis over the vesting period25,000 shares of its common stock reserved for warrants issued outside of the award.

equity incentive plans as of June 30, 2023 and December 31, 2022, respectively.

Exercise of Stock Options and Warrants

A total of 889 employee options, with an exercise price of $34.20 per share, were exercised for total proceeds to the Company of $30,391 during the three months ended June 30, 2022. A total of 1,978 employee options, with exercise prices ranging from $34.20 to $50.00 per share were exercised for total proceeds to the Company of $83,456 during the six months ended June 30, 2022. No employee options were exercised during the three and six months ended June 30, 2023.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

A total of 700,000 warrants were exercised with an exercise price of $0.0001 per share for total proceeds to the Company of $70 during the three and six months ended June 30, 2023. A total of 400 employee warrants, with an exercise price of $50.00 per share, were exercised for total proceeds to the Company of $20,000 during the three and six months ended June 30, 2022.

DeterminingA total of 4,800 employee restricted stock units vested and were converted into common shares during the appropriate fairthree and six months ended June 30, 2023. A total of 460 employee restricted stock units vested and were converted into common shares during the three and six months ended June 30, 2022.

Offerings of Common Stock and Warrants

2023 Purchase Agreements

On January 18, 2023, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain investors (collectively, the “Purchasers”). The Purchase Agreements provide for the sale and issuance by the Company of an aggregate of (i) 3,300,000 shares (the “Shares”) of the Company’s common stock, no par value per Share (the “Common Stock”), (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 700,000 shares of stock-based awards requirescommon stock and (iii) warrants (the “Common Warrants” and, together with the inputShares and the Pre-Funded Warrants, the “Securities”) to purchase up to 4,000,000 shares of subjective assumptions, includingcommon stock. The offering price per Share and associated Common Warrants is $3.00. The offering price per Pre-Funded Warrant and associated Common Warrant is $2.9999.

The Pre-Funded Warrants are immediately exercisable subject to certain ownership limitations, have an exercise price of $0.0001 per share, and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Pre-Funded Warrants were exercised immediately upon issuance. Each Common Warrant has an exercise price of $3.00 per share, will be exercisable immediately upon issuance subject to certain ownership limitations and will expire on the fifth anniversary of the date on which the Common Warrants become exercisable.

Both the Pre-Funded and Common Warrants contain provisions that regarding settlement in the event of a fundamental transaction that calculate the fair value of the warrants using a prespecified volatility assumption that was not consistent with the input used to value the warrants at issuance which causes the warrants to be classified as liabilities.

The Pre-Funded Warrants are recorded at fair value on January 18, 2023 at $1,735,941. As the Pre-Funded Warrants were immediately exercised, the fair value is recorded in equity. The Common Warrants are recorded at fair value on January 18, 2023 at $7,951,393 and are remeasured at a fair value of $4,249,751 at June 30, 2023 and are classified as a current liability on the Condensed Consolidated Balance Sheet. As a result, the Company recorded an unrealized (loss) gain of $(122,694) and $3,701,642 for the three and six months ended June 30, 2023, respectively.

The offering resulted in gross proceeds to the Company of approximately $12 million. The net proceeds to the Company from the offering were approximately $11 million, after deducting placement agent fees and other expenses. The Company used $7,500,000 of the net proceeds from the offering to repay the September 2022 Note as disclosed in Note 9 - Convertible Notes, and the remainder of the proceeds for working capital and general corporate purposes.

