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

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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 filed such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ 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 ~~5, 2018,~~13, 2019, there were approximately ~~16,027,441~~19,436,389 shares of the registrant’s common stock issued and outstanding.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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 first step in this shift has been developing an affordable, daily utility, pure electric vehicle. Over the past ~~eleven~~ten 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 first real, affordable, and fossil-free alternative for the vast majority of daily trips. Compared to the average car, the FUV has dropped ~~3/4~~2/3 of the weight and 2/3 of the footprint, in order to bring the joy of ultra-efficient, pure electric driving to the masses.

Risks and Uncertainties

The Company currently has limited production and distribution ~~capabilities and is still in the process of setting up facilities~~capabilities. Facilities to manufacture vehicles on a ~~larger scale. We~~scale of up to 10,000 vehicles per year are substantially complete, but we have started retail production at one FUV per day. Arcimoto also dodoes not have a history of higher-scale production and may encounter delays, flaws, or inefficiencies in the manufacturing process, which may prevent or delay ~~us from~~ achieving higher-scale production within ~~our~~the anticipated timeline. We believe that small scale Retail Series production will commence by early 2019; however, delays in finalizing the FUV design, availability of inventory, and machinery tooling customization could delay such estimates.

~~At the end of October 2018, Arcimoto opened its first vehicle rental test location in Eugene, Oregon. We used this location primarily as a test bed for developing the rental operations.~~ Part of ~~our~~the Company’s strategy is to use vehicle rentals to generate a positive cash flow from customer test drive activities. We have faced certain obstacles to the rental strategy including from 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 offer SLI (supplemental liability insurance) for operators of motorcycle rental facilities to sell to their customers. We have acquired rental liability insurance and are pursuing SLI for us to offer to our rental customers. As with any strategy, there is the risk that the rental business will not be successful. We learned a great deal from this short-term test that we believe will help us refine our 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 September 30, ~~2018, we have $1.9 million~~2019, the Company has $4,172,853 in inventory and another ~~$1.4 million~~approximately $1,607,786 in prepaid inventory not received yet. ~~Our motors and motor controllers~~Prepaid inventory is included in other current assets. Certain inventory components are included in prepaid inventory that are 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 ~~our~~ future products and services. In addition, the Company will compete with companies that currently have extensive and well-funded marketing and sales operations. ~~Our~~The Company’s marketing and sales efforts 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 fluctuations in these conditions. Other developments, including but not limited to economic recessions, import tariffs, trends in vehicle 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’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 products.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 2: GOING CONCERN

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. The Company has experienced recurring operating losses and negative operating cash flows since inception.

The Company ~~generated revenues for the first time in December 2017,and has had limited sales in 2018. The Company~~ has not achieved positive earnings and operating cash flows to enable the Company to finance its operations internally. Funding for the business to date has come primarily through the issuance of debt and equity securities. WeThe Company will require additional funding ~~by the end of November 2018~~ 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 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 will need to raise additional capital in order to fund its operations, which it intends to obtain through debt and/or equity offerings. Funds on hand and any follow-on capital, will be used to invest in our business to expand sales and marketing efforts, including company owned and franchise rental operations and the systems to support them, enhance our current product lines by continuing research and development (“R&D”) to enhance and reduce the cost of the FUV and to bring ~~the FUV~~future variants to retail production, continue to build ~~custom tooling~~out and optimize our production facility, debt repayment, 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: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information

The accompanying unaudited 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 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 financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of September 30, ~~2018,~~2019, and the results of its operations ~~and its cash flows~~ for the three and nine months ended September 30, 2019 and 2018 and ~~2017.~~its cash flows for the nine months ended September 30, 2019 and 2018. Results for the three and nine months ended September 30, ~~2018~~2019 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2018.~~2019. 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, ~~2017~~2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~30, 2018.~~29, 2019.

Basis of Presentation

The accounting and reporting policies of the Company conform with GAAP.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those estimates.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Fair Value Measurements

The Company’s financial instruments consist primarily of cash ~~certificates of deposits,~~ and capital lease obligations. 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.

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 measurements is defined 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 significant to the fair value measurement.

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 September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company did not have any level 2 or level 3 instruments.

~~Cash and Cash Equivalents~~Inventory

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 September 30, 2018 and December 31, 2017, the Company held its balance of cash and cash equivalents in two financial institutions, which, at times, exceed the federally insured limits.

~~Certificates of Deposit~~

The Company uses certificates of deposit for short-term investments. No more than $250,000 is invested in any single certificate of deposit so that all balances are covered by federally insured limits. As of September 30, 2018 and December 31, 2017, approximately $750,000 and $6,247,000, respectively, of the Company’s certificates 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 first-in, first-out method ~~“FIFO”~~(“FIFO”)) or market. Inventories consist of purchased electric motors, electrical storage and transmission equipment, and component parts. ~~Inventories consisted almost entirely~~

	September 30,		December 31,
	2019		2018
Raw materials and component parts	$	3,866,302	$	1,531,032
Work-in-progress		270,403		15,683
Finished goods		36,148		156,858
Total	$	4,172,853	$	1,703,573

Beta FUVs previously held in finished goods were scrapped for approximately $147,000 and written off during the quarter ended September 30, 2019, which is in addition to the disposal disclosed in Note 5.

Offering Costs

The Company accounts for offering costs in accordance with FASB ASC 340,Other Assets and Deferred Costs. Prior to the completion of ~~raw materials and component parts~~an offering, offering costs will be capitalized as deferred offering costs on the balance sheet. The deferred offering costs will be charged to stockholders’ equity or as a reduction of ~~December 31, 2017. Work-in-progress as~~debt upon the completion of an offering or to expense if the offering is not completed. As of September 30, ~~2018 was approximately $22,000, with no significant amounts as of~~2019 and December 31, ~~2017. There were $505,773~~2018, no offering costs remained capitalized. Our fourth quarter 2018 equity and debt recapitalization is further described in ~~Finished Goods at~~Note 7 and 8. For the nine months ended September 30, 2019 and 2018, ~~with no significant amounts as of December 31, 2017.~~offering costs totaled approximately $255,000 and $0, respectively.

~~Property and Equipment~~ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

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. 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 financial statement purposes.(Unaudited)

~~The estimated useful lives for significant property and equipment categories are as follows:~~

~~Computer Equipment and Software~~		~~1 – 3 years~~
~~Furniture and Fixtures~~		~~2 – 7 years~~
~~Machinery and Equipment~~		~~5 – 10 years~~
~~Leasehold Improvements~~		~~Shorter of useful or lease life~~

Customer Deposits

Non-refundable customer deposits are comingled with operating funds. 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, when control of the vehicle ~~is ready for pickup by or delivery~~passes to the customer.

Deferred Revenue

Deferred revenues represent cash collected in advance of the revenues being earned for distributor licensing arrangements and franchise fees.

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 via common carrier or when the FUV is shipped in a company owned vehicle, when delivery is completed, 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~~Revenues related to distributor licensing arrangements are generally recognized over the ~~adoption~~term 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 financial statements.~~agreement, except for specific products and services specified as part of the agreement, for which revenue may be accelerated based on when the earnings process is complete.

~~Stock-Based Compensation~~

~~The Company accounts for stock-based compensation in accordance with FASB ASC 718,~~ ~~Compensation - Stock Compensation~~~~. Under~~Distributor and Franchise fee revenue is recognized over the ~~fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the fair value~~term of the ~~award and is recognized as expense ratably over the requisite service period,~~agreements which is generally 10 years for franchises and 4 years for distributors. We have determined that any services provided to our franchise partners are not distinct from the ~~option or warrant vesting period. The Company uses~~franchise rights granted in the ~~Black-Scholes option pricing model to determine the fair value of stock options~~franchise agreement 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 forare combined into a single 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.obligation.

Research and Development

~~Expenses~~Costs relating to ~~research and development~~R&D are expensed as incurred. ~~Vehicle and battery research and development~~R&D expenses consisted of approximately $2,343,000 and $5,440,000, for the three and nine month periods ended September 30, 2019, respectively, and $779,000 and $2,191,000, for the three and nine month periods ended September 30, 2018, ~~respectively, and $288,000 and $820,000, for the three and nine month periods ended September 30, 2017,~~ respectively.

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 effect 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 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 common stock warrants and common stock options outstanding were anti-dilutive.

At September 30, ~~2018~~2019 and ~~2017,~~2018, the Company excluded the outstanding Employee Equity Plans (“EEP”) and other securities summarized below, which entitled 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.

	September 30, 2018		September 30, 2017		September 30, 2019		September 30, 2018
Warrants to purchase common stock		893,004		973,004
Stock options to purchase common stock		1,497,472		742,700
EEP Warrants to purchase common stock						647,316		893,004
EEP Stock options to purchase common stock						1,713,781		1,497,472
Notes convertible into common stock						474,433		-
Investor warrants to purchase common stock						942,857		-
Underwriters warrants		122,238		-		122,238		122,238
Warrants issued to vendors outside of employee plans		47,000		-		47,000		47,000
Total		2,559,714		1,715,704		3,947,625		2,559,714

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Recent Accounting Pronouncements

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

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies 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 effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal 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 financial statements.

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 removes certain disclosures, modifies others and introduces additional disclosure requirements for entities. The amendments in ASU 2018-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. We do not believe the adoption of ASU 2018-13 will have a material effect on our financial statements and their disclosures.

