UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: ~~June~~September 30, 2020

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

For the transition period from ~~______________~~_________ to ~~______________~~_________

Commission File Number 001-38213

ARCIMOTO, INC.

(Exact name of registrant as specified in its charter)

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

2034 West 2^nd Avenue, Eugene, OR 97402

(Address of principal executive offices and zip code)

(541) 683-6293

(Registrant’s telephone number, including area code)

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

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

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 file 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:

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

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 ~~August 18,~~November 16, 2020, there were approximately ~~31,514,584~~31,855,438 shares of the registrant’s common stock issued and outstanding.

~~Arcimoto, Inc.~~ARCIMOTO, INC.

FORM 10-Q

For the Quarterly Period Ended ~~June~~September 30, 2020

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Balance Sheets as of ~~June~~September 30, 2020 and December 31, 2019		1
	Condensed Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		2
	Condensed Statements of Stockholders’ Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		3
	Condensed Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2020 and 2019		5
	Condensed Notes to Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27	25
Item 4.	Controls and Procedures	27	25

PART II.	OTHER INFORMATION	28

Item 1.	Legal Proceedings	28	26
Item 1A.	Risk Factors	28	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28	26
Item 3.	Defaults Upon Senior Securities	28	26
Item 4.	Mine Safety Disclosures	28	26
Item 5.	Other Information	28	26
Item 6.	Exhibits	29	27

	SIGNATURES	30	28

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ARCIMOTO, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

September 30,
2020 December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 16,970,902 $ 5,832,489
Accounts receivable, net 33,918 244,450
Inventory 6,230,078 3,734,488
Prepaid inventory 603,381 1,194,695
Other current assets 584,833 665,079
Total current assets 24,423,112 11,671,201

Property and equipment, net 5,794,166 4,732,544
Security deposits 95,708 41,988
Total assets $ 30,312,986 $ 16,445,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable $ 405,828 $ 339,835
Accrued liabilities 809,817 816,013
Customer deposits 561,020 793,524
Current portion of capital lease obligations 473,828 433,967
Convertible notes payable, related parties — 1,150,907
Convertible notes payable, net of discount — 837,557
Notes payable, net of discount 234,449 3,032,438
Current portion of warranty reserve 36,831 90,000
Current portion of deferred revenue 110,131 31,174
Current portion of note payable to bank 601,537 —
Total current liabilities 3,233,441 7,525,415

Capital lease obligations, net of current portion 1,446,238 1,179,700
Warranty reserve, net of current portion 83,000 45,000
Deferred revenue, net of current portion 56,250 85,500
Note payable to bank, net of current portion 467,149 —
Total long-term liabilities 2,052,637 1,310,200
Total liabilities 5,286,078 8,835,615

Commitments and contingencies (Note 11)

Stockholders’ equity:
Series A-1 Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively — —
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively — —
Preferred Stock, no par value, 1,500,000 authorized, none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively — —
Common Stock, no par value, 60,000,000 shares authorized; 31,855,438 and 24,436,389 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 71,952,512 43,573,529
Additional paid-in capital 3,323,209 2,344,751
Accumulated deficit (50,248,813 ) (38,308,162 )
Total stockholders’ equity 25,026,908 7,610,118

Total liabilities and stockholders’ equity $ 30,312,986 $ 16,445,733
See accompanying notes to condensed financial statements.

ARCIMOTO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
June 30,
2020 December 31,
2019
ASSETS
Current assets:
Cash and cash equivalents $ 7,763,905 $ 5,832,489
Accounts receivable, net 13,714 244,450
Inventory 5,623,335 3,734,488
Prepaid inventory 501,544 1,194,695
Other current assets 360,734 665,079
Total current assets 14,263,232 11,671,201

Property and equipment, net 4,697,313 4,732,544
Security deposits 87,488 41,988

Total assets $ 19,048,033 $ 16,445,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable $ 742,680 $ 339,835
Accrued liabilities 584,314 816,013
Customer deposits 613,124 793,524
Current portion of capital lease obligations 463,877 433,967
Convertible notes payable, related parties - 1,150,907
Convertible notes payable, net of discount - 837,557
Notes payable, net of discount 36,195 3,032,438
Current portion of warranty reserve 19,515 90,000
Current portion of deferred revenue 23,500 31,174
Current portion of note payable to bank 421,076 -
Total current liabilities 2,904,281 7,525,415

Capital lease obligations, net of current portion 1,001,419 1,179,700
Warranty reserve, net of current portion 83,000 45,000
Deferred revenue, net of current portion 77,500 85,500
Note payable to bank, net of current portion 647,610 -
Total long-term liabilities 1,809,529 1,310,200

Total liabilities 4,713,810 8,835,615

Commitments and contingencies (Note 11)

Stockholders’ equity:
Series A-1 preferred stock, no par value, 1,500,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively. - -
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively. - -
Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively - -
Common Stock, no par value, 60,000,000 shares authorized; 28,442,982 and 24,436,389 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively 56,871,882 43,573,529
Additional paid-in capital 6,783,421 2,344,751
Stock subscription receivable (3,715,000 ) -
Accumulated deficit (45,606,080 ) (38,308,162 )
Total stockholders’ equity 14,334,223 7,610,118

Total liabilities and stockholders’ equity $ 19,048,033 $ 16,445,733
Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Revenue:
Product sales $ 620,438 $ 19,900 $ 1,473,428 $ 19,900
Grant revenue 10,000 — 10,000 —
Other revenue 53,457 13,411 85,800 24,570
Total revenues 683,895 33,311 1,569,228 44,470
Cost of goods sold 2,046,466 66,280 4,944,801 71,000
Gross loss (1,362,571 ) (32,969 ) (3,375,573 ) (26,530 )

Operating expenses:
Research and development 1,314,053 2,343,015 2,047,341 5,439,610
Sales and marketing 361,508 309,111 1,003,681 831,410
General and administrative 1,575,890 1,075,726 4,830,236 4,068,133
Total operating expenses 3,251,451 3,727,852 7,881,258 10,339,153

Loss from operations (4,614,022 ) (3,760,821 ) (11,256,831 ) (10,365,683 )

Other expense (income):
Interest expense 29,120 262,291 691,729 649,812
Other income — (837 ) (7,500 ) (2,255 )
Foreign exchange gain (409 ) — (409 ) —

Net loss $ (4,642,733 ) $ (4,022,275 ) $ (11,940,651 ) $ (11,013,240 )

Weighted average common shares - basic and diluted 31,677,467 18,381,328 27,111,633 17,079,633
Net loss per common share - basic and diluted $ (0.15 ) $ (0.22 ) $ (0.44 ) $ (0.64 )

See accompanying notes to condensed financial statements.

ARCIMOTO, INC.
CONDENSED STATEMENTS OF ~~OPERATIONS~~STOCKHOLDERS’ EQUITY
(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Revenue:
Product sales $ 254,955 $ - $ 852,990 $ -
Other revenue 13,583 8,514 32,343 11,159
Total revenues 268,538 8,514 885,333 11,159
Cost of goods sold 1,208,817 3,253 2,898,335 4,720
Gross (loss) profit (940,279 ) 5,261 (2,013,002 ) 6,439

Operating expenses:
Research and development 284,314 2,036,579 733,288 3,096,595
Sales and marketing 305,275 276,917 642,173 522,299
General and administrative 1,757,501 1,421,099 3,254,346 2,992,407
Total operating expenses 2,347,090 3,734,595 4,629,807 6,611,301

Loss from operations (3,287,369 ) (3,729,334 ) (6,642,809 ) (6,604,862 )

Other expense (income):
Interest expense 415,775 194,248 662,609 387,521
Other income - (1,010 ) (7,500 ) (1,418 )

Net loss $ (3,703,144 ) $ (3,922,572 ) $ (7,297,918 ) $ (6,990,965 )

Weighted average common shares - basic and diluted 25,130,897 17,401,076 24,805,672 16,417,999
Net loss per common share - basic and diluted $ (0.15 ) $ (0.23 ) $ (0.29 ) $ (0.43 )
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, 2018 — $ — 2,000,000 $ — 15,032,341 $ 30,102,738 $ 930,869 $ (22,966,473 ) $ 8,067,134
Issuance of common stock for accounts payable — — — — 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

Balance at December 31, 2019 — $ — — $ — 24,436,389 $ 43,573,529 $ 2,344,751 $ (38,308,162 ) $ 7,610,118
Issuance of common stock for accounts payable — — — — 60,591 181,329 — — 181,329
Issuance of common stock for cash — — — — 5,736,667 26,501,001 — — 26,501,001
Issuance of common stock under convertible notes — — — — 333,924 1,419,177 — — 1,419,177
Issuance of common stock to satisfy director award — — — — 5,546 8,929 (8,929 ) — —
Exercise of warrants — — — — 471,428 1,761,373 (111,374 ) — 1,649,999
Exercise of stock options — — — — 5,225 156,464 (133,758 ) — 22,706
Warrants exercised - cashless — — — — 689,439 — — — —
Stock options exercised - cashless — — — — 116,229 — — — —
Offering costs incurred on placements of common stock — — — — — (1,649,290 ) — — (1,649,290 )
Stock-based compensation — — — — — — 1,232,519 — 1,232,519
Net loss — — — — — — — (11,940,651 ) (11,940,651 )
Balance at September 30, 2020 — $ — — $ — 31,855,438 $ 71,952,512 $ 3,323,209 $ (50,248,813 ) $ 25,026,908

See accompanying notes to condensed financial statements.
2
~~ARCIMOTO, INC.~~
~~CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY~~
~~FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019~~
~~(Unaudited)~~
Series A-1 Preferred Stock Class C Preferred Stock Common Stock Additional Stock Total
Number of
Shares Amount Number of
Shares Amount Number of
Shares Amount Paid-In Capital Subscription Receivable Accumulated Deficit Stockholders’
Equity
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 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 — — — — 169,578 — — — — —
Stock-based compensation — — — — — — 282,190 — — 282,190
Net loss — — — — — — — — (6,990,965 ) (6,990,965 )
Balance at June 30, 2019 — $ — — $ — 18,347,324 $ 34,123,037 $ 1,213,059 $ — $ (29,957,438 ) $ 5,378,658

Balance at December 31, 2019 — $ — — $ — 24,436,389 $ 43,573,529 $ 2,344,751 $ — $ (38,308,162 ) $ 7,610,118

Issuance of common stock for accounts payable — — — — 43,456 81,329 — — — 81,329
Issuance of common stock for cash — — — — 3,623,667 12,785,001 — — — 12,785,001
Offering costs incurred on placements of common stock — — — — — (996,083 ) — — — (996,083 )
Issuance of common stock under convertible notes — — — — 333,924 1,419,177 — — — 1,419,177
Common stock subscribed on June 30, 2020 — — — — — — 3,715,000 (3,715,000 ) — —
Issuance of common stock to satisfy director award — — — — 5,546 8,929 (8,929 ) — — —
Stock-based compensation — — — — — — 732,599 — — 732,599
Net loss — — — — — — — — (7,297,918 ) (7,297,918 )
Balance at June 30, 2020 — $ — — $ — 28,442,982 $ 56,871,882 $ 6,783,421 $ (3,715,000 ) $ (45,606,080 ) $ 14,334,223