2023 Second Purchase Agreements

On June 12, 2023, the Company entered into securities purchase agreements (the “Second Purchase Agreements”) with certain investors (collectively, the “Purchasers”). The Second Purchase Agreements provide for the sale and issuance by the Company of an aggregate of 1,467,648 shares (the “Shares”) of the Company’s common stock, no par value per share (the “Common Stock”), in a registered direct offering and for stock options,warrants (the “Warrants” and, together with the expected lifeShares, the “Securities”) to purchase up to 2,935,296 shares of Common Stock in a concurrent private placement (the transactions contemplated by the Second Purchase Agreements are referred to herein as the “Second Offering”). The offering price per Share and associated Warrant is $1.70. Each Warrant has an exercise price of $1.75 per share, will be exercisable six months after issuance subject to certain ownership limitations and will expire on the fifth anniversary of the option,date on which the Warrants become exercisable.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Second Offering resulted in gross proceeds to the Company of approximately $2.5 million. The net proceeds to the Company from the Second Offering were approximately $2.3 million, after deducting placement agent fees and expected stock price volatility.expenses and offering expenses payable by the Company. The Company used $250,000 of the Black-Scholes option pricing modelnet proceeds from the offering to value its stock option awards. The assumptions used in calculatingpartially repay the fair value of stock-based awards represent management’s best estimates and involve inherent uncertaintiesNote payable - related party, and the applicationremainder of management’s judgment. As a result, if factors changethe proceeds for working capital and management uses different assumptions, stock-based compensation expense could be materially different for future awards. See below for the weighted average variables used in assessing the fair value at the grant date of March 1, 2017:

The total grant date fair value of employee incentive stock options issued during the three-month period ended March 31, 2017 was $290,040. Employee stock-based compensation expense related to stock options included in general and administrative expenses for the three -month period ended March 31, 2017 and 2016 was $19,835 and $12,004, respectively.

As of March 31, 2017, 102,142 employee stock options were vested and 7,500 stock options previously issued to employees were forfeited.

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. For the NQSOs issued in 2017, performance was completed on the date of issue. The fair value of non-employee awards was $22,445 and $0 for the three-month periods ended March 31, 2017 and 2016, respectively, which is included in general and administrative expenses in the accompanying statements of operations.

2012 Employee Stock Benefit Plan

As of March 31, 2017, the Company had issued warrants under its Seconded Amended and Restated 2012 Employee Stock Benefit Plan, exercisable immediately, for approximately 980,000 shares of Company common stock

NOTE 7: CUSTOMER DEPOSITScorporate purposes.

The Company has received customer deposits ranging from $100paid the Placement Agent a cash fee equal to $10,100 per order for retail production vehicles and $42,000 per order for signature series vehicles for purposes$275,000 which was 5.0% of securing its vehicle production slot. As of March 31, 2017 and December 31, 2016, the Company’s balance of refundable deposits received was $406,777 and $386,035, respectively, which are refundable upon demand. Refundable deposits are includedaggregate purchase price paid by all Purchasers in current liabilities in the accompanying balance sheets. Production of retail vehicles is expected to begin in the first half of 2018; production of signature series vehicles has begun and the first delivery is scheduled for November 2017. When a customer’s order is ready to enter the production process, the customer is notified that if they would like to proceedconnection 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.  If the customer elects to proceed with their order, their deposit becomes no longer refundable. Customer deposits from related parties total $43,700 as of March 31, 2017 and December 31, 2016.

ARCIMOTO, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 8: COMMITMENTS AND CONTINGENCIES

On September 3, 2017, the Company entered into a Triple Net Lease for an approximately 30,000 square foot commercial industrial office 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 first month, then is $12,500 per month for months two through forty-one, and one dollar for month forty-two. See the following table for future minimum rent payments by year.

Years ending December 31:

Total rent expense for the three-month periods ended March 31, 2017 and 2016 was $16,035 and $15,135, respectively.

Underwriter Agreement

In connection with its offering of common stock under Regulation Asale of the Securities, Act (the “Regulation A Offering”), the Company agreed to issue the underwriter in the Regulation A Offeringand warrants to purchase a number of shares of Common Stock equal to 5% of the Shares (the “Placement Agent Warrants”). The Company issued 73,529 Placement Agent Warrants. The Placement Agent Warrants have a five-year term, and are exercisable beginning six months after the closing of the Offering at a price of $1.87 per share. The Company recorded the aggregate placement agent fees as financing costs in the Statement of Operations.

The Warrants issued to the Purchasers are recorded at fair value on June 12, 2023 at $3,906,366 and are remeasured at a fair value of $3,495,168 at June 30, 2023 and are classified as a current liability on the Condensed Consolidated Balance Sheet. As the fair value of the Warrants was greater than the cash proceeds received from the offering, the Company recorded the excess of warrant fair value over proceeds received of $1,404,374 as financing costs. The 1,467,648 common shares issued in the offering had a fair value of $2,362,914. The fair value of the common stock equal to 5.0%shares issued were recorded as additional financing costs in the transaction because the aggregate fair value of the totalliability classified warrants and the common shares issued exceeded the offering proceeds. The Placement Agent Warrants are recorded at fair value on June 12, 2023 at $95,740 and are remeasured at a fair value of $85,320 at June 30, 2023 and are also classified as a current liability on the Condensed Consolidated Balance Sheet. As a result, the Company recorded an unrealized gain of $421,618 for the three and six months ended June 30, 2023 for the Warrants and Placement Agent Warrants.