In ~~June 2018,~~February 2016, the FASB issued ASU ~~2018-07, Compensation - Stock Compensation~~No. 2016-02, “Leases (Topic ~~718): “Improvements~~842)” (“ASU 2016-02”) which supersedes ASC Topic 840, Leases. ASU 2016-02 requires lessees to ~~Nonemployee Share-Based Payment Accounting”. ASU 2018-07 is intended to reduce cost~~recognize a right-of-use asset and ~~complexity and to improve financial reporting~~a lease liability on their balance sheets for ~~share-based payments issued to nonemployees. This ASU expands~~all the scope of Accounting Standards Codification Topic 718, “Compensation - Stock Compensation”, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Consequently, the accounting for share-based payments to nonemployees and employeesleases with terms greater than twelve months. Based on certain criteria, leases will be ~~substantially aligned.~~classified as either financing or operating, with classification affecting 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 ~~2018-07 supersedes ASC Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The amendments in this ASU are effective for~~2016-02 has been delayed until fiscal years beginning after December 15, ~~2018, including~~2020 for smaller reporting companies, and interim periods within ~~that fiscal year.~~beginning after December 15, 2022. We will adopt this new standard on January 1, 2021. In transition, lessees and lessors are ~~currently assessing~~required to recognize and measure leases at the ~~impact~~beginning of ~~this ASU on our financial statements.~~

the earliest period presented using a modified retrospective approach. In ~~February 2016,~~July 2018, the FASB issued ASU ~~2016-02,~~No. 2018-11, “Leases (Topic 842)”: Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date (e.g. January 1, 2019), ~~which significantly changes~~as opposed to the ~~accounting for operating leases by lessees. The accounting applied by lessors is largely unchanged from that applied~~earliest period presented under ~~previous guidance. The new guidance requires lessees~~the modified retrospective transition approach (January 1, 2017) and recognize a cumulative-effect adjustment to ~~recognize lease assets and lease liabilities~~the opening balance of retained earnings in the ~~balance sheet, initially measured at~~period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the ~~present value~~effective date of ~~the lease payments,~~Topic 842, including continuing to account for leases ~~which were classified as operating leases under~~that commence before the effective date in accordance with previous ~~guidance. Lease cost included in the statement of income will be calculated so that the cost of~~guidance, unless the lease is allocated over the lease term, generally on a straight-line basis. Lessees may make an accounting policy election to exclude leases with a term of 12 months or less from the requirement to record related assets and liabilities. The new standard is effective for public companies for fiscal years beginning after December 15, 2018.modified. The Company ~~plans~~currently expects that most of its operating lease commitments will be subject to ~~adopt~~ the new standard ~~effective for periods after December 31, 2018. The Company does not expect the~~and recognized as operating lease liabilities and right-of-use assets upon its adoption of ~~this standard to have a material impact on its results of operations or cash flows; however,~~Topic 842, which will increase the total assets and total liabilities that the Company ~~has not determined the impact the adoption of this new standard will have on its financial position.~~reports relative to such amounts prior to adoption.

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 financial statement presentation or disclosures.ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 4: Concentrations

~~During the nine months ended~~Payables

As of September 30, 2019, and December 31, 2018, the Company ~~purchased certain products from~~had one ~~vendor, which~~and two, respectively, significant vendors that accounted for ~~approximately 45%~~more than 10% of ~~total purchases. Management believes~~ the Company’s payables balances. As of September 30, 2019, this vendor accounted for 26% of payable balances. As of December 31, 2018, these vendors accounted for 13% and 23% of payable balances. The loss of ~~this vendor could~~these vendors would not have ~~an adverse~~a significant impact on the Company’s operations.

Purchases/Inventory

As of September 30, 2019, and December 31, 2018, the Company had three and two, respectively, significant vendors that accounted for more than 10% of the Company’s inventory balances. As of September 30, 2019 these vendors accounted for 10%, 19% and 22% of inventory balances. As of December 31, 2018, these vendors accounted for 12% and 16% of inventory balances. The loss of these vendors would not have a significant impact on the Company’s operations.

NOTE 4:5: PROPERTY AND EQUIPMENT

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, our property and equipment consisted of the following:

	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
Computer equipment and software	$	42,361		$	60,696		$	61,992		$	51,594
Furniture and fixtures		46,839			50,996			46,839			46,839
Machinery and equipment		4,107,580			1,658,976			4,578,519			4,683,529
FUV rental fleet		225,373			-			-			71,998
Leasehold improvements		349,008			297,025			349,008			349,008
Machinery and equipment in process		659,746			462,531
Fixed assets in process								671,922			1,082,345
		5,430,907			2,530,224			5,708,280			6,285,313
Less: accumulated depreciation		(302,644	)		(96,198	)		(935,564	)		(475,539	)
Total	$	5,128,263		$	2,434,026		$	4,772,716		$	5,809,774

~~Machinery and equipment~~Fixed assets in process is comprised primarily of leasehold improvements, tooling and equipment related to the manufacturing of our vehicles. The total purchase commitments for machinery and equipment in process as of September 30, 2018 and December 31, 2017, is approximately $660,000 and $574,000, respectively, which include the amounts recorded above and remaining commitments of approximately $0 and $111,000, respectively. Completed assets are transferred to their respective asset class and depreciation begins when the asset is ready for its intended use. During the three months ended September 30, 2019, the Company recorded a loss on disposal of property and equipment of approximately $710,000

Depreciation expense was approximately $173,000 and $516,000 during the three and nine months ended September 30, 2019, respectively, and was approximately $121,000 and $281,000 during the three and nine months ended September 30, 2018, ~~respectively, and was approximately $1,000 and $2,000 during the three and nine months ended September 30, 2017,~~ respectively.

NOTE 5:6: CAPITAL LEASE OBLIGATIONS

As of September 30, ~~2018,~~2019, the Company has financed a total of approximately ~~$2,093,000~~$2,232,000 of its capital equipment purchases with monthly payments ranging from $437 to $8,582, repayment terms ranging from 48 to 60 months, and effective interest rates ranging from 4.52% to 9.86%. Total monthly capital lease payments as of September 30, ~~2018~~2019 are ~~$42,669.~~approximately $46,100. These lease obligations mature ranging from December 2021 through ~~August 2023~~February 2024 and are secured by approximately ~~$2,501,000~~$2,814,000 in underlying assets which have ~~$51,601~~approximately $359,000 in accumulated depreciation as of September 30, ~~2018.~~2019. The balance of capital lease obligations ~~were~~was approximately ~~$1,940,000~~$1,694,000 and $0$1,897,000 as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

NOTE 7: NOTES PAYABLE

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 8 for additional details. On September 12, 2019, the Company issued and additional $500,000 note (“additional Note”) to the Investor, net of $15,000 discount. The additional Note principal plus accrued interest is convertible into the Company’s common stock at a conversion price of per share of $4.25.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Between July 11, 2019 and July 15, 2019, the Company entered into subscription agreements (each a “Subscription Agreement” and, collectively, the “Subscription Agreements”), pursuant to which the Company issued notes in original principal amount of $600,000 (U.S.) (each a “Note” and, collectively, the “Notes”). Of the $600,000 Notes issued $325,000 were to related parties. The principal amount due under each Note was due and payable on the two-month anniversary of the date of each Note (the “Maturity Date”): in (a) cash, (b) the Company’s common stock (valued at a price of $4.25 per share) or (c) in the event the Company issues convertible promissory notes to third parties before the Maturity Date, in a convertible promissory note on the same terms as purchased by such third parties; in each case at the election of the holder of the Note. Each Note also bore interest, payable at the Maturity Date, equal to $100,000 multiplied by the remainder of (i) the amount of the Note divided by (ii) $600,000. Interest was payable on each Note in: (a) the Company’s common stock (valued at $4.25 per share) or (b) in the event the Company issued convertible promissory notes to third parties before the Maturity Date, in a convertible promissory note on the same terms as purchased by the third parties; in each case at the election of the holder. On August 14, 2019, the $600,000 in principal and accrued interest of $48,972 on the Notes were exchanged into $648,972 in principal amount of convertible promissory notes (“New Notes”). The principal amount of the New Notes is due and payable on the one year anniversary of the date of the New Notes in (a) cash or (b) the Company’s common stock at a price of $4.25 per share, at the election of the holder of the New Notes. Interest on the New Notes accrues at an annual rate of 10%, compounded monthly. Between August 14, 2019 and September 27, 2019, the Company issued additional notes with the New Notes terms in the original principal amount of $850,000, of which 800,000 was to related parties. The Company may prepay the indebtedness at any time.

NOTE 6:8: STOCKHOLDERS’ EQUITY

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 September 30, 2018~~Stock and ~~December 31, 2017, there were no shares of~~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 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. The Series A-1 Preferred Stock was converted to common stock in July 2017, prior to the Regulation A offering and listing.

As a result of the share exchange agreement described below, the Company issued 2,000,000 shares of Class C Preferred Stock on November 15, 2018 in the exchange noted below. These 2,000,000 shares of Class C Preferred Stock were exchanged back to an equal number of shares of common stock on May 13, 2019, upon the filing of an amendment to the Company’s Second Amended and ~~outstanding.~~Restated Articles of Incorporation that increased the number of authorized shares of common stock.

Except as otherwise required by law or expressly provided in the Company’s Second Amended and Restated Articles of Incorporation, as amended, 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~~

At the May 11, 2019 annual meeting of shareholders (the “2019 Annual Meeting”), the shareholders approved an increase in the number of authorized common shares from 20,000,000 to ~~issue 20,000,000~~60,000,000, which also triggered the automatic conversion of the 2,000,000 shares of Class C Preferred Stock to common stock ~~no par value.~~described above.