ARCIMOTO, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

Series A-1 Preferred Stock Class C Preferred Stock Common Stock Additional Stock Total Series A-1
Preferred Stock Class C
Preferred Stock Common Stock Additional Stock Total
Number of
Shares Amount Number of
Shares Amount Number of
Shares Amount Paid-In Capital Subscription Receivable Accumulated Deficit Stockholders’
Equity Number of
Shares Amount Number of
Shares Amount Number of
Shares Amount Paid-In
Capital Subscription
Receivable Accumulated
Deficit Stockholders’
Equity
Balance at March 31, 2019      - $     - 2,000,000 $     - 16,340,378 $ 34,117,535 $ 1,027,319 - $ (26,034,866 ) $ 9,109,988

Exchange of Class C Preferred stock for common stock - - (2,000,000 ) - 2,000,000 - - - �� - -
Exercise of stock options - - - - 1,775 5,502 - - - 5,502
Stock options exercised - cashless - - - - 171 - - - - -
Balance at June 30, 2019 — $ — — $ — 18,347,324 $ 34,123,037 $ 1,213,059 $ — $ (29,957,438 ) $ 5,378,658
Issuance of common stock for accounts payable — — — — 10,947 36,782 — — — 36,782
Warrants exercised - cashless - - - - 5,000 - - - - - — — — — 33,674 — — — — —
Stock-based compensation - - - - - - 185,740 - - 185,740 — — — — — — 181,016 — — 181,016
Net loss - - - - - - - - (3,922,572 ) (3,922,572 ) — — — — — — — — (4,022,275 ) (4,022,275 )
Balance at June 30, 2019 - $ - - $ - 18,347,324 $ 34,123,037 $ 1,213,059 $ - $ (29,957,438 ) $ 5,378,658
Balance at September 30, 2019 — $ — — $ — 18,391,945 $ 34,159,819 $ 1,394,075 $ — $ (33,979,713 ) $ 1,574,181

Balance at March 31, 2020 - $ - - $ - 24,469,138 $ 43,626,238 $ 2,649,716 $ - $ (41,902,936 ) $ 4,373,018
Balance at June 30, 2020 — $ — — $ — 28,442,982 $ 56,871,882 $ 6,783,421 $ (3,715,000 ) $ (45,606,080 ) $ 14,334,223
Issuance of common stock for cash — — — — 2,113,000 13,716,000 (3,715,000 ) 3,715,000 — 13,716,000
Issuance of common stock for accounts payable - - - - 10,707 25,001 - - - 25,001 — — — — 17,135 100,000 — — — 100,000
Issuance of common stock for cash - - - - 3,623,667 12,785,001 - - - 12,785,001
Exercise of warrants — — — — 471,428 1,761,373 (111,375 ) — — 1,649,998
Exercise of stock options — — — — 5,225 156,464 (133,758 ) 22,706
Warrants exercised - cashless — — — — 689,439 — — — — —
Stock options exercised - cashless — — — — 116,229 — — — — —
Offering costs incurred on placements of common stock - - - - - (992,464 ) - - - (992,464 ) — — — — — (653,207 ) — — — (653,207 )
Issuance of common stock to settle convertible notes - - - - 333,924 1,419,177 - - - 1,419,177
Common stock subscribed on June 30, 2020 - - - - - - 3,715,000 (3,715,000 ) - -
Issuance of common stock to satisfy director award - - - - 5,546 8,929 (8,929 ) - - -
Stock-based compensation - - - - - - 427,634 - - 427,634 — — — — — — 499,921 — — 499,921
Net loss - - - - - - - - (3,703,144 ) (3,703,144 ) — — — — — — — — (4,642,733 ) (4,642,733 )
Balance at June 30, 2020 - $ - - $ - 28,442,982 $ 56,871,882 $ 6,783,421 $ (3,715,000 ) $ (45,606,080 ) $ 14,334,223
Balance at September 30, 2020 — $ — — $ — 31,855,438 $ 71,952,512 $ 3,323,209 $ — $ (50,248,813 ) $ 25,026,908

See accompanying notes to condensed financial statements.
4

ARCIMOTO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended
June 30, Nine Months Ended
September 30,
2020 2019 2020 2019
OPERATING ACTIVITIES
Net loss $ (7,297,918 ) $ (6,990,965 ) $ (11,940,651 ) $ (11,013,240 )
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 438,508 343,137 676,122 515,659
Amortization of debt discount 310,508 161,462 310,508 242,933
Stock-based compensation 732,599 282,190 1,232,519 463,206
Changes in operating assets and liabilities:
Gain on foreign exchange transaction (409 ) —
Loss on scrapped Beta FUV finished goods inventory — 147,305
Loss on disposal of property and equipment — 710,290
Changes in operating assets and liabilities
Accounts receivable 230,736 (19,987 ) 210,532 (4,628 )
Inventory (1,888,847 ) (1,988,599 ) (2,495,181 ) (2,616,585 )
Prepaid inventory 693,151 — 591,314 —
Other current assets 304,345 (9,130 ) 314,694 (203,502 )
Accounts payable 484,174 (197,592 ) 247,322 600,246
Accrued liabilities (123,415 ) 411,760 102,088 810,038
Customer deposits (180,400 ) 526,100 (232,504 ) 529,700
Warranty reserve (32,485 ) — (15,169 ) (4,300 )
Deferred revenue (15,674 ) 60,000 49,707 105,000
Net cash used in operating activities (6,344,718 ) (7,421,624 ) (10,949,108 ) (9,717,878 )

INVESTING ACTIVITIES
Purchases of property and equipment (333,537 ) (60,597 )
Purchase of property and equipment (1,097,307 ) (100,041 )
Security deposits (45,500 ) — (53,720 ) —
Net cash used in investing activities (379,037 ) (60,597 ) (1,151,027 ) (100,041 )

FINANCING ACTIVITIES
Proceeds from the sale of common stock 12,785,001 4,264,999 26,501,001 4,264,999
Payment of offering costs (996,083 ) (255,202 ) (1,649,290 ) (255,202 )
Proceeds from note payable to bank 1,068,686 — 1,068,686 —
Proceeds from the exercise of stock options — 10,502 22,706 10,502
Payment on capital lease obligations (218,111 ) (191,502 ) (334,038 ) (291,993 )
Repayment of convertible notes payable to related parties (188,079 ) — (188,079 ) —
Repayment of notes payable (3,296,243 ) — (3,332,437 ) —
Repayment of convertible notes payable (500,000 ) — (500,000 ) —
Proceeds from the exercise of warrants 1,649,999 —
Proceeds from related party convertible notes payable — 1,125,000
Proceeds from convertible notes payable — 810,000
Net cash provided by financing activities 8,655,171 3,828,797 23,238,548 5,663,306

Net cash increase (decrease) for period 1,931,416 (3,653,424 ) 11,138,413 (4,154,613 )
Cash at beginning of period 5,832,489 4,903,019 5,832,489 4,903,019
Cash at end of period $ 7,763,905 $ 1,249,595 $ 16,970,902 $ 748,406

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 612,506 $ 76,083 $ 644,653 $ 117,445
Cash paid during the period for income taxes $ 150 $ 150 $
150
$ 150

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Notes payable and accrued interest converted to common stock $ 1,419,177 $ — $ 1,419,177 $ —
Portion of equipment acquired through capital leases $ 69,740 $ 88,850 $ 640,437 $ 88,850
Stock issued for payment of accounts payable $ 81,329 $ — $ 181,329 $ 36,782
Insurance finance agreement $ 234,448 $ 122,571
Accrued interest converted to notes payable $ — $ 48,972

See accompanying notes to condensed financial statements.

5

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: NATURE OF OPERATIONS

Arcimoto, Inc. (the “Company”) was ~~originally formed~~incorporated in the State of Oregon on November 21, ~~2007 as WTP Incorporated, an Oregon Corporation, and later changed its name~~2007. The Company’s mission is to ~~Arcimoto, Inc. The Company was founded in order to build products that~~ catalyze the global shift to a sustainable transportation system. ~~The first step in this shift has been developing an affordable, daily utility, pure electric vehicle.~~ Over the past 13 years, the Company has developed a ~~revolutionary~~ new vehicle platform designed around the needs of everyday drivers. ~~Its main product is~~Having approximately one-third the ~~Fun Utility Vehicle® (“FUV”),~~weight and one-third of the ~~first real, affordable, and fossil-free alternative for the vast majority~~footprint of ~~daily trips. Compared to~~ the average car, the ~~FUV has dropped 2/3 of the weight and 2/3 of the footprint, in order~~Arcimoto platform’s purpose is to bring the joy of ultra-efficient, pure electric driving to the masses. To date, the Company has introduced five vehicle products built on this platform that target specific niches in the vehicle market: our flagship product, the Fun Utility Vehicle® (“FUV®”), for everyday consumer trips; the Deliverator® for last-mile delivery and general fleet utility; the Rapid Responder™ for emergency services and security; the Cameo™ for film, sports and influencers; and the Arcimoto Roadster, an unparalleled pure-electric on-road thrill machine.

Risks and Uncertainties

~~The Company currently has limited production and distribution capabilities. Facilities to manufacture vehicles at limited scale are substantially complete.~~ We started retail production in the third quarter of 2019 at one FUV per build day and ramped to two per build day in the first quarter of 2020 ~~prior~~before suspending production in response to the COVID-19 ~~production shutdown.~~pandemic. We ~~have~~ restarted ~~limited~~ production and ~~are planning to resume~~resumed deliveries to customers in the third ~~quarter. Arcimoto does not have a history~~quarter of higher-scale production and may encounter delays, flaws, inability to raise sufficient capital, or inefficiencies in the manufacturing process, which may prevent or delay achieving higher-scale production within the anticipated timeline.
~~Part of the Company’s strategy is to use vehicle rentals to generate a positive cash flow from customer test drive activities.~~2020. As ~~with any strategy, there is the risk that the rental business will not be successful.~~
As of June 30, 2020, the Company has $5,623,335 in inventory and another $501,544 in prepaid inventory not yet received. Certain inventory components are included in prepaid inventory that have long lead times requiring payment in advance.
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. To achieve full-scale production and develop new products or enhanced versions of existing products, the Company will need substantial additional working capital, and there is no assurance such capital will be available on reasonable terms, if at all.
On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate it have had, and are expected to continue to have, an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates.
In response to the pandemic, the Company announced on March 19, 2020, that it was temporarily suspending all production of the Fun Utility Vehicle at its U.S. factory located in Eugene, Oregon. We have subsequently restarted limited production and are planning to resume deliveries to customers in the third quarter. The Company plans to maintain a work-from-home staff for all employees that can work from home, to push forward critical operations, including compliance and reporting, research and development, customer service, and deployment of the Company’s recently-launched Rapid Responder and Deliverator pilot vehicles to key potential fleet operators.
~~As part~~ of the suspension of production, the Company furloughed approximately 67% of its workforce with the remaining individuals continuing to work full or part time, which resulted in meaningful cost reductions during the period of shutdown. We were able to retain most of the furloughed workers after production resumed. As a result of the shut-down,revenues from the first three quarters of 2020 ~~revenue activities~~ were negatively impacted. ~~The~~Revenues from the fourth quarter of 2020 and subsequent quarters may be negatively impacted based on the length and severity of the pandemic.

~~It is reasonably possible that estimates made~~Further, Arcimoto does not have a history of higher-scale production and may encounter delays or inefficiencies in its sales and manufacturing processes, which may prevent or delay achieving higher-scale production within anticipated timelines. In order to achieve higher-scale production, the ~~financial statements have been, or~~Company may need to raise additional capital and there can be no assurance such capital will be ~~materially and adversely impacted in the near term as a result of these conditions.~~available upon reasonable terms, if at all.

WeAdditionally, the Company’s business and operations are sensitive to governmental policies on importation and exportation, as well as the availability of vehicle components from suppliers, which themselves may be impacted by pandemics and such, lest we mention the ever-shifting general landscape of governmental policy related to cars and motorcycles.
The Company’s industry is characterized by rapid changes in technology and customer demands. The Company’s future success will depend on its ability to adapt to technological advances, its adroit anticipation of customer demands, its development of well-considered new products and services, and the enhancement of its current products and services on a timely and cost-effective basis.
Finally, the Company may not have ~~applied for Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”) through~~ the ~~Small Business Administration (“SBA”) that were made available under~~capital resources necessary to further the ~~CARES Act passed by Congress in response to the COVID-19 pandemic. The Company received PPP loan proceeds~~development of ~~$1,068,686 on May 6, 2020, and is in the process of applying for conversion to a grant.~~
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 the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring operating losses and negative operating cash flows since inception.

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. The Company may require additional funding to continue to operate in the normal course of business. The substantial doubt about the Company’s ability to continue as a going concern has been alleviated based on management’s belief that current cash reserves will sustain operations in excess of 12 months.

Although the Company’s objective is to increase its revenues from the sales of its products 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 may need to raise additional capital in order to fund its operations, which if needed, 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 future variants to retail production, continue to build 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.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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 ~~June~~September 30, 2020, and the results of its operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 and its cash flows for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019. Results for the three and ~~six~~nine months ended ~~June~~September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. 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, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020.

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
Inventory

Inventory is stated at the lower of cost (using the first-in, first-out method (“FIFO”)) or market value. Inventories consist of purchased electric motors, electrical storage and transmission equipment, and component parts.

June 30,
2020 December 31,
2019
Raw materials $ 5,512,729 $ 3,650,466
Work in progress — 25,340
Finished goods 110,606 58,682
Total $ 5,623,335 $ 3,734,488
September 30,
2020 December 31,
2019
Raw materials $ 6,128,033 $ 3,650,466
Work in progress — 25,340
Finished goods 102,045 58,682
Total $ 6,230,078 $ 3,734,488

The Company is required to remit partial prepayments for some purchases of its inventories acquired from overseas vendors.

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~Customer Deposits

~~Customer Deposits~~
~~44 non-refundable~~Non-refundable customer deposits are comingled with operating funds. ~~4,398 refundable~~Refundable customer deposits are generally held in a separate deposit account. Revenue is not recognized on customer deposits until the deposit is applied to a non-refundable vehicle order, the vehicle manufacturing process is completed, the vehicle is picked up by or delivered to the customer and the appropriate revenue recognition criteria have been met per our policy below.
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.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 ~~June~~September 30, 2020 and 2019, the Company excluded the outstanding Employee Equity Plans (“EEP”) and other securities summarized below using the Treasury Stock Method, 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.

Three months ended Six months ended
June 30, June 30, Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019 2020 2019 2020 2019
Options and other instruments under the 2012, 2015, and 2018 Plans to purchase common stock 817,254 767,163 613,553 805,358 1,959,681 669,308 1,105,733 739,545
Underwriters and investors warrants issued outside of an EEP - - - 891,699 268,484 — 19,019 4,499
Total 817,254 767,163 613,553 1,697,057 2,228,165 669,308 1,124,752 744,044


~~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 February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes ASC Topic 840, Leases. ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance sheets for all the leases with terms greater than 12 months. Based on certain criteria, leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. For leases with a term of 12 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. In November 2019, the FASB delayed the effective date for Topic 842 to fiscal years beginning after December 15, 2020 for private companies and emerging growth companies, and interim periods within those years, with early adoption permitted. In June 2020, the ~~FAAB~~FASB issued ASU No 2020-05 that further delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021. We will adopt this new standard on January 1, 2022. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date, as opposed to the earliest period presented under the modified retrospective transition approach and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the effective date of Topic 842, including continuing to account for leases that commence before the effective date in accordance with previous guidance, unless the lease is modified. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and total liabilities that the Company reports relative to such amounts prior to adoption.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Adoption of Recent Accounting Pronouncements

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 adopted the new standard on January 1, 2020. The adoption did not have a material impact on the Company’s 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. The Company adopted the new standard on January 1, 2020. The adoption did not have a material impact on the Company’s financial statements.

10
~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
NOTE 4: CONCENTRATIONS

Payables

As of ~~June~~September 30, 2020 and December 31, 2019, the Company had two and one, respectively, significant ~~vendor~~vendors in each period that accounted for more than 10% of the Company’s payables balances. The loss of these vendors would not have a significant impact on the Company’s operations.

Purchases/Inventory

As of ~~June~~September 30, 2020 and December 31, 2019, the Company had two significant vendors that accounted for more than 10% of the Company’s inventory balances. As of ~~June~~September 30, 2020 these vendors accounted for ~~13%~~37% and ~~27%~~16% of inventory balances. As of December 31, 2019, these vendors accounted for 17% and 23% of inventory balances. The loss of these vendors would not have a significant impact on the Company’s operations.

NOTE 5: PROPERTY AND EQUIPMENT

As of ~~June~~September 30, 2020 and December 31, 2019, our property and equipment consisted of the following:

September 30,
2020 December 31,
2019
Computer equipment and software $ 94,384 $ 77,583
Furniture and fixtures 52,007 46,839
Machinery and equipment 5,161,144 4,699,383
FUV rental fleet 103,316 —
Leasehold improvements 774,046 774,046
Fixed assets in process 1,415,697 264,999
Total property and equipment 7,600,594 5,862,850
Less: Accumulated depreciation (1,806,428 ) (1,130,306 )
Total $ 5,794,166 $ 4,732,544

ARCIMOTO, INC.
June 30,
2020 December 31,
2019
Computer equipment and software $ 78,490 $ 77,583
Furniture and fixtures 46,839 46,839
Machinery and equipment 5,136,608 4,699,383
FUV rental fleet 123,943 —
Leasehold improvements 774,046 774,046
Fixed assets in process 106,201 264,999
Total property and equipment
6,266,127 5,862,850
Less: Accumulated depreciation (1,568,814 ) (1,130,306 )
Total $ 4,697,313 $ 4,732,544
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

Depreciation expense was approximately ~~$231,000~~$238,000 and ~~$439,000~~$676,000 during the three and ~~six~~nine months ended ~~June~~September 30, 2020, respectively, and was approximately ~~$172,000~~$173,000 and ~~$343,000~~$516,000 during the three and ~~six~~nine months ended ~~June~~September 30, 2019, respectively.
11
~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~

NOTE 6: CAPITAL LEASE OBLIGATIONS

As of ~~June~~September 30, 2020, the Company has financed a total of approximately ~~$2,321,000~~$3,190,000 of its capital equipment purchases with monthly payments ranging from $362 to $8,582, repayment terms ranging from 48 to 6072 months, and effective interest rates ranging from 4.52% to 9.90%. Total monthly capital lease payments as of ~~June~~September 30, 2020 are $47,267. These lease obligations mature ranging from ~~December 2021~~January 2022 through ~~December 2024~~July 2027 and are secured by approximately ~~$2,903,000~~$2,909,000 in underlying assets which have approximately ~~$599,000~~$687,000 in accumulated depreciation as of ~~June~~September 30, 2020. The balance of capital lease obligations was approximately ~~$1,465,000~~$1,920,000 and $1,614,000 as of ~~June~~September 30, 2020 and December 31, 2019, 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 an additional $500,000 note (“additional Note”) to the Investor, net of a $15,000 discount. The additional Note principal plus accrued interest is convertible into the Company’s common stock at a conversion price per share of $4.25. Accrued interest expense excluding the discount amortization for the ~~six-month~~nine-month period ended ~~June~~September 30, 2020 was $164,572. The discount amortized for the ~~six-month~~nine-month period ended ~~June~~September 30, 2020 was the remaining ~~discounts~~discount on the notes of $310,508. ~~There was no such interest expense~~The discount amortized for the ~~six-month~~nine-month period ended ~~June~~September 30, ~~2019.~~2019 was $242,933. On June 15, 2020, both notes were repaid in cash, principal in the amount of $3,500,000 and accrued interest in the amount of $479,809 for a total payment of $3,979,809.

During the ~~three~~nine months ended ~~June~~September 30, 2020, the Company had 10%, one-year convertible promissory notes outstanding totaling $1,310,893, of which $962,829 was due to related parties. The notes were due in July 2020. The notes were payable in cash or convertible into common stock at $4.25 per share at the option of the ~~holder~~holder. On June 25, 2020, certain Notes were converted in accordance with the Subscription Agreement. As a result, principal amounts of $1,310,893, of which $962,829 was to related parties and unpaid accrued interest of $108,284, of which $71,725 was to related parties, were converted into 333,924 shares of ~~Common Stock~~common stock at a conversion price of $4.25 per share. The Company also paid an aggregate of $688,079 of cash to settle principal, of which $188,079 was to related parties, and $80,953 of accrued interest, of which $41,691 was to related parties, to settle the remaining convertible notes. Interest expense was ~~$53,284.~~$53,284 for the nine months ended September 30, 2020.

On May 5, 2020, the Company received a Paycheck Protection Program (“PPP”) loan in the amount of $1,068,686, referred to on the balance sheet as Note payable to bank. The loan has an interest rate of 1% and monthly payments of $60,154 for 18 months beginning December 5, 2020. This loan is eligible for the limited loan forgiveness provisions of Section 1102 of the CARES Act, and the SBA Interim Final Rule dated April 2, 2020.

11
ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 8: STOCKHOLDERS’ EQUITY

Common Stock

The Company has reserved a total of ~~5,373,789~~5,095,289 shares of its common stock pursuant to the equity incentive plans (see Note 9). The Company has ~~3,363,993~~4,037,929 and 3,293,135 stock units, options and warrants outstanding under these plans as of ~~June~~September 30, 2020 and December 31, 2019, respectively.

~~As of June 30, 2020, the~~The Company has ~~reserved an additional 2,109,539~~693,667 and 2,109,839 shares of its common stock reserved for ~~warrants.~~warrants issued outside of the equity incentive plans as of September 30, 2020 and December 31, 2019, respectively.

Common Stock Issued for Accounts Payable
The Company issued 60,591 common shares for services or materials with a fair value of $181,329 during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, the Company issued 10,947 restricted common shares for services with a fair value of $36,782. The shares were valued based on the stock price at the time of the grant when the performance commitment was complete. The shares issued during the during the nine months ended September 30, 2020 and 2019 were to settle existing accounts payable.

13
~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
Exercise of Stock Options and Warrants

NoA total of 5,225 employee options, with exercise prices ranging from $4.33 to $4.52 per share were exercised for ~~cash~~total proceeds to the Company of $22,706 during the ~~six~~nine months ended ~~June~~September 30, 2020. During the ~~six~~nine months ended ~~June~~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.

A total of ~~5,546 Director deferred stock units were converted~~171,470 employee options with exercise prices ranging from $2.0605 to common shares during the six months ended June 30, 2020. During the six months ended June 30, 2019, a total of 205,688 employee warrants to purchase common stock, 35,688 with an exercise price of $0.50 per share and 170,000 with an exercise price of $0.9375$4.52 per share were exercised in cashless transactions at market prices ranging from ~~$4.138~~$6.32 to $7.64 per share and a total of 34,666 options issued to a consultant with exercise prices ranging from 2.54 and 3.57 were also exercised in a cashless transaction at a market price of $7.638, which was based on the Company’s daily closing prices surrounding the transaction dates. The transactions resulted in the issuance of 93,766 shares of common stock issued for qualified options to employees and 22,463 shares issued of common stock for non-qualified options issued to a consultant during the nine months ended September 30, 2020. 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 ~~169,578~~53,684 shares of the Company’s common ~~stock with no proceeds received.~~stock.

~~No employee warrants~~A total of 5,546 director deferred stock units were converted to ~~purchase~~ common ~~stock were exercised~~shares during the ~~six~~nine months ended ~~June~~September 30, 2020. During the ~~six~~nine months ended ~~June~~September 30, 2019, ano director deferred stock units were converted to common shares.
A total of ~~96,581~~50,004 employee ~~options to purchase common stock,~~warrants with an exercise ~~prices ranging from $2.06 to $3.10~~price of $0.50 per share were exercised in a cashless ~~transactions~~transaction at a market ~~prices ranging from $3.33 to $5.21~~price of $7.484 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction dates. The transaction resulted in the issuance of a total of 46,663 shares of the Company’s common stock during the nine months ended September 30, 2020. 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 ~~53,684~~203,252 shares of the Company’s common stock.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
A total of 944,444 warrants issued to investors with an exercise price of $2.83 per share were exercised in a cashless transaction at a market price of $8.86 per share, which was based on the bid price of the Company’s common stock on the Nasdaq Capital Market as reported by Bloomberg L.P. as of the time of the holder’s execution of the applicable notice of exercise. The transaction resulted in the issuance of a total of 642,776 shares of the Company’s common stock during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, no warrants issued to investors were exercised.
A total of 471,428 warrants issued to an investor with an exercise price of $3.50 per share were exercised for total proceeds to the Company of $1,649,999 during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, no warrants issued to investors were exercised.
Offerings of Common Stock
On June 11, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue in a registered direct offering an aggregate of 2,666,667 shares of its common stock at a purchase price per share of $3.00 for aggregate gross proceeds of approximately $8,000,000. The Company incurred placement agent fees of $480,000 related to the offering.

On June 30, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue in a registered direct offering an aggregate of 1,700,000 shares of its common stock, no par value per share, at a purchase price per share of $5.00 for aggregate gross proceeds of approximately $8,500,000, of which $4,785,000 was received on June 30, 2020. The balance of $3,715,000 from the offering was received by July 2, 2020. The Company incurred placement agent fees of $510,000 related to the offering.
On July 9, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue in a registered direct offering an aggregate of 1,370,000 shares of the Company’s common stock, no par value per share, at a purchase price per share of $7.30 for aggregate gross proceeds of approximately $10.0 million. The Securities Purchase Agreement includes customary representations, warranties and covenants by the Company. The Company incurred placement agent fees of $600,000 related to the offering.

~~ARCIMOTO, INC.~~Aggregate other cost of the three offerings for legal and accounting was approximately $59,000.
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
NOTE 9: STOCK-BASED PAYMENTS

The Company grants common stock, common stock units, and common stock purchase 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. The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates.

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.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The Company uses the following inputs when valuing 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 comparables 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 statements of operations as follows:

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Research and development $ 45,515 $ 52,558 $ 99,215 $ 73,566
Sales and marketing 33,749 23,862 54,905 37,606
General and administrative 283,364 109,320 447,248 171,018
Cost of goods sold 65,006 — 131,231 —
Total $ 427,634 $ 185,740 $ 732,599 $ 282,190
Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Research and development $ 64,810 $ 52,359 $ 164,025 $ 125,925
Sales and marketing 31,121 23,849 86,027 61,455
General and administrative 315,274 104,808 762,520 275,826
Cost of goods sold 88,716 — 219,947 —
Total $ 499,921 $ 181,016 $ 1,232,519 $ 463,206

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
Consulting Agreement with Common Stock Compensation

During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company issued ~~43,456~~60,591 common shares for accounts payable with a fair value of ~~$81,329.~~$181,329. The shares were valued based on the stock price at the time of the grant when the performance commitment was complete. 32,749 of these shares were for the August 3, annual renewal of an investor relations consulting contract. The terms of the contract call for the issuance of $100,000 worth of common shares issued at each annual renewal based on the market price at the time of the renewal. In addition to the payment in common shares, this consultant receives cash payments of $7,500 per month and payments for additional services as needed. During the three-month periods ending ~~June~~September 30, 2020 and 2019, we paid this investor relations consultant ~~$217,500~~$94,500 and ~~$9,689~~$0 respectively. During the ~~six-month~~nine-month periods ending ~~June~~September 30, 2020 and 2019, we paid the same investor relations consultant ~~$240,000~~$334,500 and $48,251 respectively, which included significant additional services.
2018 Omnibus Stock Incentive Plan

The 2018 Plan authorizing 1,000,000 shares 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. On April 20, 2020, the board of directors approved an increase from 2,000,000 to 4,000,000 shares; at the annual shareholder meeting on June 20, 2020, the increase was approved by a majority of the shareholders.

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 NQSOs and restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. As of ~~June~~September 30, 2020, the Company had a remaining reserve of ~~2,005,351~~1,051,915 shares of common stock under the 2018 Plan. Awards that are forfeited generally become available for grant under the 2018 Plan.
14
ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

Employee stock-based compensation expense under the 2018 Plan included in operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2020 was ~~$401,311~~$474,174 and ~~$668,953,~~$1,143,127, respectively.

Employee stock-based compensation expense under the 2018 Plan included in operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2019 was ~~$136,638~~$132,335 and ~~$205,943,~~$338,278, respectively.

Total compensation cost related to non-vested awards issued under the 2018 Plan not yet recognized as of ~~June~~September 30, 2020 was approximately ~~$1,237,762~~$4,160,423 and will be recognized on a straight-line basis through ~~December 2022~~September 2023 based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or forfeitures.

On January 6, 2020, the board of directors approved a director deferred compensation plan under the 2018 Plan. The deferred compensation plan calls for stock units to be held on account for each director and issued 90 days after separation from service as a director. If cash reserves are estimated to be less than the amount needed for 5five months of operations the Directors are required to take their compensation in Deferred Stock Units under the 2018 Plan, otherwise, Directors have the option of taking compensation in any combination of cash or Deferred Stock Units. For the ~~six~~nine months ended ~~June~~September 30, 2020, a total of ~~108,743~~143,644 stock units with a value of ~~$277,880,~~$507,529, based on the closing price on the last day of the quarter, were reserved and expensed. 28,673 of the stock units were valued with a price per share of $1.61 based on the closing stock price on the last trading day of the fourth quarter of 2019, and were recorded as a $46,163 expense on January 6, 2020 because the plan was adopted by the Board of Directors retroactively to the fourth quarter 2019. 46,584 of the stock units were valued with a price per share of $1.15 based on the closing stock price on the last trading day of the first quarter of 2020, and were recorded as a $53,572 expense on March 31, 2020. 33,486 of the stock units were valued with a price per share of $5.32 based on the closing stock price on the last trading day of the second quarter of 2020, and were recorded as a $178,146 expense on June 30, 2020.
~~On February 12, 2020, 32,749 shares~~ 34,901 of the stock units were valued with a ~~total value~~price per share of ~~$56,328 were granted and issued from the 2018 Plan at~~$6.58 based on the closing stock price on ~~that~~the last trading day of ~~$1.72 per share in payment~~the third quarter of ~~services provided.~~2020, and were recorded as a $229,649 expense on September 30, 2020.

On April 27 and June 18, 2020, non-qualified options to purchase 29,666 and 5,000 shares of common stock were issued to a consultant under the 2018 ~~plan~~Plan with grant date fair values of $44,956 and $13,430 respectively. The exercise price of the options were $2.54 and $3.57, respectively. These options vested on issuance and were exercised on August 20, 2020, in a cashless transaction at a market price of $7.638 per share resulting in the issuance of 22,463 shares.
On September 11, 2020, non-qualified options to purchase 41,000 shares of common stock were issued to consultants under the 2018 Plan with grant date fair value of $139,544. The exercise price of the options are $5.41. 20,000 of these options vest over two years and 21,000 of these options vest over one year.

During the ~~six~~nine months ended ~~June~~September 30, 2020, qualified options to purchase ~~32,000 shares of common stock were granted to employees under the 2018 plan with a grant date fair value of $42,728. During the six months ended June 30, 2019, qualified options to purchase 498,600~~912,000 shares of common stock were granted to employees under the 2018 Plan with a grant date fair value of $3,112,715. The options were valued using the Black-Scholes option pricing model with a six-year expected term, risk free interest rates ranging from 0.36% to 0.45%, and an annualized standard deviation of stock price volatility of 69.4% to 74.9%, with a weighted average exercise price of $5.30. These options vest over three years. During the nine months ended September 30, 2019, the Company granted 498,600 options under the 2018 Plan. These options had an exercise price of $4.52 and vest over three years. The total grant date fair value of these options was $963,929.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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. One million shares of common stock were authorized for issuance under the 2015 Plan. Awards that are forfeited generally become available for grant under the 2015 Plan. As of ~~June~~September 30, 2020, ~~810,275~~667,303 shares of common stock were reserved for issuance pursuant to stock options that are outstanding, and ~~4,444~~5,444 shares remain available for issuance pursuant to future awards that might be made under the 2015 Plan.

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
During the ~~six~~nine months ended ~~June~~September 30, 2020, qualified options to purchase 13,000 shares of common stock were granted to employees under the 2015 plan with a grant date fair value of $17,358. During the ~~six~~nine months ended ~~June~~September 30, 2019, ~~qualified~~141,600 options ~~to purchase 141,600 shares of common stock~~ were granted ~~to employees~~ under the 2015 Plan with a grant date fair value of $273,751.

Employee stock-based compensation expense included in operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2020 related to the 2015 Plan was ~~$26,323~~$25,747 and ~~$63,646,~~$89,392, respectively.

Employee stock-based compensation expense included in operating expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2019 related to the 2015 Plan was ~~$49,102~~$48,681 and ~~$76,247,~~$124,928, respectively.

Total compensation cost related to non-vested awards not yet recognized as of ~~June~~September 30, 2020 was ~~$165,654~~$138,178 and will be recognized on a straight-line basis through May 2023 based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or forfeitures.

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 issuance under the 2012 Plan. Awards that are forfeited generally become available for grant under the 2012 Plan. As of ~~June~~September 30, 2020, ~~658,316~~608,312 shares of common stock were reserved for issuance pursuant to warrants that are issued and outstanding under the 2012 Plan and 1 share remains 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. The warrants were fully expensed prior to 2019.

NOTE 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 ~~June~~September 30, 2020 and December 31, 2019, the Company’s balance of deposits received was approximately ~~$613,000~~$561,000 and $794,000, respectively. As of ~~June~~September 30, 2020, and December 31, 2019, ~~$388,124~~$393,524 and $374,524, 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~~There were $100 and $11,200 customer deposits from related parties ~~total $11,200~~ as of ~~June~~September 30, 2020 and December 31, ~~2019.~~2019, respectively.

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~

NOTE 11: COMMITMENTS AND CONTINGENCIES

Litigation
~~On March 11, 2018, the Company was served with a lawsuit entitled~~ ~~John R Switzer vs W.R. Hambrecht & Co. LLC et al.~~, Case Number: CGC-18-564904, filed in San Francisco County Superior Court in the State of California. In this action, the Company 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 was 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 alleged violations of Section 12(a)(2) and Section 15 of the Securities Act, 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 entitled ~~Jay 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 was styled as a putative class action, the Company was also 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 the ~~Mendelson~~ ~~action were substantially similar to those of the~~ ~~Switzer~~ action and the plaintiff was also 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 was without merit and vigorously 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. On September 28, 2018, plaintiffs in that case filed a First Amended Consolidated Complaint. The Company denied the substantive claims and allegations made in that amended pleading and continued to assert a vigorous defense. On January 25, 2019, the parties reached a settlement agreement in the consolidated cases, subject to court approval. The parties to the lawsuit have filed a motion with the court seeking approval of the settlement agreement. On June 5, 2020, the Court signed the Order Granting Final Approval of Class Action Settlement. By its terms, the settlement agreement resolves this litigation in its entirety. The settlement amount, which is not material, was paid in full by Arcimoto’s insurance carriers.

On March 6, 2020, the Company filed a complaint (“the Complaint”) against Ayro, Inc. (“Ayro”), accusing Ayro of patent infringement in Federal District Court for the Western District of Texas, Waco Division (Case No. 6:20-cv-00176-ADA) (“the Ayro Litigation”). In the Complaint, Arcimoto alleges that Ayro’s 311 two-seater electric vehicles infringe U.S. Patent 8,985,255 (the “255 Patent”). The Complaint asks for monetary damages and enhanced damages due to willful infringement of the 255 Patent by Ayro. On March 27, 2020, Ayro answered the Complaint, denying liability and asserting counterclaims of noninfringement and patent invalidity. The Court ~~had~~held a ~~telephonic Scheduling Conference~~Markman Hearing on ~~April 29,~~October 15, 2020 ~~and set~~to construe the meaning of certain disputed claim terms. At the Markman ~~Hearing for October 15, 2020. The~~hearing the Court adopted four of six constructions proposed by Arcimoto. Discovery on the litigation has ~~yet to~~begun and the Court set a jury trial ~~date.~~for July 19, 2021 The Company remains committed to protecting its valuable intellectual property.

NOTE 12: SUBSEQUENT EVENTS
On July 1 and 2, 2020, the remaining $3,715,000 of the cash from the June 30, 2020 $8.5 million offering was received and all 1.7 million shares were issued on July 2, 2020, as discussed in Note 8. The shares totaling 743,000 paid after June 30, 2020, of $3,715,000 were not included in shares outstanding as of June 30, 2020.

On July 6, 2020, 944,444 of the 1,044,444 common stock purchase warrants issued to investors in a registered direct offering on October 8, 2019, at an exercise price of $2.83 per share were exercised in a cashless transaction resulting in the issuance of 642,776 common shares.
On July 7, 2020, 471,428 of the 942,857 warrants issued in a subscription agreement with FOD Capital, LLC on December 27, 2018, at an exercise price of $3.50 per shares, as discussed in Note 7, were exercised in a cash transaction netting the Company approximately $1,650,000.
~~On July 7, 2020, the Company financed $300,206 in insurance payments after a $52,977 down payment at an annual interest rate of 4.8% and monthly payments of $34,027 for nine months.~~
On July 9, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors pursuant to which the Company agreed to issue in a registered direct offering an aggregate of 1,370,000 shares of the Company’s common stock, no par value per share, at a purchase price per share of $7.30 for aggregate gross proceeds of approximately $10.0 million (the “Offering”). The Securities Purchase Agreement includes customary representations, warranties and covenants by the Company. The Company intends to use the net proceeds from the Offering for general corporate purposes, including to cover the Company’s operating expenses and inventory. The Company incurred placement agent fees of approximately $600,000 related to the offering.
Between July 13 and August 18, 2020, 50,004 employee warrants from the 2012 Plan with an exercise price of $0.50 per share were exercised in a cashless transaction resulting in the issuance of 46,663 common shares. 120,416 employee options from the 2015 Plan with an average exercise price of $2.56 per share were exercised in cashless transactions resulting in the issuance of 72,328 common shares. 12,944 employee options from the 2018 Plan with an average exercise price of $4.41 per share were exercised in cashless transactions resulting in the issuance of 3,480 common shares. 4,792 employee options from the 2018 Plan with an exercise price of $4.33 per share were exercised with $20,749 proceeds to the Company.
~~On August~~November 4, 2020 the Company financed ~~$192,980 in production equipment~~$440,754 of its Director and Officers insurance annual renewal premium at ~~an annual interest rate~~4.64% for nine monthly payments of ~~5.56% with a monthly payment of $3,144 for 72 months.~~$49,924.

~~On August 10, 2020, the Company financed $430,827 in production equipment at an annual interest rate of 5.66% with a monthly payment of $8,220 for 60 months.~~
~~On August 18, 2020, the Company issued 17,135 shares valued at $100,000 under the 2018 Plan for investor relations services per the annual renewal agreement dated August 2, 2018.~~

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
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 identify financing sources to fund our capital expenditure requirements and continue operations until sufficient cash flow can be generated from operations;
● 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, including the temporary closure of our facility due to COVID-19;
● our dependence on our suppliers, whose ability to supply us may be negatively impacted by the measures being implemented to address COVID-19;
● 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 U.S. 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 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;


~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
● 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 or losses;
● interest rates and the credit markets;
● our ability to maintain our NASDAQ Capital Market listing;
● costs and risks associated with litigation; and
● other risks described from time to time in periodic and current reports that we file with the SEC.

The foregoing list does not contain all 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 ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 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, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020. 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, 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

Arcimoto’s mission is to catalyze the shift to a sustainable transportation system. Since our incorporation, we have been engaged primarily in the design, development, manufacture, sale and ~~manufacture~~rental of ultra-efficient three-wheeled electric vehicles. Arcimoto’s fundamental thesis: there is disconnect between the size and efficiency of a car (~4,000 pounds of material that can carry 5 to 7 people) and how people use cars on a daily basis (1 or 2 passengers driving an average of 30 miles a day with cargo). Arcimoto, Inc. (the “Company”) was ~~formed~~incorporated in the State of Oregon on November 21, 2007 as WTP Incorporated, an Oregon corporation, and later changed its name to Arcimoto, Inc. We design, develop, manufacture, sell, and rent through franchised locations ultra-efficient fully electric vehicles. 2007.

2019 was a watershed year for the Company, which saw us complete compliance testing required to produce and sell retail ~~vehicles,~~vehicles; outfit the scalable, automated, vertically-integrated Arcimoto Manufacturing Plant for retail production; begin retail production of the Fun Utility Vehicle (FUV); develop our post-production programs including service, support, recall and supplier quality management; and deliver first vehicles to our first rental franchisee in Key West, Florida. We also expanded our product portfolio offering with the announcement of the Rapid Responder and Deliverator platform concepts targeted at fleet verticals.

Retail production began on September 19, 2019. In total, Arcimoto produced 57 model year 2019 ~~FUVs,~~vehicles, 46 of which were delivered to customers by December 31, 2019. ~~To date,~~In the nine months ending September 30, 2020, Arcimoto ~~has built more than 100 production vehicles.~~produced 79 model year 2020 vehicles, and delivered 69 vehicles to customers.

In ~~mid-March~~March 2020, ~~the Company suspended production operations in response to the COVID-19 pandemic, following the launch of~~Arcimoto launched production pilots of the Rapid Responder and Deliverator product lines. ~~We have~~In September 2020, the Company on-roaded its fourth product concept, the Cameo. In November 2020 the Company unveiled its fifth product concept, the Arcimoto Roadster prototype.
For a portion of the first three quarters of 2020, Arcimoto’s production operations were suspended in response to the COVID-19 pandemic. The Company restarted limited production and ~~are planning to resume~~resumed deliveries to customers in the third quarter.
The Company’s focus is now squarely on volume production planning, in order to push to sustainable profitability and ~~meet the demands posed by~~fulfill the thousands of ~~preorders still~~pre-orders in our queue, as well as ~~those we generate~~to meet the demand generated by ~~the pilots of~~ our pilot fleet ~~offerings~~vehicles in the field. The Company has received a Paycheck Protection Program (“PPP”) loan and applied for an Economic Injury Disaster Loan (“EIDL”) through the Small Business Administration (“SBA”) that were made available under the CARES Act passed by Congress in response to the COVID-19 pandemic at the end of March 2020. The Company is currently preparing an application for the Advanced Technology Vehicle Manufacturing Loan Program to secure the funds necessary to execute our growth strategy.

~~Thesis~~
19

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. Current automotive platforms are inefficient by design. Cars can weigh upwards of 4,000 lbs., take up an average area of almost 100 square feet and are highly inefficient. The vast majority of daily transportation tasks are those involving one or two people, traveling a relatively short distance, with a relatively small volume of items.

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,~~road; dual-motor front-wheel drive for enhanced ~~traction,~~traction; can be parked 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. The Company has secured 10 utility patents on various constituent technologies and vehicle platform architectures.

Products

Arcimoto’s ~~three~~ vehicle products are based on the Arcimoto Platform. While intended to serve very different market segments, an estimated 90% of the constituent parts are the same between ~~our three initial products.~~all products currently in production and development.

Fun Utility Vehicle^® (FUV^®)

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 June 30, 2020, we had 4,398 FUV pre-orders with small refundable deposits, representing an increase of 201, or 5%, from the 4,197 pre-orders as of December 31, 2019.~~

~~Arcimoto’s first entry into the market is the Evergreen Edition FUV.~~ We ~~are leading~~led 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 a sustainable transportation future. ~~As of June 30, 2020, we delivered 84 Evergreen Edition FUVs to retail customers.~~

Rapid Responder™

The Rapid Responder was announced on February 15, 2019. The pure-electric Rapid Responder is developed on the Arcimoto platform, and designed to perform 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.

Arcimoto is 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 also plans to market the Rapid Responder as a solution for campus security and law enforcement ~~applications as well.~~applications.

Arcimoto’s test of the Rapid Responder in a pilot program with the City of Eugene, the Eugene-Springfield Fire Department, is ongoing and the second vehicle is expected to be delivered soon with a single seat for more cargo capacity. We are targeting delivery of the first production Rapid Responders in 2020.
~~Deliverator™~~Deliverator^®

Development of the Deliverator was officially announced on March 19, 2019 with the reveal 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 have several ongoing pilot programs:~~Cameo (™)
Arcimoto completed a prototype of the ~~first~~Cameo, an FUV equipped with a ~~local non-profit delivering supplies~~rear-facing rear seat and a modified roof built for on-road filming in September 2020. We teased the Cameo prototype in several Arcimoto videos in September 2020 and have used the Cameo to shoot all of our own videos since its on-roading. Development of the ~~unhoused during the pandemic, two rentable Deliverators with a gig vehicle rental service in Los Angeles, and one with a franchise~~Cameo is still in the ~~quick-serve restaurant~~planning stages.
The Cameo is aimed at the film industry, ~~in Key West, Florida. We are targeting several additional pilot programs,~~ as well as ~~delivery~~the growing influencer and DIY film market.
Arcimoto Roadster
The Arcimoto Roadster prototype was first introduced in a video released October 30, 2020. Conceived as a pure platform fun machine, the Roadster offers a lower center of gravity, lower overall weight, and potentially improved aerodynamics due to less frontal surface area. We announced the formal development of the ~~first production Deliverators, through the remainder of~~Roadster product, in collaboration with industry partners on November 16, 2020.

Management Opportunities, Challenges and Risks

Demand, Production and Capital

Demand for the Retail Series Arcimoto FUV has continued to increase. As of ~~June~~September 30, 2020, we had ~~4,398~~4,566 FUV pre-orders with small refundable deposits or fleet order commitments, representing an increase of ~~201,~~369, or approximately 5%9%, from the 4,197 pre-orders as of December 31, 2019.
We began taking $5,000 non-refundable reservations for the Fun Utility Vehicle in the first quarter of 2019 with a starting price point of $19,900. The average sales price, including custom upgrade options, for the three months ended June 30, 2020 was $24,413. We secured non-refundable reservations for the first 100 FUVs in anticipation of initial retail production and delivery. In the last week of September 2019, we delivered the first two (2) Evergreen Edition FUVs. In total, Arcimoto produced 57 model year 2019 FUVs, 46 of which were delivered to customers by December 31, 2019. An additional 38 model year 2019 and 2020 FUVs were delivered to customers during the six months ended June 30, 2020.

In the third quarter of 2019, we completed vehicle testing. 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. Following completion of compliance testing, 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.

We temporarily suspended production in March 2020 due to the COVID-19 pandemic. Though conditions in Lane County have worsened since, we resumed limited production in Q2, implementing significant safety measures. We ~~are currently targeting Q3 2020 to resume~~resumed customer ~~deliveries.~~deliveries in the third quarter of 2020. With FUV production currently limited, we are focusing on pilot programs for the Rapid Responder and Deliverator, performing value engineering and planning for volume manufacture to achieve sustainable profitability, applying to the Federal Department of Energy’s Advanced Technology Vehicle Manufacturing Loan Program (“ATVMLP”) to finance high volume production (10,000+ units/year), engaging sales efforts focused on fleet deployments, and expanding our service network.

The average sales price, including custom upgrade options, for the three months ended September 30, 2020 was $22,693, $2,793 or 14% above the starting price. We began taking $5,000 non-refundable reservations for the Fun Utility Vehicle in the first quarter of 2019 with a starting price point of $19,900. We secured non-refundable reservations for the first 100 FUVs in anticipation of initial retail production and delivery. In the last week of September 2019, we delivered the first two FUVs. In total, Arcimoto produced 57 model year 2019 FUVs, 46 of which were delivered to customers by December 31, 2019. An additional 69 model year 2019 and 2020 FUVs were delivered to customers during the nine months ended September 30, 2020.
We have contracted with a lean design consultant to evaluate Arcimoto’s manufacturing processes and supply chain management in order to drive down costs and begin high-volume production of Arcimoto ultra-efficient electric vehicles.

Arcimoto’s test of the Rapid Responder in a pilot program with the City of Eugene, the Eugene-Springfield Fire Department (ESFD), is ongoing. A second vehicle is in development for ESFD with a single seat for more cargo capacity. We are evaluating upfitters and defining the process for installation of non-compliant accessories such as lights and sirens and are planning to release pricing and availability for the Rapid Responder in Q1 2021.
We have several ongoing Deliverator pilot programs with individuals, municipalities, and corporate fleets. We are building Deliverators in low volume through the remainder of 2020, delivering to individuals, as well as targeting additional pilot programs, as we tool-up for manufacture and production in 2021.
On September 26, 2020, Arcimoto introduced the beta Configurator, a web tool for selecting vehicle options and visualizing the final configured product. We subsequently opened $2,500 non-refundable reservations for production FUVs through the end of the year to pre-order customers in Washington, California, and Oregon, with a new starting price of $17,900, and many more configurable options than our previous offering. Average sales price as configured for the first 50 reservations is $21,762.

Trends in Cash Flow, Capital Expenditures and Operating Expenses

In 2019, Arcimoto generated cash flow from retail production vehicle sales for the first time. Cash inflow from vehicle sales has been substantially reduced following the suspension of production due to the COVID-19 pandemic.

Our capital expenditures for low-volume production are substantially ~~complete, with minimal (approximately $1,600,000) capital costs in our 2020 plan for tooling, quality test equipment, leasehold improvements, service and delivery vehicles.~~complete. We are bringing the thermo forming of body panels inhouse and ordered approximately ~~$1,162,000~~$1,749,000 in equipment for this. Approximately ~~$1,108,000~~$571,000 of this amount has been financed at interest rates ranging from ~~4.37%~~5.56% to ~~5.66%~~5.99% and terms ~~from 60 to 84 months, as discussed in~~of 72 months. We anticipate a savings of $780 per FUV produced with this automation. We are purchasing two additional welding cells at a total cost of $553,791 for welding the ~~subsequent events notes to the financial statements.~~upper and lower frames. We anticipate securing low interest debt for these equipment purchases. We anticipate a savings of $390 per FUV produced with this automation. The Company is preparing a significant ATVMLP application to finance high volume production.

Operating expenses decreased by approximately ~~30%~~24%, or ~~$1,981,000,~~$2,458,000, for the ~~six~~nine months ended ~~June~~September 30, 2020, as compared to the ~~six~~nine months ended ~~June~~September 30, 2019. This decrease was due to ~~transferring approximately $1,989,000~~manufacturing overhead being allocated to cost of goods sold with the start of production in ~~overhead to Cost of Goods Sold now that the Company is in production and these functions are no longer performing R&D.~~September 2019. The number of employees increased by approximately 4%24%, from 9994 as of ~~June~~September 30, 2019 to ~~103~~117 employees as of ~~June~~September 30, 2020. In December 2017, we moved into an 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, we re-negotiated the lease for this space. From December 2019The increased staff was needed to March 2020 we added another approximately 21,600 square feet of manufacturing and office space. As a result, we incurred costs associated with equipping the employees, implementing systems, and running the larger facilities. R&D costs decreased by approximately 76%, or $2,363,000, during the six months ended June 30, 2020, as this was the majoritybuild out all parts of the ~~overhead moved to Cost of Goods Sold. Work was focused on developing hard doors~~Company for ~~the FUV, the Deliverator,~~selling and Emergency Responder. Sales and marketing costs increased by approximately 23%, or $120,000. Approximately 133%, or $159,000, of the increase was for developing the franchise rental business, the reminder of the increase was due to a 10% increase in non-cash compensation a 9% decrease in salaries and benefits and a 14% decrease in marketing activities. General and administrative cost increased mainly due to investor relations.servicing vehicles.

New Accounting Pronouncements

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 under Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020.

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. See Note 3 to our Financial Statements under Part I, Item I of this Quarterly Report on Form 10-Q.

Results of Operations
Three Months Ended ~~June~~September 30, 2020 versus three months ended ~~June~~September 30, 2019

Revenues

We had approximately ~~$269,000~~$684,000 in revenue, comprising of approximately ~~$255,000~~$620,000 in revenue from the sales of our vehicles, approximately $53,000 in revenue from merchandise and outside metal fabrication, and approximately $10,000 in revenue from grants during the three months ended September 30, 2020. We had approximately $33,000 in revenue, comprising of approximately $20,000 in revenue from the sales of our vehicles, and approximately ~~$14,000~~$13,000 in revenue from merchandise and outside metal fabrication during the three months ended ~~June 30, 2020. We had approximately $9,000 in revenue from merchandise, and outside metal fabrication during the three months ended June~~September 30, 2019.

Cost of Goods Sold

We had approximately ~~$1,209,000~~$2,046,000 in ~~Cost~~cost of ~~Goods Sold~~goods sold (“COGS”), comprising approximately ~~$771,000~~$1,280,000 in overhead and underutilized factory capacity, ~~$232,000~~$692,000 in FUV parts from the sale of our vehicles, $9,000 in FUV delivery cost, approximately ~~$10,000~~$32,000 in warranty reserves, ~~and~~ approximately ~~$9,000~~$11,000 in COGS from merchandise and outside metal fabrication, and ~~by an~~ approximately ~~$187,000 increase~~$22,000 in COGS due to an adjustment to inventory for loss, obsolescence, purchase price variance and scrap during the three months ended ~~June~~September 30, 2020. We had ~~$3,253~~$66,280 in COGS from merchandise and outside metal fabrication during the three months ended ~~June~~September 30, 2019.

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, as discussed above. R&D expenses for the three months ended ~~June~~September 30, 2020 and 2019 were approximately ~~$284,000~~$1,314,000 and ~~$2,037,000,~~$2,343,000, respectively. The primary reason for the decrease in R&D expenses of ~~$1,752,000,~~$1,029,000, or ~~86%~~44%, resulted from ~~a decrease~~pre-production materials cost reduction with the start of production in engineering salaries and benefits, as direct and indirect labor allocated to COGS, of approximately $674,000, a $315,000 decrease in cash compensation offset by an increase of $58,000 in non-cash compensation, a decrease in materials and testing of approximately $749,000, a decrease in tools and equipment expense of approximately $56,000, and a $16,000 decrease in computer, licenses and subscriptions expense. The major R&D projects during the three months ended June 30, 2020 were the development of hard doors for the FUV, the Deliverator and Emergency Responder.September 2019.

24

Sales and Marketing Expenses

Sales and marketing (“S&M”) expenses for the three months ended ~~June~~September 30, 2020 and 2019 were approximately ~~$305,000~~$362,000 and ~~$277,000,~~$309,000, respectively. The primary reasons for the increase in sales and marketing expenses during the three months ended ~~June~~September 30, 2020 of approximately ~~$28,000,~~$52,000, or ~~10%~~17%, as compared to the prior period was ~~a $103,000~~an increase in ~~rental franchise development expenses, offset by a $40,000 decrease in~~personnel and public relations, marketing and ~~marketing expense, a $32,000 decrease in cash compensation and a $3,000 decrease in non-cash compensation.~~travel

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 legal fees for professional and contract services. G&A expenses for the three months ended ~~June~~September 30, 2020 were approximately ~~$1,758,000~~$1,576,000 as compared to approximately ~~$1,421,000~~$1,076,000 for the same period last year, representing an increase of approximately ~~$337,000,~~$500,000, or ~~24%~~46%. The primary reasons for the increase in the current period was due to ~~a $297,000 increase in expenses associated with~~$210,000 of non-cash compensation, $179,000 was of legal fees for defending Company patents against infringement and the majority of the remainder was the increased cost of being a ~~publicly traded corporation (investor~~public company—investor relations, insurance, and professional fees), a $174,000 increase in non-cash compensation, and a $59,000 increase in depreciation expense. These increases were offset by a $66,000 decrease in cash compensation, a $97,000 overhead allocation to COGS, a $20,000 decrease in lobbying expense, and a $10,000 decrease in bank fees.

Interest Expense

Interest expense for the three months ended ~~June~~September 30, 2020 was approximately ~~$416,000,~~$29,000, as compared to ~~$194,000~~$262,000 during the three months ended ~~June~~September 30, 2019. ~~Approximately $150,000 was amortization of the FOD Capital, LLC note extension fee, $69,000 of the increase~~Interest expense decreased due to paying off all non-equipment financing in ~~interest expense was for convertible notes, and $3,000 was for additional equipment financing and other interest.~~June 2020.