2022 Offerings

On January 14, 2022, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Canaccord, under which the Company may offer and sell, from time to time, through or to Canaccord, as sales agent up to $100,000,000 of its common stock. The Company intends to use the net proceeds of the sales pursuant to the Sales Agreement primarily for working capital and general corporate purposes.

We issued and sold 175,306 shares of common stock sold in any closing ofduring the Regulation A Offering, excluding shares purchased by investors sourced via alternative funding platforms (the “Underwriter Warrants”). The Underwriter Warrants are exercisable commencing on the Qualification Date (as such term is defined in the Underwriter Warrants), and have a term of five years. The Underwriter Warrants are not redeemable by the Company. The exercise price for the Underwriter Warrants will be the amount that is 15% greater than the offering price, or $7.475. In the fourth quarter of 2017, the Company granted 122,238 Underwriter Warrantsthree months ended June 30, 2022, in connection with the Regulation A Offering.Sales Agreement at per share prices between $64.60 and $97.80, resulting in net proceeds to the Company of $12,602,091 after subtracting offering expenses. We issued and sold 203,320 shares of common stock during the six months ended June 30, 2022, in connection with the Sales Agreement at per share prices between $64.60 and $143.60, resulting in net proceeds to the Company of $16,315,741 after subtracting offering expenses. There were no transactions during the three and six months ended June 30, 2023 under the Sales Agreement due to the one-year restrictions discussed in Note 2.

Litigation

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 11: STOCK-BASED PAYMENTS

The Company has common stock, common stock units, and common stock purchase options and warrants reserved pursuant to the 2022 Omnibus Stock Incentive Plan (“2022 Plan”), 2018 Omnibus Stock Incentive Plan (“2018 Plan”), and the Amended and Restated 2015 Stock Incentive Plan (“2015 Plan”).

Stock-based compensation, including stock options, warrants and stock issued for compensation and services is involved in claims and litigation from time to timeincluded in the normal coursecondensed consolidated statements of business. At March 31, 2017, Company management believes there are no pending matters that are expected to have a material adverse effect onoperations as follows:

2022 Omnibus Stock Incentive Plan

On July 29, 2022, Arcimoto’s shareholders approved the business of2022 Omnibus Stock Incentive Plan (the “2022 Plan”). The Plan enables the Company their financial condition, resultsto provide additional incentives or awards to Employees, Directors and Consultants. The maximum aggregate number of operations or cash flows.

shares which may be issued pursuant to all awards is 100,000 shares. The 2022 Plan was amended on June 16, 2023 to increase the number of shares available for issuance to 1,600,000.

ARCIMOTO, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 9: SUBSEQUENT EVENTS

Offering Costs

As of September 30, 2017, all deferred offering costs were charged to stockholders’ equity upon the initial close of the Regulation A Offering (see Note 2). As of September 30, 2017, offering costs charged to stockholders’ equity was $1,299,021 which includes the offering cost for the Regulation A Offering through the nine months ended September 30, 2017.

Common Stock

During September 2017,The 2022 Plan provides the Company issued 2,936,757the ability to grant 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-qualified stock options (“NQSOs”) and restricted stock, provided that only employees are entitled to receive incentive stock options in a Regulation A Offering at a public offering price of $6.50 per share. The Company received net proceeds of $18,031,525 in this closing after deducting underwriter commissions of $1,049,395 and escrow closing fees of $8,000. See Note 8 for fees paid toaccordance with IRS guidelines. During the underwriter in the Regulation A Offering.

On October 4, 2017,six months ended June 30, 2023, the Company issued 4,000100,000 restricted stock awards under the plan, which vested immediately. There is no non-vested compensation expense as of June 30, 2023. Awards that are forfeited generally become available for grant under the 2022 Plan.