The Company has reserved a total of ~~2,877,800~~3,482,031 shares of its common stock pursuant to the equity incentive plans (see Note 7)9). The Company has ~~2,390,476~~2,316,097 and ~~1,957,204~~2,236,893 stock options and warrants outstanding under these plans as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

As of September 30, 2019, the Company has reserved an additional 942,857 shares of its common stock for warrants pursuant to the Subscription Agreement discussed above, 122,238 shares for underwriter warrants associated with the 2017 Regulation A offering, and 47,000 warrants to consultants. As of September 30, 2019, these warrants were fully vested.

Common Stock Issued for Compensation

During the ~~nine-month period~~nine months ended September 30, 2019 and 2018, the Company issued 10,947 and 55,000 restricted common shares for ~~investor relation~~ services with a fair value of $36,782 and $195,450, respectively. The shares were valued based on the ~~closing~~stock price at the time of the grant when the performance commitment was complete. The shares issued during the nine months ended September 30, 2019 were to settle existing accounts payable.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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 $29,258.

During the nine months ended September 30, 2019, a total of 3,388 employee options were exercised at a price per share of $3.10 for total proceeds to the Company of $10,502.

During the nine months ended September 30, 2019, a total of 245,688 employee warrants, 75,688 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 market prices ranging from $3.162 to $5.212 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction dates. The transactions resulted in the issuance of a total of 203,252 shares of the Company’s common stock.

During the nine months ended September 30, 2018, a total of 80,000 employee warrants with an exercise price of $0.50 per share were exercised in cashless transactions at market prices between $3.77756 and $4.403 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.

During the nine months ended September 30, 2019, a total of 119,637 employee options, with exercise prices ranging from $2.0605 to $3.10 per share were exercised in cashless transactions at market prices ranging from $2.864 to $5.212 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction dates. The transactions resulted in the issuance of a total of 53,684 shares of the Company’s common stock.

During the nine months ended September 30, 2018, a total of 13,000 employee options, with an exercise price of $2.50 per share were exercised in a cashless transaction at a market price of $4.202 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction date. The transaction resulted in the issuance of a total of 5,265 shares of the Company’s common stock.

Public Offering of Common Stock

On March 25, 2019, the Company entered into Subscription Agreements with certain investors relating to a public offering of 800,000 shares of common stock directly to investors, for an offering price of $4.25 a share. The gross proceeds of $3,400,000 were offset by approximately $255,000 in various legal and transaction fees.

The March 25, 2019 offering was made pursuant to the Company’s registration statement on Form S-3, previously filed with the Securities and Exchange Commission (the “SEC”) on October 3, 2018, and declared effective by the SEC on October 17, 2018, a base prospectus forming a part of the effective registration statement, and a prospectus supplement dated March 25, 2019.

Private Offering of Common Stock

During January and February 2019, the Company entered into Subscription Agreements, with four independent investors, pursuant to which the Company issued to the Investors at total of 288,333 shares of its common stock, no par value per share at a purchase price of $3.00 per share, pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Entry into a Material Definitive Agreement

On December 27, 2018, the Company entered into a Subscription Agreement with 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 “2018 Note”). The Shares, Warrant and 2018 Note were purchased together by the Investor for an aggregate amount of $4.5 million but were issued separately (collectively, the “Transaction”).

The Company offered the Shares and Warrant in a public offering pursuant to the Company’s registration statement filed with the SEC that was declared effective on October 17, 2018, as well as the prospectus supplement filed on December 27, 2018.

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 the exclusive option on the 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 9, 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 2018 Note is secured by a perfected first 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 2018 Note, with a minimum of one year of interest paid at such time. The 2018 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 2018 Note, the Company entered into a Security Agreement, an Intellectual Property Security 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 2018 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 ~~grant. This fair value was expensed upon issuance~~maturity.

On September 12, 2019, Arcimoto, Inc. (the “Company”) entered into an Amended and Restated Subscription Agreement (the “Restated Subscription Agreement”) with the Investor, which amended and restated that certain Subscription Agreement dated December 27, 2018 by and among the Company and the Investor (the “Original Agreement”).

Pursuant to the Restated Subscription Agreement and in addition to the issuances under the Original Agreement, the Company issued to the Investor a convertible note in the principal amount of $500,000 (the “Convertible Note”) for ~~services rendered. Issuances~~an additional purchase price of $500,000. The Convertible Note matures on September 12, 2020, provided, that the Convertible Note may convert into the Company’s common stock at any time at the option of the Investor at a rate of $4.25 per share. In connection with the Restated Subscription Agreement, the Company also granted the Investor franchise rights for the ~~exercise~~Florida Keys, subject to certain modifications to the terms of ~~warrants and options are disclosed~~the Company’s standard franchise agreement including, but not limited to, a right of first refusal for any Company rental franchise in the South Beach Region of Miami Beach, Florida.

The Convertible Note is secured by a perfected first secured lien on all of our assets. In connection with the Original Agreement, the Company entered into the Collateral Documents, each of which apply to the Convertible Note pursuant to the Restated Subscription Agreement.

��

The Convertible Note is included in the New Convertible Notes discussed in Note 7.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 7:9: STOCK-BASED PAYMENTS

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 Benefit 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 different assumptions, stock-based compensation expense could be materially different 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 “simplified method,” as the Company has insufficient historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. The simplified 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 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 and services is included in the statement of operations as follows:

Three months ended
September 30, Nine months ended
September 30,
2018 2017 2018 2017
Research and development $ 28,418 $ - $ 85,429 $ -
Sales and marketing 11,588 - 83,961 -
General and administrative 175,913 36,294 211,926 121,482
Total $ 215,919 $ 36,294 $ 381,316 $ 121,482

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Research and development	$	52,359	$	28,418	$	125,925	$	85,429
Sales and marketing		23,849		11,588		61,455		83,961
General and administrative		104,808		175,913		275,826		211,926
Total	$	181,016	$	215,919	$	463,206	$	381,316

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. At the 2019 Annual Meeting, the shareholders approved an additional 1,000,000 shares of common stock to be issued under the 2018 Plan. 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-qualified stock options (“NQSOs”)~~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~~2,000,000 shares of common stock under the 2018 Plan. Awards that are forfeited generally become available for grant under the 2018 Plan.

ARCIMOTO, INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

During the nine months ended September ~~1, 2018, 617,000~~30, 2019, the Company granted 498,600 options ~~were issued~~ under the 2018 ~~Plan, 20,000~~Plan. These options had an exercise price of ~~those grants~~$4.52 and vest over three years. The total grant date fair value of these options was $963,929. As of September 30, 2019, 899,150 stock options are outstanding and 1,100,850 shares were ~~forfeited, leaving 597,000 grants outstanding none of which have vested~~available for issuance under the 2018 ~~Plan as of September 30, 2018.~~Plan. See below for the range of variables used in assessing the fair value at the grant date for the options issued ~~during~~under the ~~nine months ended September 30, 2018:~~2018 Plan:

	~~September 30, 2018~~April 5, 2019
Annual dividend yield		-
Expected life (years)		~~6.0-10.0~~6.0
Risk-free interest rate		~~2.78-2.86~~2.36	%
Expected volatility		~~36.2~~40.9	%

Employee stock-based compensation expense under the 2018 Plan included in operating expenses for the three and nine months ended September 30, ~~2018~~2019 was ~~$27,377.~~$132,335 and $338,278, respectively.

For options issued to a non-employee contractor for the three and nine months ended September 30, 2018, vesting was completed on the date of issue. The fair value of these non-employee awards was $1,112 for the three and nine months ended September 30, 2018.

Total compensation cost related to non-vested awards issued ~~on September 1, 2018~~ under the 2018 Plan not yet recognized as of September 30, ~~2018~~2019 was ~~$1,000,177~~approximately $1,198,838 and will be recognized on a straight-line basis through April 2022 based on the ~~end of the~~respective vesting ~~periods which is September 30, 2021.~~periods. The amount of future stock option compensation expense could be affected 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~~One million shares of common stock were authorized for ~~delivery~~issuance under the 2015 Plan. Awards that are forfeited generally become available for grant under the 2015 Plan.

~~There~~ As of September 30, 2019, 814,631 shares of common stock were ~~no grants~~reserved for issuance pursuant to stock options that are outstanding and 8,088 shares remain available for issuance pursuant to future awards that might be made under the 2015 ~~Plan during~~Plan.

During the nine months ended September 30, ~~2018.~~2019, 141,600 options were granted under the 2015 Plan with a grant date fair value of $273,751. See below for the range of variables used in assessing the fair value at the grant date for the options issued during the nine months ended September 30, ~~2017:~~2019:

	~~September 30, 2017~~April 5, 2019
Annual dividend yield		-
Expected life (years)		~~6.0-10.0~~6.0
Risk-free interest rate		~~2.14-2.46~~2.36	%
Expected volatility		~~21.3~~40.9	%

Employee stock-based compensation expense included in operating expenses for the three and nine months ended September 30, ~~2018~~2019 related to the 2015 Plan was $48,681 and ~~2017 was $150,410 and $94,487, respectively. Employee stock-based compensation expense included in operating expenses for the three months ended September 30, 2018 and 2017 was $49,180 and $36,294,~~$124,928, respectively.

For the NQSOs issued for the nine months ended September 30, 2017, vesting was completed on the date of issue. The fair value of these non-employee awards was $22,445 for the nine months ended September 30, 2017.