~~Six~~Nine Months Ended ~~June~~September 30, 2020 versus ~~six~~nine months ended ~~June~~September 30, 2019

Revenues

We had approximately ~~$885,000~~$1,569,000 in revenue, comprising of approximately ~~$853,000~~$1,473,000 in revenue from the sales of our vehicles, approximately $86,000 in revenue from merchandise and outside metal fabrication, and approximately $10,000 in revenue from grants during the nine months ended September 30, 2020. We had approximately $44,000 in revenue, comprising of $20,000 in revenue from the sales of our vehicles, and approximately ~~$32,000~~$24,000 in revenue from merchandise and outside metal fabrication during the ~~six~~nine months ended ~~June 30, 2020. We had approximately $11,000 in revenue from merchandise, and outside metal fabrication during the six months ended June~~September 30, 2019.

Cost of Goods Sold

We had approximately ~~$2,898,000~~$4,945,000 in ~~Cost of Goods Sold (“COGS”),~~COGS, comprising approximately ~~$1,989,000~~$3,269,000 in overhead and underutilized factory capacity, ~~$882,000~~$1,574,000 in FUV parts from the sale of our vehicles, approximately ~~$39,000~~$31,000 in delivery COGS, approximately $70,000 in warranty reserves and approximately ~~$26,000~~$15,000 in COGS from merchandise and outside metal fabrication during the ~~six~~nine months ended ~~June~~September 30, 2020. This was offset by an approximately ~~$37,000~~$15,000 reduction in COGS due to an adjustment to inventory for loss, obsolescence, purchase price variance and scrap. We had ~~$4,720~~$71,000 in COGS from merchandise and outside metal fabrication during the ~~six~~nine months ended ~~June~~September 30, 2019.

Operating Expenses

Research and Development Expenses

Research and ~~development (“R&D”)~~Development expenses consist primarily of personnel costs for our pre-production manufacturing, engineering and research teams, external lab testing costs, and prototyping materials expense, as discussed above. R&D expenses for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 were approximately ~~$733,000~~$2,047,000 and ~~$3,097,000,~~$5,440,000, respectively. The primary reason for the decrease in R&D expenses of ~~$2,364,000,~~$3,393,000, or ~~76%~~62%, resulted from ~~an increase~~approximately $184,000 in ~~facilities~~personnel cost ~~of $75,000, a decrease in engineering salaries and benefits, as direct and indirect labor~~ allocated to ~~COGS, of approximately $1,679,000,~~manufacturing overhead cost, a ~~$48,000 decrease~~$2,026,000 reduction in ~~cash compensation offset by an increase of $157,000 in non-cash compensation,~~pre-production material cost, a ~~decrease in materials and testing of approximately $789,000, a decrease~~$138,000 reduction in tools and equipment, a $50,000 reduction in computer and software expense ~~of approximately $25,000,~~ and a ~~$55,000 decrease~~$39,000 reduction in ~~computer, licenses and subscriptions expense. The major R&D projects during the six months ended June 30, 2020 were the development of hard doors for the FUV, the Deliverator and Emergency Responder.~~regulatory testing.
2523

Sales and Marketing Expenses

Sales and ~~marketing (“S&M”)~~Marketing expenses for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 were approximately ~~$642,000~~$1,004,000 and ~~$522,000,~~$831,000, respectively. The primary reasons for the increase in sales and marketing expenses during the ~~six~~nine months ended ~~June~~September 30, 2020 of approximately ~~$120,000,~~$172,000, or ~~23%~~21%, as compared to the prior period was ~~a $159,000 increase in~~the cost of developing the sales, franchise and rental ~~franchise development expenses, and a $4,000 increase in non-cash compensation offset by a $19,000 decrease in public relations and marketing expense, and a $24,000 decrease in cash compensation.~~business.

General and Administrative Expenses

General and ~~administrative (“G&A”)~~Administrative expenses consist primarily of personnel and facilities costs related to executives, finance, human resources, information technology, as well as legal fees for professional and contract services. G&A expenses for the ~~six~~nine months ended ~~June~~September 30, 2020 were approximately ~~$3,254,000~~$4,830,000 as compared to approximately ~~$2,992,000~~$4,068,000 for the same period last year, representing an increase of approximately ~~$262,000,~~$762,000, or 9%19%. The primary reasons for the increase in the current period was due to a ~~$269,000~~$744,000 increase in ~~expenses associated with~~the cost of being a ~~publicly traded corporation (investor~~public company—investor relations increased $392,000, insurance increased $127,000, legal cost increased $123,000 and professional ~~fees), a $276,000 increase in non-cash~~fees increased $101,000. Non-cash compensation ~~a $95,000 increase in depreciation expense, and a $22,000 increase in cash compensation,. These increases were~~increased $487,000 but this was offset by a ~~$310,000 overhead allocation to COGS, a $85,000~~$206,000 decrease in ~~lobbying expense,~~salaries and ~~a $5,000~~$262,000 decrease in ~~bank fees.~~other expense.

Interest Expense

Interest expense for the ~~six~~nine months ended ~~June~~September 30, 2020 was approximately ~~$663,000,~~$692,000, as compared to ~~$388,000~~$650,000 during the ~~six~~nine months ended ~~June~~September 30, 2019. ~~Approximately $300,000 of the~~The increase was ~~amortization of~~due to the ~~FOD Capital, LLC note extension fee, $121,000 of the increase in interest expense was for~~ convertible notes that were issued between August 14 and ~~$16,000 of the increase was for equipment financing~~September 27, 2019 and ~~other interest. These increases were offset by a $162,000 decrease~~paid off in ~~interest expense for the FOD Capital, LLC warrant OID amortization which was completed on December 31, 2019.~~June 2020.

Liquidity and Capital Resources

As of ~~June~~September 30, 2020, we had approximately ~~$7,764,000~~$16,971,000 in cash and cash equivalents, representing an increase in cash and cash equivalents of approximately ~~$1,931,000~~$11,138,000 from December 31, 2019. In July 2020, we raised approximately $15,366,000 of additional cash. 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 provide us with well in excess of 12 months of liquidity. 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.
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 ~~six~~nine months ended ~~June~~September 30, 2020, cash used in operating activities was approximately ~~$6,345,000,~~$10,949,000, which was primarily the result of our net loss incurred of approximately ~~$7,298,000, a decrease in accrued liabilities of approximately $123,000,~~$11,941,000, a decrease in customer deposits of approximately ~~$180,000,~~$233,000, a decrease in warranty accrual of approximately ~~$32,000,~~$15,000, and an increase in inventories of approximately ~~$1,889,000~~$2,495,000 related to materials for our electric vehicles. These increases in cash outflows were partially offset by stock-based compensation of approximately ~~$733,000,~~$1,233,000, depreciation expense of approximately ~~$439,000,~~$676,000, amortization of capital debt of approximately $311,000, a decrease in accounts receivable of approximately ~~$231,000,~~$211,000, a decrease of prepaid inventory of approximately ~~$693,000,~~$591,000, an increase in accounts payable of approximately ~~$484,000,~~$247,000, a decrease in accrued liabilities of approximately $102,000, and a decrease in other current assets of approximately ~~$304,000.~~$315,000.

Cash Flows from Investing Activities

Cash flows from investing activities primarily relates to the capital expenditures to support our growth in operations, including investments in manufacturing equipment and tooling. During the ~~six~~nine months ended ~~June~~September 30, 2020, the Company paid approximately ~~$334,000~~$1,097,000 for manufacturing equipment and fixed asset purchases, and approximately ~~$46,000~~$54,000 for security deposits.

During the ~~six~~nine months ended ~~June~~September 30, 2019, the Company paid approximately ~~$61,000,~~$100,000, for manufacturing equipment and tooling fixed asset purchases.

Cash Flows from Financing Activities

During the ~~six~~nine months ended ~~June~~September 30, 2020, net cash provided by financing activities was approximately ~~$8,655,000,~~$23,239,000, compared to net cash provided of ~~$3,829,000~~$5,663,000 during the ~~six~~nine months ended ~~June~~September 30, 2019. Cash flows provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2020 comprised of proceeds from the issuance of common stock through our ~~S-3 offering~~registered offerings of approximately ~~$12,785,000,~~$26,501,000, proceeds from the ~~paycheck protection program~~Paycheck Protection Program loan of approximately $1,069,000, payments on capital lease obligations amounting to approximately ~~$218,000,~~$334,000, offering costs of approximately ~~$996,000,~~$1,649,000, repayment of convertible notes payable to related parties of approximately $188,000, repayment of convertible notes payable of approximately $500,000, ~~and~~ repayments of notes payable of approximately ~~$3,296,000.~~$3,332,000, and proceeds from the exercise of warrants of approximately $1,650,000.

During the ~~six~~nine months ended ~~June~~September 30, 2019, net cash provided by financing activities was approximately ~~$3,829,000.~~$5,663,000. Cash flows provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2019 mainly comprised of payments on capital lease obligations amounting to approximately ~~$192,000,~~$292,000, offering costs of approximately $255,000, 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 ~~our S-3~~registered offerings of ~~$3,400,000~~approximately $4,265,000 and through a ~~Series 4(a)(2)~~convertible note offering of approximately ~~$865,000.~~$1,950,000 exempt from registration under Section 4(a)(2) of the Securities Act.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Quarterly Report on Form 10-Q, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation 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. Management uses the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013) to evaluate internal disclosure controls and procedures.

Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting

There has not been any material change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the period ended June 30, 2020, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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 11 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.

There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.

EXHIBIT INDEX

Exhibit Incorporated by Reference
(Unless Otherwise Indicated)
Number Exhibit Description Form File No. Exhibit Filing Date
3.1(a) Second Amended and Restated Articles of Incorporation 10-K 001-38213 3.1(a) March 29, 2019
3.1(b) Articles of Amendment to Second Amended and Restated Articles of Incorporation of Arcimoto, Inc 10-K 001-38213 3.1(b) March 29, 2019
3.2 Second Amended and Restated Bylaws of Arcimoto, Inc 1-A 024-10710 2.2 August 8, 2017
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
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
Exhibit Incorporated by Reference
(Unless Otherwise Indicated)
Number Exhibit Description Form File No. Exhibit Filing Date
3.1(a) Second Amended and Restated Articles of Incorporation of Arcimoto, Inc. 10-K 001-38213 3.1(a) March 29, 2019
3.1(b) Articles of Amendment to Second Amended and Restated Articles of Incorporation of Arcimoto, Inc 10-K 001-38213 3.1(b) March 29, 2019
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 as of July 9, 2020, by and among Arcimoto, Inc. and the purchasers party thereto 8-K 001-38213 10.1 July 9, 2020
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
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: ~~August 19,~~November 16, 2020 By: /s/ Douglas M. Campoli
Douglas M. Campoli
Principal Financial and Chief Accounting Officer

30
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	September 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	16,970,902		$	5,832,489
Accounts receivable, net		33,918			244,450
Inventory		6,230,078			3,734,488
Prepaid inventory		603,381			1,194,695
Other current assets		584,833			665,079
Total current assets		24,423,112			11,671,201

Property and equipment, net		5,794,166			4,732,544
Security deposits		95,708			41,988
Total assets	$	30,312,986		$	16,445,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	405,828		$	339,835
Accrued liabilities		809,817			816,013
Customer deposits		561,020			793,524
Current portion of capital lease obligations		473,828			433,967
Convertible notes payable, related parties		—			1,150,907
Convertible notes payable, net of discount		—			837,557
Notes payable, net of discount		234,449			3,032,438
Current portion of warranty reserve		36,831			90,000
Current portion of deferred revenue		110,131			31,174
Current portion of note payable to bank		601,537			—
Total current liabilities		3,233,441			7,525,415

Capital lease obligations, net of current portion		1,446,238			1,179,700
Warranty reserve, net of current portion		83,000			45,000
Deferred revenue, net of current portion		56,250			85,500
Note payable to bank, net of current portion		467,149			—
Total long-term liabilities		2,052,637			1,310,200
Total liabilities		5,286,078			8,835,615

Commitments and contingencies (Note 11)

Stockholders’ equity:
Series A-1 Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		—			—
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		—			—
Preferred Stock, no par value, 1,500,000 authorized, none issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		—			—
Common Stock, no par value, 60,000,000 shares authorized; 31,855,438 and 24,436,389 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		71,952,512			43,573,529
Additional paid-in capital		3,323,209			2,344,751
Accumulated deficit		(50,248,813	)		(38,308,162	)
Total stockholders’ equity		25,026,908			7,610,118

Total liabilities and stockholders’ equity	$	30,312,986		$	16,445,733

	June 30, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	7,763,905		$	5,832,489
Accounts receivable, net		13,714			244,450
Inventory		5,623,335			3,734,488
Prepaid inventory		501,544			1,194,695
Other current assets		360,734			665,079
Total current assets		14,263,232			11,671,201

Property and equipment, net		4,697,313			4,732,544
Security deposits		87,488			41,988

Total assets	$	19,048,033		$	16,445,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	742,680		$	339,835
Accrued liabilities		584,314			816,013
Customer deposits		613,124			793,524
Current portion of capital lease obligations		463,877			433,967
Convertible notes payable, related parties		-			1,150,907
Convertible notes payable, net of discount		-			837,557
Notes payable, net of discount		36,195			3,032,438
Current portion of warranty reserve		19,515			90,000
Current portion of deferred revenue		23,500			31,174
Current portion of note payable to bank		421,076			-
Total current liabilities		2,904,281			7,525,415

Capital lease obligations, net of current portion		1,001,419			1,179,700
Warranty reserve, net of current portion		83,000			45,000
Deferred revenue, net of current portion		77,500			85,500
Note payable to bank, net of current portion		647,610			-
Total long-term liabilities		1,809,529			1,310,200

Total liabilities		4,713,810			8,835,615

Commitments and contingencies (Note 11)

Stockholders’ equity:
Series A-1 preferred stock, no par value, 1,500,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.		-			-
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.		-			-
Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		-			-
Common Stock, no par value, 60,000,000 shares authorized; 28,442,982 and 24,436,389 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		56,871,882			43,573,529
Additional paid-in capital		6,783,421			2,344,751
Stock subscription receivable		(3,715,000	)		-
Accumulated deficit		(45,606,080	)		(38,308,162	)
Total stockholders’ equity		14,334,223			7,610,118

Total liabilities and stockholders’ equity	$	19,048,033		$	16,445,733

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
Product sales	$	620,438		$	19,900		$	1,473,428		$	19,900
Grant revenue		10,000			—			10,000			—
Other revenue		53,457			13,411			85,800			24,570
Total revenues		683,895			33,311			1,569,228			44,470
Cost of goods sold		2,046,466			66,280			4,944,801			71,000
Gross loss		(1,362,571	)		(32,969	)		(3,375,573	)		(26,530	)

Operating expenses:
Research and development		1,314,053			2,343,015			2,047,341			5,439,610
Sales and marketing		361,508			309,111			1,003,681			831,410
General and administrative		1,575,890			1,075,726			4,830,236			4,068,133
Total operating expenses		3,251,451			3,727,852			7,881,258			10,339,153

Loss from operations		(4,614,022	)		(3,760,821	)		(11,256,831	)		(10,365,683	)

Other expense (income):
Interest expense		29,120			262,291			691,729			649,812
Other income		—			(837	)		(7,500	)		(2,255	)
Foreign exchange gain		(409	)		—			(409	)		—

Net loss	$	(4,642,733	)	$	(4,022,275	)	$	(11,940,651	)	$	(11,013,240	)

Weighted average common shares - basic and diluted		31,677,467			18,381,328			27,111,633			17,079,633
Net loss per common share - basic and diluted	$	(0.15	)	$	(0.22	)	$	(0.44	)	$	(0.64	)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue:
Product sales	$	254,955		$	-		$	852,990		$	-
Other revenue		13,583			8,514			32,343			11,159
Total revenues		268,538			8,514			885,333			11,159
Cost of goods sold		1,208,817			3,253			2,898,335			4,720
Gross (loss) profit		(940,279	)		5,261			(2,013,002	)		6,439

Operating expenses:
Research and development		284,314			2,036,579			733,288			3,096,595
Sales and marketing		305,275			276,917			642,173			522,299
General and administrative		1,757,501			1,421,099			3,254,346			2,992,407
Total operating expenses		2,347,090			3,734,595			4,629,807			6,611,301

Loss from operations		(3,287,369	)		(3,729,334	)		(6,642,809	)		(6,604,862	)

Other expense (income):
Interest expense		415,775			194,248			662,609			387,521
Other income		-			(1,010	)		(7,500	)		(1,418	)

Net loss	$	(3,703,144	)	$	(3,922,572	)	$	(7,297,918	)	$	(6,990,965	)

Weighted average common shares - basic and diluted		25,130,897			17,401,076			24,805,672			16,417,999
Net loss per common share - basic and diluted	$	(0.15	)	$	(0.23	)	$	(0.29	)	$	(0.43	)

	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, 2018		—	$	—		2,000,000		$	—		15,032,341	$	30,102,738		$	930,869		$	(22,966,473	)	$	8,067,134
Issuance of common stock for accounts payable		—		—		—			—		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

Balance at December 31, 2019		—	$	—		—		$	—		24,436,389	$	43,573,529		$	2,344,751		$	(38,308,162	)	$	7,610,118
Issuance of common stock for accounts payable		—		—		—			—		60,591		181,329			—			—			181,329
Issuance of common stock for cash		—		—		—			—		5,736,667		26,501,001			—			—			26,501,001
Issuance of common stock under convertible notes		—		—		—			—		333,924		1,419,177			—			—			1,419,177
Issuance of common stock to satisfy director award		—		—		—			—		5,546		8,929			(8,929	)		—			—
Exercise of warrants		—		—		—			—		471,428		1,761,373			(111,374	)		—			1,649,999
Exercise of stock options		—		—		—			—		5,225		156,464			(133,758	)		—			22,706
Warrants exercised - cashless		—		—		—			—		689,439		—			—			—			—
Stock options exercised - cashless		—		—		—			—		116,229		—			—			—			—
Offering costs incurred on placements of common stock		—		—		—			—		—		(1,649,290	)		—			—			(1,649,290	)
Stock-based compensation		—		—		—			—		—		—			1,232,519			—			1,232,519
Net loss		—		—		—			—		—		—			—			(11,940,651	)		(11,940,651	)
Balance at September 30, 2020		—	$	—		—		$	—		31,855,438	$	71,952,512		$	3,323,209		$	(50,248,813	)	$	25,026,908

	Series A-1 Preferred Stock				Class C Preferred Stock					Common Stock					Additional			Stock						Total
	Number of Shares		Amount		Number of Shares			Amount		Number of Shares		Amount			Paid-In Capital			Subscription Receivable			Accumulated Deficit			Stockholders’ Equity
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 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		—		—		—			—		169,578		—			—			—			—			—
Stock-based compensation		—		—		—			—		—		—			282,190			—			—			282,190
Net loss		—		—		—			—		—		—			—			—			(6,990,965	)		(6,990,965	)
Balance at June 30, 2019		—	$	—		—		$	—		18,347,324	$	34,123,037		$	1,213,059		$	—		$	(29,957,438	)	$	5,378,658

Balance at December 31, 2019		—	$	—		—		$	—		24,436,389	$	43,573,529		$	2,344,751		$	—		$	(38,308,162	)	$	7,610,118

Issuance of common stock for accounts payable		—		—		—			—		43,456		81,329			—			—			—			81,329
Issuance of common stock for cash		—		—		—			—		3,623,667		12,785,001			—			—			—			12,785,001
Offering costs incurred on placements of common stock		—		—		—			—		—		(996,083	)		—			—			—			(996,083	)
Issuance of common stock under convertible notes		—		—		—			—		333,924		1,419,177			—			—			—			1,419,177
Common stock subscribed on June 30, 2020		—		—		—			—		—		—			3,715,000			(3,715,000	)		—			—
Issuance of common stock to satisfy director award		—		—		—			—		5,546		8,929			(8,929	)		—			—			—
Stock-based compensation		—		—		—			—		—		—			732,599			—			—			732,599
Net loss		—		—		—			—		—		—			—			—			(7,297,918	)		(7,297,918	)
Balance at June 30, 2020		—	$	—		—		$	—		28,442,982	$	56,871,882		$	6,783,421		$	(3,715,000	)	$	(45,606,080	)	$	14,334,223

	June 30, 2020		December 31, 2019
Raw materials	$	5,512,729	$	3,650,466
Work in progress		—		25,340
Finished goods		110,606		58,682
Total	$	5,623,335	$	3,734,488

	Three months ended				Six months ended
	June 30,				June 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Options and other instruments under the 2012, 2015, and 2018 Plans to purchase common stock		817,254		767,163		613,553		805,358		1,959,681		669,308		1,105,733		739,545
Underwriters and investors warrants issued outside of an EEP		-		-		-		891,699		268,484		—		19,019		4,499
Total		817,254		767,163		613,553		1,697,057		2,228,165		669,308		1,124,752		744,044

	September 30, 2020			December 31, 2019
Computer equipment and software	$	94,384		$	77,583
Furniture and fixtures		52,007			46,839
Machinery and equipment		5,161,144			4,699,383
FUV rental fleet		103,316			—
Leasehold improvements		774,046			774,046
Fixed assets in process		1,415,697			264,999
Total property and equipment		7,600,594			5,862,850
Less: Accumulated depreciation		(1,806,428	)		(1,130,306	)
Total	$	5,794,166		$	4,732,544


	●	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, including the temporary closure of our facility due to COVID-19;


	●	our dependence on our suppliers, whose ability to supply us may be negatively impacted by the measures being implemented to address COVID-19;


	●	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 U.S. 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 design, produce and market our 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;


	●	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;


	●	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 or losses;


	●	our ability to maintain our NASDAQ Capital Market listing;


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

Exhibit		Incorporated by Reference (Unless Otherwise Indicated)
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1(a)	Second Amended and Restated Articles of Incorporation	10-K	001-38213	3.1(a)	March 29, 2019
3.1(b)	Articles of Amendment to Second Amended and Restated Articles of Incorporation of Arcimoto, Inc	10-K	001-38213	3.1(b)	March 29, 2019
3.2	Second Amended and Restated Bylaws of Arcimoto, Inc	1-A	024-10710	2.2	August 8, 2017
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
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

Exhibit		Incorporated by Reference (Unless Otherwise Indicated)
Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1(a)	Second Amended and Restated Articles of Incorporation of Arcimoto, Inc.	10-K	001-38213	3.1(a)	March 29, 2019
3.1(b)	Articles of Amendment to Second Amended and Restated Articles of Incorporation of Arcimoto, Inc	10-K	001-38213	3.1(b)	March 29, 2019
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 as of July 9, 2020, by and among Arcimoto, Inc. and the purchasers party thereto	8-K	001-38213	10.1	July 9, 2020
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
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

	ARCIMOTO, INC.

Date: ~~August 19,~~November 16, 2020	By:	/s/ Douglas M. Campoli
		Douglas M. Campoli
		Principal Financial and Chief Accounting Officer