Stock-based compensation expense under the 2022 Plan for the three and six months ended June 30, 2023 was $82,122 and $258,923, respectively. There was no stock-based compensation expense under the 2022 Plan for the three and six months ended June 30, 2022.

2018 Omnibus Stock Incentive Plan

The 2018 Plan authorizing 50,000 shares was approved by the Board of Directors and the Company’s shareholders at the Company’s 2018 annual meeting of shareholders held on June 9, 2018. At the 2019 Annual Meeting, the shareholders approved an additional 50,000 shares of common stock to be issued under the 2018 Plan. On April 20, 2020, the board of directors approved an increase from 100,000 to 200,000 shares; at the annual shareholder meeting on June 20, 2020, the increase was approved by a vendor in paymentmajority of video production services.the shareholders. At the annual shareholder meeting on June 11, 2021, a majority of the shareholders approved an increase from 200,000 to 300,000 shares.

On October 17, 2017,The 2018 Plan provides the Company issued 8,900the ability to grant to employees, directors, consultants or advisors shares of common stock in a subsequent close of the Regulation A offering atCompany through the grant of equity awards, including, but not limited to, options that are incentive stock options or NQSOs and restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. As of June 30, 2023, the Company had a public offering priceremaining reserve of $6.50 per share. The Company received net proceeds222,339 shares of $56,115 in this closing after deducting underwriting commissionscommon stock under the 2018 Plan for outstanding grants. Since approval of $1,735. See Note 8the 2022 Plan, awards that are forfeited no longer become available for fees paid togrant under the underwriter in the Regulation A Offering.2018 Plan.

Preferred StockStock-based compensation expense under the 2018 Plan for the three and six months ended June 30, 2023 was $851,912 and $1,814,442, respectively. Stock-based compensation expense under the 2018 Plan for the three and six months ended June 30, 2022 was $1,809,842 and $3,202,222, respectively.

During the second quarterfirst half of 2017, the Company sold 157,7002022, unqualified and qualified options to purchase 67,565 shares of Series A-1 Preferred Stock for cash proceeds of $788,500 in a Regulation D offering. Of these shares, 2,000 were sold to a related party. As discussed in Note 2, these shares were converted to common stock on July 25, 2017.

2012 Employee Stock Benefit Plan

On May 1, 2017, 8,000 warrants were issuedgranted to employees and vendors/consultants under the Second Amended and Restated 2012 Employee Stock Benefit2018 Plan towith a lobbying contractor with an exercise price of $2.50 per share and a five-year term. The Black-Scholes variables used in assessing thegrant date fair value atof approximately $5,803,000. The options were valued using the grant date were anBlack-Scholes option pricing model with approximately a 6.1 year expected life of 5 years,term, risk free interest rate of 1.84%1.8%, a dividend yield of 0%, and expectedan annualized standard deviation of stock price volatility of 21.34% resulting97.14%. These options vest over three years.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

During the first half of 2022, 19,764 restricted stock were issued to certain personnel and outside consultants with a grant date fair value of approximately $1,406,000. These shares were valued by using the closing date of the Company’s stock price on the date of the grant. The majority of awards to external consultants vest over a one to three-year period except for 2,964 of the awarded units, which vested immediately upon issuance.

No options were granted or restricted stock issued during the first half of 2023 under the 2018 Plan.

Total compensation cost related to non-vested awards issued under the 2018 Plan not yet recognized as of June 30, 2023 was approximately $3,518,861 and will be recognized on a straight-line basis through July 2025 based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or 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. 50,000 shares of common stock were authorized for issuance under the 2015 Plan. Since approval of the 2022 Plan, awards that are forfeited no longer become available for grant under the 2015 Plan. As of June 30, 2023, 25,688 shares of common stock were reserved for issuance pursuant to stock options that are outstanding.

Stock-based compensation expense under the 2015 Plan for the three and six months ended June 30, 2023 was $469 and $1,675, respectively. Stock-based compensation expense under the 2015 Plan for the three and six months ended June 30, 2022 was $2,177 and $20,908, respectively.

There is no non-vested compensation expense as June 30, 2023 as all awards were fully vested as of May 2023.

NOTE 12: COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, the Company 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. The Company has an accounting policy to record an accrual of legal costs on the basis of an estimate of future legal costs. As of June 30, 2023, the Company had no accrual for future legal costs.