Total compensation cost related to non-vested awards not yet recognized as of September 30, ~~2018~~2019 was ~~$252,799~~$299,722 and will be recognized on a straight-line basis through April 2022 based on the ~~end of the~~respective vesting ~~periods or December 31, 2020.~~periods. The amount of future stock option compensation expense could be affected by any future option grants or ~~by any~~ forfeitures.

~~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.~~

On September 24, 2018, 13,000 employee options with an exercise price of $2.50 per share were exercised in a cashless transaction at a market price of $4.202 per share, which was based on the average of the Company’s daily closing prices from September 17-21, 2018, amounting to 5,265 common shares issued.

~~As of September 30, 2018, 72,328 options are still issuable under the 2015 Plan.~~

2012 Employee Stock Benefit Plan

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 originally reserved 1,000,000 shares of common stock for ~~delivery~~issuance under the 2012 Plan. ~~Warrants~~Awards that are forfeited generally become available for grant under the 2012 Plan. As of September 30, 2019, 647,316 shares of common stock were reserved for issuance pursuant to warrants that are issued and outstanding under the 2012 Plan ~~as of September 30, 2018~~ and ~~2017 were 893,004 and 973,004, respectively.~~11,996 shares remain available for issuance pursuant to future awards that might be made under the 2012 Plan. Warrants expire 10 to 15 years from the grant date and were vested when issued.

On January 29, 2018, 15,000 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market price of $3.77756 per share, which was based on the average of the Company’s daily closing prices from January 19-25, 2018, amounting to 13,014 shares.

On July 10, 2018, 15,000 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market price of $4.403 per share, which was based on the average of the Company’s daily closing prices from July 2-7, 2018, amounting to 13,296 shares.

ARCIMOTO, INC.

On July 17, 2018, 30,000 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market price of $4.102 per share, which was based on the average of the Company’s daily closing prices from July 10-16, 2018, amounting to 26,343 shares.CONDENSED NOTES TO FINANCIAL STATEMENTS

(Unaudited)

On September 24, 2018, 20,000 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market price of $4.202 per share, which was based on the average of the Company’s daily closing prices from September 17-21, 2018, amounting to 17,620 shares.

~~As of September 30, 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 nine months ended September 30, 2018 issued outside the 2012 Plan in the prior year.~~

NOTE 8:10: 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 September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company’s balance of deposits received was approximately ~~$395,000~~$984,000 and ~~$400,000,~~$455,000, respectively. As of September 30, ~~2018~~2019 and December 31, ~~2017, $311,000~~2018, $405,324 and ~~$231,967,~~$370,624, 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 notified 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 $1,400 and $1,700 as of September 30, 2018 and December 31, 2017, respectively.~~

NOTE 9:11: COMMITMENTS AND CONTINGENCIES

Litigation

On March 11, 2018, the Company was served with a lawsuit entitledJohn R Switzer vs W.R. Hambrecht & Co. LLC et al., Case Number: CGC-18-564904, filed in San Francisco County Superior Court in the State of California. In this action, the Company ~~has been~~was named as a defendant along with five individuals who were directors and/or executive officers at the time of the completion of the Company’s Regulation A offering on September 21, 2017. The action iswas styled as a putative class action, alleged on behalf of all those who purchased the Company’s common stock in its Regulation A offering. The plaintiff ~~has~~ alleged violations of Section 12(a)(2) and Section 15 of the Securities Act, ~~of 1933, as amended,~~ and is seeking damages in an unspecified amount to be proven at trial. In addition, on March 28, 2018, the Company was served with another lawsuit entitledJay Mendelson v. Arcimoto, Inc. et al., Case Number CGC-18-565324, filed in San Francisco County Superior Court in the State of California. In that action, which iswas styled as a putative class action, the Company ~~has~~was also ~~been~~ named as a defendant along with the same individuals who were directors and/or executive officers at the time of the completion of our Regulation A offering on September 21, 2017. The allegations and claims made in theMendelsonaction ~~are~~were substantially similar to those of theSwitzeraction and the plaintiff was also is seeking damages in an unspecified 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 iswas without merit and ~~intends to~~ vigorously ~~defend~~defended itself against these claims in court. On July 30, 2018, counsel for the Company filed 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,~~demurrer. On September 28, 2018, plaintiffs in that case filed a First Amended Consolidated Complaint. The Company ~~denies~~denied the substantive claims and allegations made in that amended pleading and ~~shall continue~~continued to assert a vigorous defense. On January 25, 2019, the parties reached a settlement agreement in the consolidated cases, subject to court approval. The parties to the lawsuit have filed a motion with the court seeking approval of the settlement agreement, which motion is currently pending. By its terms, the settlement agreement resolves this litigation in its entirety.

NOTE ~~10:~~12: SUBSEQUENT EVENTS

On ~~October 3, 2018, the Company~~November 7, 2019, we filed a Registration Statement on Form ~~S-3~~S-1 with the SEC.

On October 8, 2019, we issued to ~~register up to $150 million~~certain institutional investors in a registered direct offering an aggregate of equity securities, debt securities, warrants and/or rights thereto. Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell securities pursuant to a Registration Statement on Form S-3 with a value of more than one-third of the aggregate market value1,044,444 shares of our common stock ~~held by non-affiliates~~at a purchase price per share of $2.25 for aggregate gross proceeds of approximately $2.35 million, and in ~~any 12 month period, so long as the aggregate market value of our common stock held by non-affiliates is less than $75.0 million. We have not offered any securities~~a concurrent private placement pursuant to ~~General Instruction I.B.6 of Form S-3 during~~ the ~~12 calendar months prior to and including the date of this Quarterly Report on Form 10-Q.~~

~~On October 15, 2018, we re-negotiated a lease previously entered into~~exemption provided in June 2018, for an approximately 5,291 square foot commercial industrial office 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, office and general use.

On October 18, 2018, the Company entered into a lease for an approximately 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 plus a 5% management fee. A portion of the space is being used for Arcimoto’s California dealer showroom. On October 18, 2018, the Company 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 costsSection 4(a)(2) under the ~~lease.~~

On October 16, 2018, 10,000 employee options with an exercise price of $2.0605 per share were exercised in a cashless transaction at a market price of $3.763 per share, which was based on the average of the Company’s daily closing prices from October 9-15, 2018, amounting to 4,524 common shares issued.

~~On October 19, 2018, 6,500~~Securities Act, and 10,000 employee options with an exercise price of $2.0605 and $2.50 per share, respectively, were exercised in a cashless transaction at a market price of $3.6575 per share, which was based on the average of the Company’s daily closing prices from October 12-18, 2018, amounting to 6,178 common shares issued.

~~On October 30, 2018, the Company entered into a 60-month equipment lease with a principal balance of $53,176 interest rate of 9.98% and payments of $1,059 per month.~~

~~On November 15, 2018, an amendment~~Rule 506(b) promulgated thereunder, issued to the ~~Company’s Second Amended and Restated Articles of Incorporation were effective with the Oregon Secretary of State, creating a newly designated Class C of preferred shares.~~

~~On November 15, 2018, the Company also entered into a Share Exchange Agreement with Mark Frohnmayer, our President, Chief Executive Officer and Chairman of the Board of Directors, pursuant~~investors warrants to ~~which Mr. Frohnmayer exchanged 2,000,000 of his~~purchase up to 1,044,444 shares of common stock at an exercise price per share of $2.83 per share. H.C. Wainwright & Co., LLC acted as exclusive agent for ~~2,000,000 shares~~the offerings, and received a placement fee equal to 7.5% of the ~~newly created Class C preferred stock.~~gross proceeds received by us in the offerings. The ~~Class C preferred stock will automatically convert into 2,000,000 shares of common stock upon~~net proceeds from the ~~filing of an additional amendment~~offerings were used for general corporate purposes, including to cover our ~~Second Amended~~operating expenses and ~~Restated Articles of Incorporation that increases our authorized shares of our Common Stock.~~inventory.

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:

	●	our ability to ~~generate sufficient cash flow by the end of November 2018~~identify financing sources to fund our capital expenditure requirements and continue operations until sufficient cash flow can be generated from operations;

	●	~~our ability to identify financing 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 effectively 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 specifically, both in the United States and globally;
	●
	●	changes in US and foreign trade policy, including the imposition of tariffs and the resulting consequences;
	●	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;~~vehicles within projected timeframes given that a vehicle consists of several thousand unique items and we can only go as fast as the slowest item;

	●	our inexperience to date in manufacturing vehicles at the high volumes that we anticipate;

	●	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 maintain adequate liquidity and financing sources and an appropriate level of debt, if any, 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 maintain quality control over our vehicles and avoid material vehicle recalls;

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

	●	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 effect on ~~earnings;~~earnings or losses;

	●	interest rates and the credit markets;

	●	our ability to maintain our NASDAQ Capital Market listing; and

	●	costs and risks associated with litigation; and

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

The foregoing list does not contain all ~~of the~~potential 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 reflect events or circumstances after the filing date of this report.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2019 and 2018 should be read together with our unaudited condensed financial statements and related notes included elsewhere in this report and in conjunction with the audited financial statements and notes thereto for the year ended December 31, ~~2017~~2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~30, 2018.~~29, 2019. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of ~~factors.~~factors, including those set forth above. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements.”

Overview

We design, develop, manufacture, sell, and plan to rent through company owned and franchised locations ultra-efficient fully electric vehicles. We achieved limited production of our first Signature Series vehicles at the end of 2017, with additional, limited Signature Series and Beta vehicle production in ~~the third quarter~~ 2018. We completed ~~fifteen~~23 Beta vehicles in 2018 and an additional 5 partial vehicles for testing. In the ~~third quarter~~first half of ~~2018. We anticipate completing six to ten~~2019, we produced 35 additional prototype vehicles ~~in the fourth quarter of 2018,~~or vehicle chassis and numerous lighting and system test fixtures. These tests were for quality, reliability, and compliance, for testing ~~of the remaining~~ design changes, product robustness, due care for voluntarily added equipment and compliance, prior to the ~~production~~initiation of Retail Series ~~vehicles ramping up~~production. Compliance testing was completed, and retail production began on September 19, 2019. We are planning on producing at least one vehicle per build day for the remainder of 2019, while we refine the logistics and production processes. Arcimoto currently employs a four day build week.

Arcimoto’s mission is to catalyze the shift to a sustainable transportation system. Since our incorporation, we have been engaged primarily in ~~2019. The Company completed~~the design, development, and now the production of ultra-efficient three-wheeled electric vehicles. Arcimoto was formed on November 21, 2007 as WTP Incorporated, an Oregon Corporation, and later changed its ~~first rental operations test~~name to Arcimoto, Inc.

We went public in ~~Eugene, Oregon. We learned~~September 2017, following the conclusion of a ~~great deal from this short-term test~~Tier 2 Regulation A stock offering that ~~we believe will help us refine our rental operations in preparation for a planned reopening of~~netted $18.1 million, after offering costs. Our shares are listed on the ~~Oregon rental facility and potential launch of~~Nasdaq Capital Market under the San Diego rental operation after retail FUV production has commenced. 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 the Company 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.ticker symbol ‘FUV.’

To execute our growth strategy, we will require significant additional funds going forward. If we are unable to successfully raise sufficient additional capital, though future financings or otherwise, we anticipate current operational funds will be depleted by approximately the end of November 2018.funds. No assurances can be made that we will be successful in raising the capital in the short term required to ~~continue operations.~~execute our growth strategy.

Thesis

Current automotive platforms are inefficient by design. Cars can weigh upwards of 4,000 lbs., take up on average almost 100 square feet of space on the road and, when parked, are way overcapacity for the vast majority of daily transportation tasks – those involving one or two people, traveling a relatively short distance, with a relatively small volume of items.

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

Platform and Technologies

Arcimoto spent its first decade developing and refining 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 efficient, by an order of magnitude, than today’s gas-powered 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 different market segments, an estimated 90% of the constituent parts are the same between our three initial products.

Fun Utility Vehicle

Arcimoto’s flagship product is the Fun Utility Vehicle. The FUV delivers a thrilling ride experience, exceptional maneuverability, comfort for two passengers with cargo, highly-efficient parking (three FUVs to a single parking space), and ultra-efficient operation, all at an affordable price. Over time, we anticipate offering the FUV with several option packages to meet the needs of a variety of customers. As of September 30, 2019, we had 4,128 FUV pre-orders with small refundable deposits, representing an increase of 911, or approximately 28%, from the 3,217 pre-orders as of December 31, 2018.

Evergreen Edition

Arcimoto’s first entry into the market is the Evergreen Edition FUV. We are leading with a consumer product, because we are a consumer-first brand. We believe individuals should be able to choose more efficient, more affordable, and lighter-footprint mobility solutions, so that more of us can participate in the transition to sustainable transportation future.

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 first responders to incidents more quickly and affordably than traditional emergency response vehicles.

Initially targeting the more than 50,000 fire stations across the United States that use traditional fire 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-Springfield Fire Department, and the city of Eastvale, California. We are targeting first production Rapid Responders to be delivered in 2020.

Deliverator

Development of the Deliverator was officially announced on March 19, 2019 with the unveiling of the first Deliverator prototype.

The Deliverator is a pure electric, last-mile delivery solution designed to more quickly, efficiently, and affordably 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 are targeting the first production Deliverators to be delivered in 2020.

Management Opportunities, Challenges and Risks

Demand, Production and Capital

Demand for the Retail Series Arcimoto FUV has continued to increase. As of September 30, ~~2018,~~2019, we had ~~3,018~~4,128 FUV pre-orders with small refundable deposits, representing an increase of ~~1,184,~~911, or approximately ~~65%~~28%, from the ~~1,834~~3,217 pre-orders as of December 31, 2018.

We began taking $5,000 non-refundable reservations for the FUV Evergreen Edition in Q1 2019. The FUV Evergreen Edition is our first retail product trim offering, starting at a price point of $19,900. Evergreen FUVs will be initially available to our pre-order customers in the west coast states of Oregon, California, and Washington. We secured non-refundable reservations for the first 100 FUVs in anticipation of initial retail production and delivery. In the last week of September ~~30, 2017. As~~2019, we delivered the first two (2) Evergreen Edition FUVs, and as of November ~~4, 2018,~~11, 2019, we ~~had 3,153 pre-orders.~~have produced 25 Evergreen Edition FUVs, four (4) for internal marketing, engineering and quality use, 18 that have been sold and delivered and three (3) in transit to retail customers.

~~Although~~In the third quarter of 2019, we ~~initially contemplated producing approximately 2,000 vehicles~~completed the vehicle testing begun in the eighteen months following the closing of our Regulation A offering, management decided to slow the rollout of FUVs post-offering by reducing the total number of vehicles that we anticipate producing in 2018. Our decision was based, in part, on the following factors that became apparent to us in the fourthfirst quarter of ~~2017:~~2019. Arcimoto tested to verify robustness of its vehicle design, to demonstrate compliance with all Federal Motor Vehicle Safety Standards required for motorcycles, and to demonstrate proper function of voluntarily-added equipment such as the FUV’s 3+3 seat belts. At the end of the third quarter of 2019, vehicle testing and regulatory requirements were completed, and we initiated the sales process with our first customers. As sales are completed pre-order and reservation fees are applied to the purchase price and balances due are collected on delivery.

The substantial public support we received in our Regulation A offering in September and October 2017 allowed us to begin significant portions of the Phase 2 production preparations which we originally contemplated would not commence until twelve months after the closing of our Regulation A offering. 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 profitability 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 efficiency.

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 first quarter 2018. These supplier delays have continued throughout 2018.

The manufacture of the first two Signature Series vehicles took longer than anticipated, due primarily to the fitting of body panel parts. We are using the knowledge we gleaned from the manufacturing processes used in the production of our first Signature Series vehicles to optimize and finalize the design and manufacturing processes for the Beta and future FUVs. As a venture that embraces continuous improvement, we strive to improve our designs and manufacturing processes.

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 finalization, 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 profitability 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~~produce at least an ~~additional six to ten vehicles~~average of one FUV per build day during the remainder of 2019, ramping up production in ~~the fourth quarter of 2018 and ramp up Retail Series production during 2019.~~2020. Given this plan, our capital expenditures, ~~include~~which are substantially complete, have included significant capital costs for the tooling, production equipment and construction of the FUV production line. ~~However,~~

Now that FUVs are in production, we need to balance the demand for the initial limited production. In the first half of 2020, we will start allocating FUVs to the plan to open rental stores in key destination markets to serve as ~~stated above,~~test drive facilities. We believe this rental model will offer the potential for Arcimoto to share the FUV experience with prospective customers, generate more lifetime revenue per rental vehicle, and build in-market stores that operate with better margins than if we ~~are unable~~were to successfully raise sufficient additional capital to cover our ongoing operating expenses in the short term, we anticipate current operational funds will be depleted by approximately the end of November 2018 and we will not be able to continue operations.offer free test drives.

Operating expenses grew by approximately ~~313%~~39%, or $2,893,000, for the nine months ended September 30, ~~2018,~~2019, as compared to the nine months ended September 30, ~~2017. This~~2018. R&D materials and testing costs accounted for approximately 62%, or $1,788,000, of the overall increase in expenses during the nine months ended September 30, 2019, as we completed testing and redesigning the FUV for regulatory requirements and automated production processes. Approximately 42%, or $1,213,000, of the overall increase was driven by ~~beginning~~employment growth associated with the transformation of Arcimoto from a private research and development (“R&D”) operation into a public manufacturing company. The number of employees increased by approximately ~~192%~~24%, from 2676 as of September 30, ~~2017~~2018 to 7694 employees as of September 30, ~~2018.~~2019. In December 2017, we moved into a new ~~30,000~~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 office space, and in October 2018, re-negotiated the lease for this space. We also have the Eugene and San Diego vehicle rental facilities and 3,000 square feet of additional warehouse space. As a result, ~~we incurred~~facilities costs ~~associated with equipping~~accounted for approximately 5%, or $135,000, of the employees, implementing systems, and running the larger facilities. R&D costs increased during the nine months ended September 30, 2018, as we redesigned the FUV for automated production processes, and salesoverall increase., Sales and marketing, and general travel costs ~~increased~~accounted for approximately 13%, or $379,000, of the overall decrease due to ~~investor relations expenses~~reduced participation in marketing roadshow events. Expenses associated with being a publicly traded ~~company. General~~corporation, investor relations, insurance and ~~administrative cost continues~~professional fees, accounted for approximately 11%, or $317,000, of the overall decrease. Approximately 7%, or $204,000, of the overall increase was due to ~~increase as we build out manufacturing, service and regulatory processes and operate as a public company.~~depreciation on the capital assets prior to production.

New Accounting Pronouncements

~~See Note 3~~For a description of our critical accounting policies and estimates, please refer to the “Summary of Significant Accounting Policies” in Note 3 to our Financial Statements ~~included~~ under Part I, Item 1 of this Quarterly Report on Form 10-Q ~~which includes a discussion of recent accounting pronouncements that may impact us.~~

~~Disclosure About Off-Balance Sheet Arrangements~~

~~None.~~and the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2019.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect 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 differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

~~For a description of our critical accounting policies and estimates, please refer to the “Summary of Significant Accounting Policies” in~~ See Note 3 to our Financial Statements under Part I, Item 1I of this Quarterly Report on Form ~~10-Q and the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2018.~~10-Q.

Results of Operations

Three months ended September 30, ~~2018~~2019 versus three months ended September 30, ~~2017~~2018

Revenues

We had approximately $33,000 in revenue, comprising of approximately $20,000 in revenue from the sales of our vehicles, and approximately $13,000 in revenue from merchandise and outside metal fabrication during the three months ended September 30, 2019. We had approximately $6,000 in revenue from merchandise, and outside metal fabrication during the ~~quarterly period~~three months ended September 30, 2018. ~~There was no such revenue for the quarterly period ended September 30, 2017.~~

Operating Expenses

Research and Development Expenses

~~Research and development (“~~

R~~&D”)~~&D expenses consist primarily of personnel costs for our pre-production manufacturing, engineering and research teams, external lab testing costs, and prototyping materials expense. R&D expenses for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 were approximately ~~$779,000~~$2,345,000 and ~~$288,000,~~$779,000, respectively. The primary reason for the increase in R&D expenses of ~~$491,000,~~$1,566,000, or ~~170%~~201%, resulted from an increase in engineering salaries and benefits of approximately ~~$206,000,~~$594,000, an increase in ~~computer~~materials and testing of approximately $970,000, which includes approximately $609,000 of Beta FUV’s disposed out of fixed assets and approximately $147,000 of Beta FUV’s scrapped out of finished goods inventory, an increase in tools and equipment expense ~~for new employees~~ of ~~$26,000,~~approximately $15,000, and an increase in ~~R&D materials expense~~travel and training of approximately ~~$250,000.~~$5,000. There was an approximate $20,000 decrease in computer, licenses and subscriptions expense. The major R&D projects during the three months ended September 30, 2019 were the development of doors for the FUV and final regulatory compliance testing which was completed during the third quarter 2019.

Sales and Marketing Expenses

Sales and marketing (“S&M”) expenses for the three months ended September 30, ~~2018~~2019 and ~~2017~~2018 were approximately ~~$386,000~~$309,000 and ~~$243,000,~~$386,000, respectively. The primary reasons for the ~~increase~~decrease in sales and marketing expenses during the three months ended September 30, ~~2018~~2019 of approximately ~~$143,000~~$77,000 or ~~59%~~20%, as compared to the prior period was an ~~$80,000 increase~~$126,000 decrease in public relations, marketing, and travel expenses, ~~associated with investor relations, a $104,000 increase in salary and benefits expenses.~~net of approximately $101,000 loss on disposal of marketing Beta FUV’s.

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of personnel and facilities costs related to executives, finance, 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 workflow, ~~regulatory compliance,~~ materials, service, ~~quality,~~ and legal organizations, as well as legal fees for professional and contract services. G&A expenses for the three months ended September 30, ~~2018~~2019 were approximately ~~$2,054,000~~$1,076,000 as compared to approximately ~~$156,000~~$2,054,000 for the same period last year, representing ~~an increase~~a decrease of approximately ~~$1,898,000,~~$978,000, or ~~1,217%~~48%. The primary reasons for the ~~increase~~decrease in the current period was due to ~~a $1,054,000 increase~~an approximate $475,000 decrease in the salary and benefits ~~associated with developing our manufacturing, materials, service, quality~~that were shifted to R&D related matters, and ~~compliance, and other operations, a $888,000 increase~~an approximate $626,000 decrease in expenses associated with being a ~~public company~~publicly traded corporation (investor relations, insurance, and professional fees). These decreases were offset by an approximate $46,000 increase in depreciation expense, a $12,000 increase in travel and a $65,000 increase in other costs.

Interest Expense

Interest expense for the three months ended September 30, ~~2018~~2019 was approximately ~~$37,000,~~$262,000, as compared to ~~$9,000~~$37,000 during the three months ended September 30, ~~2017. The~~2018. Approximately $156,000 of the increase in interest expense was due to ~~increasing balances~~the $3,000,000 debt financing secured in December 2018. Approximately $36,000 in total or $1,000 of the decrease in the interest expense for the three months ended September 30, 2019 was for equipment capital leases. Approximately $65,000 of the increase was for our convertible notes, and $5,000 was for insurance premium financing, credit card and vendor interest.

Nine months ended September 30, ~~2018~~2019 versus nine months ended September 30, ~~2017~~2018

Revenues

We had approximately $44,000 in revenue, comprising of $20,000 in revenue from the sales of our vehicles, and approximately $24,000 in revenue from merchandise and outside metal fabrication during the nine months ended September 30, 2019. We had approximately $92,000 in revenue, comprising of $84,000 in revenue from the sales of our vehicles, ~~to non-related parties~~ and approximately $8,000 in revenue from merchandise and outside metal fabrication during the ~~nine-month period~~nine months ended September 30, 2018. ~~For the nine-month period ended September 30, 2017, we had no revenue from the sale of our vehicles and $40,580 of grant revenue.~~

Operating Expenses

Research and Development Expenses

R&D expenses consist primarily of personnel costs for manufacturing prototypes, our engineering and research teams, ~~as well as~~external lab testing cost and prototyping materials expense. R&D expenses for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 were approximately ~~$2,191,000~~$5,440,000 and ~~$820,000,~~$2,191,000, respectively. The primary ~~reasons~~reason for the increase in R&D expenses of ~~approximately $1,371,000,~~$3,249,000, or ~~167%~~148%, ~~include~~resulted from an increase in engineering salaries and benefits of approximately ~~$767,000,~~$1,360,000, an increase in ~~R&D~~ materials ~~expense~~and testing of approximately ~~$473,000, an increase in computer expense for new employees of approximately $74,000, an increase in~~$1,788,000, tools and equipment expense of approximately ~~$57,000.~~$97,000, and travel and training of approximately $21,000. These increases were offset by a decrease of approximately $17,000 for computers, licenses and subscriptions. The major R&D projects during the nine months ended September 30, 2019 were the development of doors for the FUV, Deliverator, and Rapid Responder prototypes, and final regulatory compliance testing which was completed during the third quarter of 2019.

Sales and Marketing Expenses

Sales and marketing (“S&M&M”) expenses for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 were approximately ~~$1,159,000~~$831,000 and ~~$478,000,~~$1,159,000, respectively. The primary reasons for the ~~increase of approximately $681,000 or 142%,~~decrease in ~~S&M~~sales and marketing expenses during the nine months ended September 30, ~~2018,~~2019 of approximately $327,000 or 28%, as compared to the prior period was an approximately $177,000 increase in expense for developing and franchising the rental business, and a ~~$428,000~~$44,000 increase in salary and benefits expenses, offset by an approximately $446,000 decrease in public relations, marketing, and travel expenses associated with ~~public company investor relations, a $201,000 increase in salary~~trade shows, and ~~benefits expenses,~~customer road shows, and a ~~$38,000 increase~~$14,000 decrease in ~~lobbying~~computers, supplies and materials expense.

General and Administrative Expenses

General and administrative (“G&A&A”) expenses consist primarily of personnel and facilities costs related to ~~executive,~~executives, finance, human resources, ~~IT,~~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 workflow, ~~regulatory compliance,~~ materials, service, ~~quality,~~ and legal organizations, as well as legal fees, professional and contract services. G&A expenses for the nine months ended September 30, ~~2018~~2019 were approximately ~~$4,096,000~~$4,068,000 as compared to approximately ~~$503,000~~$4,096,000 for the same period last year, representing ~~an increase~~a decrease of approximately ~~$3,593,000,~~$28,000, or ~~714%~~1%. The primary reasons for the ~~increase~~decrease in the current period ~~were a $2,465,000 increase~~was due to an approximately $191,000 decrease in salary and benefits associated with ~~developing our manufacturing, materials, service, quality and compliance, and other operations,~~shifting more labor resources to R&D functions, a ~~$1,397,000 increase~~$317,000 decrease in expenses associated with being a public company (investor relations, insurance, and professional fees), offset by a ~~$279,000~~$204,000 increase in depreciation ~~expense.~~expense due to the manufacturing facility and equipment being placed into service but not yet operating for production, a $39,000 increase in lobbying and an $88,000 shift in lobbying expense from S&M to G&A, a $46,000 increase in travel, and a $103,000 increase in other cost.

Interest Expense

Interest expense for the nine months ended September 30, ~~2018~~2019 was approximately ~~$57,500,~~$650,000, as compared to ~~$31,000~~$57,500 during the nine months ended September 30, ~~2017.~~2018. Approximately $467,000 of the increase in interest expense was due to the $3,000,000 debt financing secured in December 2018. Approximately $111,000 in total or $53,000 of the increase in the interest expense for the nine months ended September 30, 2019 was for equipment capital leases. Approximately $65,000 of the increase was for our convertible notes, and $6,000 was for insurance premium financing, credit card and vendor interest.

Liquidity and Capital Resources

As of September 30, ~~2018,~~2019, we had approximately ~~$2,372,000~~$748,000 in cash and cash equivalents, ~~and another $750,000 in certificates of deposits with original maturities between three and nine months~~ representing a decrease in cash and cash equivalents ~~and certificate of deposits~~ of approximately ~~$10,949,000~~$4,155,000 from December 31, ~~2017.~~2018. Sources of cash were predominantly from the sale of ~~equity.~~equity and convertible notes. We anticipate that our current sources of liquidity, including cash and cash equivalents, together with our current projections of cash flow from operating activities, will ~~only~~ provide us with liquidity ~~through~~into the ~~end~~fourth quarter of ~~November 2018.~~2019. We need to successfully raise funds in the ~~short term,~~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. ~~If we are unable to successfully raise sufficient additional capital, the Company anticipates current operation funds will be depleted by approximately the end of November 2018.~~

Our estimates for tooling and manufacturing capital expenditures for our current FUV production facility will require approximately $4,820,000, of which approximately $4,767,000 has been expended to date. We anticipate utilizing the remaining $53,000 by the end of the fourth quarter 2018.

Cash Flows from Operating Activities

Our cash flows from operating activities are significantly affected by our cash outflows to support the growth of our business in areas such as R&D, sales and marketing and G&A expenses. Our operating cash flows are also affected by our working capital needs to support personnel related expenditures, accounts payable, inventory purchases and other current assets and liabilities.

During the nine months ended September 30, ~~2018,~~2019, cash used in operating activities was approximately ~~$9,907,000,~~$9,718,000, which was primarily the result of our net loss incurred of approximately ~~$7,463,000,~~$11,013,000, a decrease of accounts receivable of approximately $5,000, an increase in accrued liabilities of approximately $810,000, an increase in accounts payable of approximately $563,000, a decrease in other current assets of ~~$1,217,000, a decrease in accounts payable of~~ approximately ~~$593,000~~$204,000, and an increase in inventories of approximately ~~$1,713,000~~$2,469,000 related to materials for our electric vehicles. These increases in cash outflows were partially offset by stock-based compensation of ~~$381,000.~~approximately $500,000, customer deposits of approximately $530,000, deferred revenue of $105,000, depreciation expense of approximately $516,000, loss on disposal of property and equipment of approximately $710,000 related to the retirement of Beta FUVs, loss on scrapped Beta FUV’s in finished goods inventory of approximately $147,000, and the amortization of capital debt of approximately $243,000.

Cash Flows from Investing Activities

Cash flows from investing activities primarily relates to the ~~purchases and redemptions of certificates of deposits and~~ capital expenditures to support our growth in operations, including investments in manufacturing equipment and tooling. During the nine months ended September 30, 2019, the Company paid approximately $100,000, for manufacturing equipment and tooling fixed asset purchases.

During the nine months ended September 30, 2018, the Company purchased and redeemed $5,250,000 and $10,750,000 of certificates of deposits, respectively, and paid approximately $878,000, net of financing, for manufacturing equipment ~~tooling~~ and ~~FUVs placed into company service. The Company had no such purchases or redemptions of certificates of deposits or capital expenditures during the nine months ended September 30, 2017.~~tooling.

Cash Flows from Financing Activities

During the nine months ended September 30, 2019, net cash provided by financing activities was approximately $5,663,000, compared to net cash used of $129,000 during the nine months ended September 30, 2018. Cash flows provided by financing activities during the nine months ended September 30, 2019 mainly comprised of payments on capital lease obligations amounting to approximately $292,000, offering costs of approximately $270,000, and proceeds from, the issuance of our common stock through the exercise of employee stock options of approximately $11,000, the issuance of our common stock through registered offerings of approximately $4,265,000 and through a convertible note offering of approximately $1,950,000 exempt from registration under Section 4(a)(2) of the Securities Act.

During the nine months ended September 30, 2018, net cash used in financing activities was approximately ~~$129,000, compared to net cash provided of $18,905,000 during the nine months ended September 30, 2017.~~$129,000. Cash flows used in financing activities during the nine months ended September 30, 2018 mainly comprised of payments on capital lease obligations amounting to approximately $158,000, and proceeds from the issuance of our common stock through the exercise of employee stock options of approximately $29,000. Cash flows provided by financing activities during the nine months ended September 30, 2017 consisted primarily of $19,088,000 in gross proceeds from our Regulation A offering of 2,936,757 shares of Common Stock, $1,226,000 in gross proceeds from our Regulation D offering in that period of 245,100 shares of Series A-1 Preferred Stock as well as proceeds from the issuance of convertible debt of $275,000. These proceeds were slightly offset by approximately $1,289,000 in offering costs and $395,000 in repayments of notes payable.

On October 15, 2018, the Company re-negotiated a lease previously entered into during June 2018, for an approximately 5,291 square foot commercial industrial office 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, office and general use.

On October 18, 2018, the Company entered into a lease for an approximately 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, the Company 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including ~~Mark Frohnmayer,~~ our ~~President and~~ Chief Executive Officer and ~~Douglas M. Campoli,~~ our Chief Financial Officer, we conducted an evaluation ~~of the effectiveness of the design and operation~~ of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on ~~management’s~~this evaluation, our ~~President and~~ Chief Executive Officer and our Chief Financial Officer concluded that ~~as of September 30, 2018,~~ our disclosure controls and procedures were ~~designed to, and were~~ effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures as of ~~September 30, 2018.~~the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of any changes in our internal controls over financial reporting (as such terms are defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act that occurred during the quarter ended September 30, 2018. Based on that evaluation, our President and Chief Executive Officer and Chief Financial Officer concluded that thereThere has not been any material change in our internal control over financial reporting ~~occurred~~(as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the period ended September 30, ~~2018,~~2019, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. 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 911 of the Notes to Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

Item 1A. Risk Factors.

~~Investing~~There have been no material changes to the disclosures relating to this item from those set forth in our common stock involves a high degree of risk. Our business, financial condition, results of operations and future growth prospects are subject to various risks, including those described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018, which we strongly encourage you to review. In addition to the risks described therein, we revised, supplemented and added certain risk factors as follows:~~2018.

The notes to our financials for the quarter ended September 30, 2018 include an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern and provide that our cash likely will be depleted as of approximately the end of November 2018.

The notes accompanying this Quarterly Report on Form 10-Q contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern and the depletion of our cash as of approximately the end of November 2018. The financial statements in this Quarterly Report on Form 10-Q have been prepared “assuming that the Company will continue as a going concern.” Our ability to continue as a going concern is dependent on raising additional capital to fund our operations in the near term. There can be no assurance that we will be able to raise sufficient additional capital to address all of our cash flow needs. If we are not able to raise capital or find alternative sources of cash, we will not be able to continue our operations.

~~We may not be able to obtain adequate financing to continue our operations.~~

The design, manufacture, sale and servicing of vehicles is a capital-intensive business. At September 30, 2018, our working capital (deficit) was approximately $5,151,000, a decrease of $12,036,000 from the comparable period in 2017. We have previously raised funds through equity investment and 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 financing 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 financial 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 financing transactions, which may adversely affect our ability to raise the capital necessary to continue operations.

We are authorized to issue 20,000,000 shares of common stock, of which 16,027,441 shares were outstanding on November 5, 2018. At November 5, 2018, we had reserved 2,508,770 shares of common stock for issuance upon exercise of our outstanding options and warrants. In addition, at such date, we had 408,000 shares of our common stock reserved for future issuance under our 2018 Omnibus Stock Incentive Plan, 91,216 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 Benefit 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 3,019,982, which in addition to the 16,027,441 shares outstanding, would leave 952,577 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 insufficient shares of common stock available to issue in connection with any future equity financing 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 affect our ability to continue operations.

~~If we are unable to effectively implement or manage our developing growth strategy, our operating results and financial condition could be materially and adversely affected.~~

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 first 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 affect 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 challenges we may face from the insurance industry) or integrate a rental vehicle business into our existing infrastructure;~~

●

~~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 significant 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 inefficiencies 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 flexibility 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 efforts might not be successful;~~

●

~~the difficulty of managing the operations of a larger company; and~~

●

~~the difficulty of competing for growth opportunities with companies having greater financial 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, financial condition or results of operations.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~The following table contains information regarding purchases of our common stock made during the quarter ended September 30, 2019 by or on behalf of Arcimoto, Inc. (the “Company”) or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Exchange Act:

Issuer Purchases of Equity Securities

Period
Total
Number
of Shares
Purchased
Average
Price Paid
per Share
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs(a)

Approximate
Dollar
Value
of Shares
that May
Yet Be
Purchased
Under the
Plans or
Programs(a)

07/01/19-07/31/19 — $ — — $ —
08/01/19-08/31/19 — $ — — $ —
09/01/19-09/30/19 10,947 $ 3.36 (1) — $ —
Total 10,947 $ 3.36 (1) — $ —
(1) Vendors accepted payment in FUV common stock at the market closing price of $3.36 for invoices outstanding.

Item 3. Defaults Upon Senior ~~Securities.~~Securities

None.

Item 4. Mine Safety ~~Disclosures.~~Disclosures

Not applicable.

Item 5. Other ~~Information.~~Information

None.

Item 6. Exhibits.

EXHIBIT INDEX

~~Exhibit~~
Exhibit
Incorporated by Reference
(Unless Otherwise Indicated)
Number Exhibit Description Form File No. Exhibit Filing Date
3.1 Arcimoto, Inc. Second Amended and Restated Articles of Incorporation (as amended through June 30, 2019) — — — Filed herewith
3.2 Second Amended and Restated Bylaws of Arcimoto, Inc. 1-A 024-10710 2.2 August 8, 2017
10.1 Form of Securities Purchase Agreement dated March 24, 2019 8-K 001-38213 10.1 March 25, 2019
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. — — — Filed herewith
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. — — — Filed herewith
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. — — — Filed herewith
99.1 Third Quarter 2019 Financial Results Press Release Filed herewith
101.INS XBRL Instance Document. — — — Filed herewith
101.SCH XBRL Taxonomy Extension Schema Document. — — — Filed herewith
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. — — — Filed herewith
101.DEF XBRL Taxonomy Extension Definition Linkbase Document. — — — Filed herewith
101.LAB XBRL Taxonomy Extension Label Linkbase Document. — — — Filed herewith
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. — — — Filed herewith
~~Incorporated by Reference~~
~~(Unless Otherwise Indicated)~~
~~Number~~ ~~Exhibit Description~~ ~~Form~~ ~~File No.~~ ~~Exhibit~~ ~~Filing Date~~
~~31.1~~ ~~Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ — — — ~~Filed herewith~~
~~31.2~~ ~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~ — — — ~~Filed herewith~~
~~32.1~~ ~~Certification of President and Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~ — — — ~~Filed herewith~~
~~101.INS~~ ~~XBRL Instance Document.~~ — — — ~~Filed herewith~~
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema Document.~~ — — — ~~Filed herewith~~
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document.~~ — — — ~~Filed herewith~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document.~~ — — — ~~Filed herewith~~
~~101.LAB~~ ~~XBRL Taxonomy Extension Label Linkbase Document.~~ — — — ~~Filed herewith~~
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document.~~ — — — ~~Filed herewith~~

SIGNATURES

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.

ARCIMOTO, INC.

Date: November ~~16, 2018~~14, 2019 By: /s/ ~~Mark Frohnmayer~~Douglas M. Campoli
~~Mark Frohnmayer~~Douglas M. Campoli
~~President~~Principal Financial and Chief ~~Executive~~Accounting Officer

2528

Oregon		26-1449404
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common stock, no par value		FUV		Nasdaq Capital Market

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒ ☐	Smaller reporting company	☒
		Emerging growth company	☒


		Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018	1
	Condensed Statements of Operations for the Three and Nine ~~months~~Months ended September 30, ~~2018~~2019 and ~~2017~~2018	2
	Condensed Statement of Stockholders Equity for the Three and Nine Months ended September 30, 2019 and 2018	3-4
	Condensed Statements of Cash Flows for the Nine ~~months~~Months ended September 30, ~~2018~~2019 and ~~2017~~2018	35
	Condensed Notes to Financial Statements	46
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1519
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	1925
Item 4.	Controls and Procedures	2025

PART II.	OTHER INFORMATION	21

Item 1.	Legal Proceedings	2126
Item 1A.	Risk Factors	2126
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2326
Item 3.	Defaults Upon Senior Securities	2326
Item 4.	Mine Safety Disclosures	2326
Item 5.	Other Information	2326
Item 6.	Exhibits	2427

	SIGNATURES	2528

	September 30, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	2,371,903		$	7,824,109
Certificates of deposit		749,815			6,246,850
Accounts receivable		1,035			500
Inventory		1,907,553			194,525
Other current assets		1,617,990			401,160
Total current assets		6,648,296			14,667,144

Property and equipment, net		5,128,263			2,434,026
Other long-term assets		38,844			-
Total assets	$	11,815,403		$	17,101,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	98,494		$	663,773
Accrued liabilities		627,240			255,758
Customer deposits		395,224			399,967
Current portion of capital lease obligations		367,975			-
Current portion of warranty accrual		8,400			-
Total current liabilities		1,497,333			1,319,498
Capital lease obligations, net of current portion		1,572,320			-
Warranty accrual		16,800			-
Total liabilities		3,086,453			1,319,498

Commitments and contingencies (Note 9)

Stockholders’ equity:
Series A-1 preferred stock, no par value, 1,500,000 authorized, none issued and outstanding as of September 30, 2018 and December 31, 2017, respectively.		-			-
Common stock, no par value, 20,000,000 authorized, 16,016,739 and 15,872,001 issued and outstanding as of September 30, 2018 and December 31, 2017, respectively.		27,402,498			27,177,790
Additional paid-in capital		705,206			519,340
Accumulated deficit		(19,378,754	)		(11,915,458	)
Total stockholders’ equity		8,728,950			15,781,672

Total liabilities and stockholders’ equity	$	11,815,403		$	17,101,170

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Revenue
Grant revenue	$	-		$	-		$	-		$	40,580
Product sales – related party		-			-			907			-			-			-			-			907
Product sales		5,793			-			90,875			-			19,900			5,793			19,900			90,875
Other revenue														13,411			-			24,570			-
Total revenues		5,793			-			91,782			40,580			33,311			5,793			44,470			91,782
Cost of goods sold		31,625			-			127,439			-			66,280			31,625			71,000			127,439
Gross profit (loss)		(25,832	)		-			(35,657	)		40,580
Gross loss														(32,969	)		(25,832	)		(26,530	)		(35,657	)

Operating expenses
Research and development		779,367			288,311			2,190,819			820,213			2,343,015			779,367			5,439,610			2,190,819
Sales and marketing		385,738			242,858			1,159,415			478,210			309,111			385,738			831,410			1,159,415
General and administrative		2,054,062			155,568			4,096,227			502,687			1,075,726			2,054,062			4,068,133			4,096,227
Total operating expenses		3,219,167			686,737			7,446,461			1,801,110			3,727,852			3,219,167			10,339,153			7,446,461

Loss from operations		(3,244,999	)		(686,737	)		(7,482,118	)		(1,760,530	)		(3,760,821	)		(3,244,999	)		(10,365,683	)		(7,482,118	)

Other income and (expense)
Other expense and (income)
Interest expense		(36,984	)		(9,261	)		(57,506	)		(30,611	)		262,291			36,984			649,812			57,506
Other income, net		35,857			1,429			76,328			1,489			(837	)		(35,857	)		(2,255	)		(76,328	)
Net loss	$	(3,246,126	)	$	(694,569	)	$	(7,463,296	)	$	(1,789,652	)	$	(4,022,275	)	$	(3,246,126	)	$	(11,013,240	)	$	(7,463,296	)

Weighted-average common shares outstanding - basic and diluted		15,973,816			13,181,828			15,930,152			12,773,830			18,381,328			15,973,816			17,079,633			15,930,152
Net loss per common share - basic and diluted	$	(0.20	)	$	(0.05	)	$	(0.47	)	$	(0.14	)	$	(0.22	)	$	(0.20	)	$	(0.64	)	$	(0.47	)

	Series A-1 Preferred Stock				Class C Preferred Stock					Common Stock					Additional					Total
	Number of Shares		Amount		Number of Shares			Amount		Number of Shares		Amount			Paid-In Capital		Accumulated Deficit			Stockholders’ Equity

Balance at December 31, 2017		-	$	-		-		$	-		15,872,001	$	27,177,790		$	519,340	$	(11,915,458	)	$	15,781,672

Issuance of common stock for services		-		-		-			-		55,000		195,450			-		-			195,450
Exercise of stock options		-		-		-			-		19,465		29,258			-		-			29,258
Warrants exercised – cashless		-		-		-			-		70,273		-			-		-			-
Stock-based compensation		-		-		-			-		-		-			185,866		-			185,866
Net loss		-		-		-			-		-		-			-		(7,463,296	)		(7,463,296	)
Balance at September 30, 2018		-	$	-		-		$	-		16,016,739	$	27,402,498		$	705,206	$	(19,378,754	)	$	8,728,950

Balance at December 31, 2018		-	$	-		2,000,000		$	-		15,032,341	$	30,102,738		$	930,869	$	(22,966,473	)	$	8,067,134

Issuance of common stock for services		-		-		-			-		10,947		36,782			-		-			36,782
Issuance of common stock for cash		-		-		-			-		1,088,333		4,264,999			-		-			4,264,999
Exchange of Class C Preferred stock for common stock		-		-		(2,000,000	)		-		2,000,000		-			-		-			-
Exercise of stock options		-		-		-			-		3,388		10,502			-		-			10,502
Offering costs		-		-		-			-		-		(255,202	)		-		-			(255,202	)
Stock options exercised – cashless		-		-		-			-		53,684		-			-		-			-
Warrants exercised – cashless		-		-		-			-		203,252		-			-		-			-
Stock-based compensation		-		-		-			-		-		-			463,206		-			463,206
Net loss		-		-		-			-		-		-			-		(11,013,240	)		(11,013,240	)
Balance at September 30, 2019		-	$	-		-		$	-		18,391,945	$	34,159,819		$	1,394,075	$	(33,979,713	)	$	1,574,181

Period	Total Number of Shares Purchased		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(a)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(a)
07/01/19-07/31/19		—	$	—			—	$	—
08/01/19-08/31/19		—	$	—			—	$	—
09/01/19-09/30/19		10,947	$	3.36	(1)		—	$	—
Total		10,947	$	3.36	(1)		—	$	—

	ARCIMOTO, INC.

Date: November ~~16, 2018~~14, 2019	By:	/s/ ~~Mark Frohnmayer~~Douglas M. Campoli
		~~Mark Frohnmayer~~Douglas M. Campoli
		~~President~~Principal Financial and Chief ~~Executive~~Accounting Officer