NOTE 13: RELATED PARTY TRANSACTIONS

Arcimoto may, from time to time, sell to its management and employees at a discounted price. Sales to such parties for the three and six months ended June 30, 2023 were not material. Also, from time to time, the Company may make certain purchases from an entity owned by the former Chief Operating Officer. During the first half of 2023, the purchases were not material and the amount owed to the related party was zero at June 30, 2023.

On May 26, 2023, the Company entered into a $500,000 promissory note with a director of the Company (the “Related Party Note”). The principal was due and payable in cash on the earlier of (a) June 25, 2023; or (b) the date the Company raises third-party capital in an amount equal to or in excess of the principal (“Maturity Date”) in either cash or, at the option of the holder, in the event the Arcimoto issues convertible promissory notes in an offering led, or participated, by Ducera Investments LLC (“Ducera”) to third parties before the Maturity Date, in a valueconvertible promissory note on the same terms as purchased by such third parties. On the Maturity Date, the Company will pay the holder a fixed interest amount of $0.57 per warrant. $75,000 in the Company’s common stock calculated based on the closing stock price on the Maturity Date.

The total valueRelated Party Note was amended on June 11, 2023. The amendment provided that if the promissory note becomes due because the Company raises third-party capital in an amount equal to or in excess of $4,550$500,000, the principal amount shall be paid 50% in cash and 50% in the Company’s common stock based on the closing stock price on the Maturity Date.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

On June 12, 2023, the Company completed an equity offering raise in excess of $500,000. The Related Party Note matured in connection with the offering, as described above, and was recorded as lobbying expense. On September 20, 2017, 15,000 employee warrants were exercisedpartially repaid with $250,000 in a cashless transaction resulting incash. The remaining principal balance and interest are to be settled by the issuance of 13,846 common shares.201,863 shares of Common Stock, which have not yet been issued.

SeeOn April 25, 2022, the Company entered into a $4,500,000 convertible promissory note agreement with Ducera, a related party because a partner at Ducera is also Notes 4, 5 and 8 for additional subsequent events.a member of the Company’s Board of Directors. Further disclosures are presented in Note 9 - Convertible Notes.

NOTE 14: SEGMENT REPORTING

Arcimoto has three reportable segments that are identified based on its product lines and services: fun utility vehicles (“FUV”), rental and TMW. The FUV segment consists of the sale of its electric vehicle product lines while the rental segment’s operations involve generating revenue from the short-term rental of its electric vehicles via various channels or networks. The TMW segment, as discussed above, engages in the design, production, sales, and installation of a bolt on kit that converts a two wheeled motorcycle into a tilting three wheeled motorcycle.

The reportable segments were identified based on how the Chief Operations Decision Maker (“CODM”), which in the Company’s case, is the Chief Executive Officer (“CEO”), allocates resources to the various operations. The following tables disclose the financial information used by the CODM in allocating the Company’s resources.

ARCIMOTO, INC.

CONDENSED CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 15: SUBSEQUENT EVENTS

The Company evaluates subsequent events that have occurred after the balance sheet date but before the condensed consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.

The Company has evaluated subsequent events through the date the condensed consolidated financial statements were issued and up to the time of filing with the Securities and Exchange Commission. The discussions that follow reflect this evaluation.

On July 14, 2023, the Company signed an extension for the Mortgage Loan, which extended the maturity date by six months to February 17, 2024. As a result of the extension, the Company will pay a $300,000 facility fee and an additional $600,000 fee.

On August 8, 2023, the Company signed two promissory notes totaling $660,000 at an original issue discount purchase price of $600,000. The principal of $660,000 is due on August 15, 2023. Prior to the maturity on August 15, 2023, the notes shall not bear interest. The noteholders have the right to convert any outstanding principal balance of the note, in whole or in part, into securities of the Company at a rate of 125% of the converted principal amount in connection with any new financing of the Company.

If any event of default occurs, the full principal amount of the note shall become, at the payee’s election, immediately due and payable in cash. Commencing 3 days after the occurrence of any event of default that results in the acceleration of the note, interest accrues at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ 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 file with the SEC. In addition, such statements could be affected by risks and uncertainties related to: