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: ~~September 30, 2020~~March 31, 2021

☐ 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 ~~November 16, 2020,~~May 17, 2021, there were approximately ~~31,855,438~~35,783,000 shares of the registrant’s common stock issued and outstanding.

ARCIMOTO, INC.

FORM 10-Q

For the Quarterly Period Ended ~~September 30, 2020~~March 31, 2021

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited)		1
	Condensed Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020		1
	Condensed Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~		2
	Condensed Statements of Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~		3
	Condensed Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~		54
	Condensed Notes to Financial Statements		65
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1917
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		2524
Item 4.	Controls and Procedures	24

PART II.	OTHER INFORMATION	25

~~PART II.~~	~~OTHER INFORMATION~~

Item 1.	Legal Proceedings		2625
Item 1A.	Risk Factors		2625
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2625
Item 3.	Defaults Upon Senior Securities		2625
Item 4.	Mine Safety Disclosures		2625
Item 5.	Other Information		2625
Item 6.	Exhibits		2725

	SIGNATURES		2826

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~~
Item 1. Financial Statements (Unaudited)

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 )
March 31,
2021 December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 46,650,143 $ 39,451,401
Accounts receivable, net 13,882 17,117
Inventory 5,642,824 5,104,068
Prepaid inventory 946,119 1,029,617
Other current assets 990,608 900,827
Total current assets 54,243,576 46,503,030

Property and equipment, net 6,949,160 6,645,230
Intangible assets, net 10,517,319 —
Goodwill 6,824,209 —
Security deposits 125,771 101,688

Total assets $ 78,660,035 $ 53,249,948

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable $ 1,060,267 $ 205,133
Accrued liabilities 529,173 431,166
Customer deposits 616,173 605,532
Current portion of capital lease obligations 264,220 246,524
Notes payable 231,597 478,928
Current portion of warranty reserve 177,659 161,607
Current portion of deferred revenue 281,509 127,219
Current portion of equipment financing notes payable 306,551 237,069
Current portion of note payable to bank — 421,076
Total current liabilities 3,467,149 2,914,254

Capital lease obligations, net of current portion 330,272 534,624
Warranty reserve 126,500 66,500
Long-term deferred revenue 43,750 50,000
Equipment financing notes payable, net of current portion 1,525,026 1,352,930
Note payable to bank, net of current portion 1,068,686 647,610
Total long-term liabilities 3,094,234 2,651,664

Total liabilities 6,561,383 5,565,918

Commitments and contingencies (Note 12)

Stockholders’ equity:
Series A-1 Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively — —
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively — —
Preferred Stock, no par value, 1,500,000 authorized, none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively — —
Common Stock, no par value, 60,000,000 shares authorized; 35,758,090 and 34,187,555 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively 128,855,849 100,236,178
Additional paid-in capital 4,413,966 3,876,503
Accumulated deficit (61,171,163 ) (56,428,651 )
Total stockholders’ equity 72,098,652 47,684,030

Total liabilities and stockholders’ equity $ 78,660,035 $ 53,249,948

See accompanying notes to condensed financial statements.

ARCIMOTO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2021 2020
Revenue:
Product sales $ 1,246,363 $ 598,035
Other revenue 147,612 18,760
Total revenues 1,393,975 616,795
Cost of goods sold 3,244,507 1,689,518
Gross loss (1,850,532 ) (1,072,723 )

Operating expenses:
Research and development 2,407,695 448,974
Sales and marketing 964,447 336,898
General and administrative 2,420,613 1,496,845
Total operating expenses 5,792,755 2,282,717

Loss from operations (7,643,287 ) (3,355,440 )

Other expense (income):
Interest expense 52,227 246,834
Other income (14,154 ) (7,500 )

Loss before benefit for income taxes
(7,681,360
)
(3,594,774
)

Income tax benefit 2,938,848 —

Net loss $ (4,742,512 ) $ (3,594,774 )

Weighted average common shares - basic and diluted 35,327,316 24,480,445
Net loss per common share - basic and diluted $ (0.13 ) $ (0.15 )
See accompanying notes to condensed financial statements.
2
ARCIMOTO, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

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
Number
of Shares Amount Number
of Shares Amount Number
of Shares Amount Additional
Paid-In
Capital Accumulated
Deficit Total Stockholders’
Equity
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 settlement of payable — — — — 32,749 56,328 — — 56,328
Offering costs — — — — — (3,619 ) — — (3,619 )
Stock-based compensation — — — — — — 304,965 — 304,965
Net loss — — — — — — — (3,594,774 ) (3,594,774 )
Balance at March 31, 2020 — $ — — $ — 24,469,138 $ 43,626,238 $ 2,649,716 $ (41,902,936 ) $ 4,373,018

Balance at December 31, 2020 — $ — — $ — 34,187,555 $ 100,236,178 $ 3,876,503 $ (56,428,651 ) $ 47,684,030

Issuance of common stock for settlement of payable — — — — 11,000 146,300 — — 146,300
Issuance of common stock for cash, net of offering costs of $543,523 — — — — 581,782 13,526,512 — — 13,526,512
Issuance of common stock for the acquisition of TMW — — — — 436,339 13,038,355 — — 13,038,355
Exercise of warrants — — — — 486,429 1,714,663 (57,162 ) — 1,657,501
Exercise of stock options �� — — — 54,985 193,841 (65,854 ) — 127,987
Stock-based compensation — — — — — — 660,479 — 660,479
Net loss — — — — — — — (4,742,512 ) (4,742,512 )
Balance at March 31, 2021 — $ — — $ — 35,758,090 $ 128,855,849 $ 4,413,966 $ (61,171,163 ) $ 72,098,652

See accompanying notes to condensed financial statements.

3
~~ARCIMOTO, INC.~~
~~CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY~~
~~(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 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 — — — — 33,674 — — — — —
Stock-based compensation — — — — — — 181,016 — — 181,016
Net loss — — — — — — — — (4,022,275 ) (4,022,275 )
Balance at September 30, 2019 — $ — — $ — 18,391,945 $ 34,159,819 $ 1,394,075 $ — $ (33,979,713 ) $ 1,574,181

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 — — — — 17,135 100,000 — — — 100,000
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 — — — — — (653,207 ) — — — (653,207 )
Stock-based compensation — — — — — — 499,921 — — 499,921
Net loss — — — — — — — — (4,642,733 ) (4,642,733 )
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.~~

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

Nine Months Ended
September 30, Three Months Ended
March 31,
2020 2019 2021 2020
OPERATING ACTIVITIES
Net loss $ (11,940,651 ) $ (11,013,240 ) $ (4,742,512 ) $ (3,594,774 )
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 676,122 515,659 429,561 207,551
Amortization of debt discount 310,508 242,933 — 153,748
Stock-based compensation 1,232,519 463,206 660,479 304,965
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
Deferred income tax benefit (2,938,848 ) —
Changes in operating assets and liabilities:
Accounts receivable 210,532 (4,628 ) 3,235 228,225
Inventory (2,495,181 ) (2,616,585 ) (196,362 ) (1,461,051 )
Prepaid inventory 591,314 — 83,498 70,505
Other current assets 314,694 (203,502 ) (85,698 ) 47,542
Accounts payable 247,322 600,246 1,001,434 742,691
Accrued liabilities 102,088 810,038 98,007 (50,355 )
Customer deposits (232,504 ) 529,700 (81,108 ) (145,100 )
Warranty reserve (15,169 ) (4,300 ) 76,052 20,874
Deferred revenue 49,707 105,000 148,040 (11,674 )
Net cash used in operating activities (10,949,108 ) (9,717,878 ) (5,544,222 ) (3,486,853 )

INVESTING ACTIVITIES
Purchase of property and equipment (1,097,307 ) (100,041 ) (598,461 ) (198,993 )
Security deposits (53,720 ) — (24,083 ) (47,100 )
Cash paid for acquisition of Tilting Motor Works (1,754,083 ) —
Net cash used in investing activities (1,151,027 ) (100,041 ) (2,376,627 ) (246,093 )

FINANCING ACTIVITIES
Proceeds from the sale of common stock 26,501,001 4,264,999 14,070,035 —
Payment of offering costs (1,649,290 ) (255,202 ) (543,523 ) (3,619 )
Proceeds from note payable to bank 1,068,686 —
Proceeds from exercise of warrants 1,657,501 —
Proceeds from the exercise of stock options 22,706 10,502 127,987 —
Proceeds from equipment notes 204,661 69,740
Repayment of notes payable (247,331 ) (167,847 )
Repayment of equipment notes (88,583 ) (58,146 )
Payment on capital lease obligations (334,038 ) (291,993 ) (61,156 ) (49,954 )
Repayment of convertible notes payable to related parties (188,079 ) —
Repayment of notes payable (3,332,437 ) —
Repayment of convertible notes payable (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 23,238,548 5,663,306
Net cash provided by (used in) financing activities 15,119,591 (209,826 )

Net cash increase (decrease) for period 11,138,413 (4,154,613 ) 7,198,742 (3,942,772 )
Cash at beginning of period 5,832,489 4,903,019 39,451,401 5,832,489
Cash at end of period $ 16,970,902 $ 748,406 $ 46,650,143 $ 1,889,717

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 644,653 $ 117,445 $ — $ 42,015
Cash paid during the period for income taxes $
150
$ 150 $
—
$
—

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Notes payable and accrued interest converted to common stock $ 1,419,177 $ —
Portion of equipment acquired through capital leases $ 640,437 $ 88,850
Stock issued for payment of accounts payable $ 181,329 $ 36,782
Insurance finance agreement $ 234,448 $ 122,571
Accrued interest converted to notes payable $ — $ 48,972
Common shares issued for Tilting Motor Works acquisition $ 13,038,355 $ —
Issuance of common stock for settlement of accounts payable $ 146,300 $ 56,328

See accompanying notes to condensed financial statements.


4
ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: NATURE OF OPERATIONS

Arcimoto, Inc. (the “Company”) was incorporated in the State of Oregon on November 21, 2007. The Company’s mission is to catalyze the global shift to a sustainable transportation system. Over the past 13 years, the Company has developed a new vehicle platform designed around the needs of everyday drivers. Having approximately one-third the weight and one-third of the footprint of the average car, the 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

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 before suspending production in response to the COVID-19 pandemic. We restarted production and resumed deliveries to customers in the third quarter of 2020. As a result of the suspension, revenues from ~~the first three quarters of~~ 2020 were negatively impacted. Revenues from ~~the fourth quarter of 2020 and~~ subsequent quarters may be negatively impacted based on the length and severity of the pandemic. Production in the first quarter of 2021 achieved three FUV per build day and successfully tested to validate four per day.

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.~~timeliness. In order to achieve higher-scale production, the Company may need to raise additional capital, and there can be no assurance such capital will be available upon reasonable terms, if at all.

Additionally, 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~~as well as 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~~nimble reaction to 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 the capital resources necessary to further the development of existing and/or new products.

~~ARCIMOTO, INC.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
~~NOTE 2: GOING CONCERN~~
The accompanying financial statements have been prepared on 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 3:2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern
The accompanying financial statements have been prepared on a basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred significant losses since inception and management expects losses to continue for the foreseeable future. The Company had approximately $46,650,000 of cash as of March 31, 2021, which is in excess of cash needed for the next twelve months.

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

The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q promulgated by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and disclosures required by GAAP for complete financial statement presentation. In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of ~~September 30, 2020,~~March 31, 2021, and the results of its operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ and its cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. Results for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020.~~2021. 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~~2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on ~~April 14, 2020.~~March 31, 2021.

Business Combinations
The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the acquired assets and liabilities and results of operations are consolidated beginning at the acquisition date.
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.

September 30,
2020 December 31,
2019 March 31,
2021 December 31,
2020
Raw materials $ 6,128,033 $ 3,650,466 $ 4,892,827 $ 4,667,780
Work in progress — 25,340 59,078 65,210
Finished goods 102,045 58,682 690,919 371,078
Total $ 6,230,078 $ 3,734,488 $ 5,642,824 $ 5,104,068

The Company is required to remit partial prepayments for some purchases of its inventories acquired from overseas ~~vendors.~~vendors which are included in prepaid inventories. The Company is currently selling vehicles below the base cost of a finished unit. Accordingly, the Company expensed all labor and overhead as period costs, and recorded an allowance to reduce inventories to net realizable value of approximately $593,000 and $550,000 as of March 31, 2021 and December 31, 2020, respectively.

Customer Deposits

Non-refundable customer deposits are comingled with operating funds. Refundable customer deposits are ~~generally~~ held in a separate deposit account. Revenue is not recognized on 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.~~met.

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

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Goodwill
The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment, the Company may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.
The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches. For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, the Company uses internal analyses based primarily on market comparables. The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations.
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 ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company excluded the outstanding Employee Equity Plans (“EEP”) and other securities summarized below calculated 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
September 30, Nine Months Ended
September 30, Three Months Ended
March 31,
2020 2019 2020 2019 2021 2020
Options and other instruments under the 2012, 2015, and 2018 Plans to purchase common stock 1,959,681 669,308 1,105,733 739,545 3,094,548 431,746
Underwriters and investors warrants issued outside of an EEP 268,484 — 19,019 4,499 76,402 —
Total 2,228,165 669,308 1,124,752 744,044 3,170,950 431,746

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.

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

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 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,~~October 2020, the FASB issued ASU ~~2018-07, Improvements~~2020-10, “Codification Improvements” (“ASU 2020-10”), which updates various codification topics by clarifying or improving disclosure requirements to ~~Nonemployee Share-Based Payment Accounting, which simplifies~~align with the ~~accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most~~SEC’s regulations. The effective date of the ~~guidance on such payments to nonemployees would~~standard will be ~~aligned with the requirements~~ for ~~share-based payments granted to employees. The amendments are effective for fiscal years~~interim and annual reporting periods 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~~2020 for public entities. The new guidance was effective upon issuance of ~~Topic 606.~~this final accounting standards update. The Company has adopted ~~the new~~this standard ~~on January 1, 2020. The~~and the adoption did not have a material impact on ~~the Company’s~~its condensed consolidated financial ~~statements.~~ statements or disclosures.

~~In August 2018,~~NOTE 3: TMW ACQUISITION
On January 23, 2021, the ~~FASB issued Accounting Standards Update~~Company entered into an Asset Purchase Agreement (the “Agreement”) with Tilting Motor Works, Inc. (“~~ASU”~~TMW”), a Washington corporation (the “Seller”) ~~2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes~~and its owner. Pursuant to the ~~Disclosure Requirements~~terms and conditions of the Agreement, the Company paid cash of $1,754,083 and issued 436,339 shares of Company common stock as consideration for ~~Fair Value Measurement”. ASU 2018-13 removes~~substantially all of the TMW’s assets and certain ~~disclosures, modifies others~~assumed liabilities. The common shares issued were unregistered and ~~introduces additional disclosure requirements for entities.~~are subject to sales restrictions under the Securities Act of 1933. The ~~amendments~~Company valued the shares issued 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~~transaction at the average of ~~significant unobservable inputs used to develop Level 3 fair value measurements,~~opening and closing price on the ~~narrative description~~date of ~~measurement uncertainty should be applied prospectively~~acquisition with a 12.5% discount for ~~only~~lack of marketability. The acquisition closed on February 4, 2021 and was recorded as a business combination as the ~~most recent interim or annual~~set of assets and activities acquired met the definition of a business.
The purchase price is allocation is as follows:
Cash $ 1,754,083
Add: Fair value of shares issued 13,038,355
Total consideration $ 14,792,438

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Description Fair value
Assets acquired:
Inventory $ 342,394
Prepaid expenses and other current assets 4,083
Property, plant, and equipment 4,349
Trade name 2,052,000
Proprietary technology 7,010,000
Customer relationships 1,586,000
Goodwill 6,824,209
Total assets acquired $ 17,823,035

Liabilities assumed:
Customer deposits $ 91,749
Deferred tax liability 2,938,848
Total liabilities assumed 3,030,597
Estimated fair value of net assets acquired $ 14,792,438
The following unaudited pro-forma financial information presents the consolidated results of operations of the Company and TMW for the three months ended March 31, 2021 and 2020, as if the acquisition had occurred as of the beginning of the first period presented ininstead of on February 4, 2021. The proforma information does not necessarily reflect the ~~initial fiscal year~~results of ~~adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted~~operations that would have occurred had the ~~new standard on January 1, 2020. The adoption did not have~~entities been a ~~material impact on the Company’s financial statements.~~single company during those periods.

~~NOTE 4: CONCENTRATIONS~~The pro-forma financial information for the Company and TMW is as follows:

For the Three Months Ended
March 31,
2021 2020
Revenues $ 1,403,954 $ 828,660
Net loss attributable to common stockholders $ (7,911,783 ) $ (3,860,541 )
Net loss per basic and diluted common share $ (0.22 ) $ (0.15 )
Weighted average common shares outstanding:
Basic and diluted 35,327,316 24,916,784
~~Payables~~
9
ARCIMOTO, INC.
As of September 30, 2020 and December 31, 2019, the Company had two and one, respectively, significant 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.CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
~~Purchases/Inventory~~
As of 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 September 30, 2020 these vendors accounted for 37% and 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 5:4: PROPERTY AND EQUIPMENT

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 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.~~
~~CONDENSED NOTES TO FINANCIAL STATEMENTS~~
~~(Unaudited)~~
March 31,
2021 December 31,
2020
Machinery and equipment $ 5,245,534 $ 5,245,534
Fixed assets in process 2,105,561 1,993,760
Leasehold improvements 983,522 983,522
FUV fleet 520,354 336,730
FUV rental fleet 115,124 —
Computer equipment and software 188,984 94,384
Vehicles 97,661 —
Furniture and fixtures 52,007 52,007
Total property and equipment 9,308,747 8,705,937
Less: Accumulated depreciation (2,359,587 ) (2,060,707 )
Total $ 6,949,160 $ 6,645,230

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. FUV fleet consists of marketing and other non-revenue generating vehicles. FUV rental fleet is comprised of rental revenue generating vehicles.

Depreciation expense was approximately ~~$238,000~~$299,000 and ~~$676,000~~$208,000 during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively,~~respectively.
On December 23, 2020, the Company entered into an agreement to purchase certain buildings totaling approximately 187,000 square feet, and approximately 6.6 acres of real estate located within the City of Eugene, Oregon. The Company has agreed to purchase the properties commonly known as 311 Chambers Street and 1480 West 3rd Avenue, from RLA Holdings, LLC for the total purchase price of $10,250,000. The Company pledged $80,000 as earnest money for the transaction. During the first quarter of 2021, an additional 4.1 acres and 33,000 square feet of buildings to the south were added to the purchase agreement totaling $2,500,000. The total sales price was ~~approximately $173,000~~increased to $12,750,000. The purchase was contingent upon the Company’s complete and ~~$516,000 during~~unconditional approval of: (i) the ~~three~~property and ~~nine~~its physical condition, zoning and land use restrictions, and all systems, utilities, and access rights pertaining to the property; (ii) the seller’s documents; (iii) securing financing; (iv) a Phase I environmental assessment and all appropriate inquiries investigation so as to protect the Company under CERCLA; and (v) anything else the Company deems necessary. On March 15, 2021, the due diligence was complete and the Company paid the $80,000 earnest money. On April 19, 2021, the Company closed and completed the purchase of the properties described above. RLA Holdings, LLC will be permitted to rent back the 311 Chambers St property after closing for up to six (6) months ~~ended September 30, 2019, respectively.~~at a rate of $50,000 per month plus all utilities, taxes, insurance, and maintenance expenses. $25,000 was deduced from the purchase price at the closing to cover the tenant’s security deposit. $1,250,000 was deducted at the closing and will be paid in one year from the closing date. This sum is secured by a zero interest note. The Company intends to utilize these properties to improve its production capabilities. The new facility is expected to be operational by the end of 2022.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 5: INTANGIBLE ASSETS
The following table summarizes the Company’s intangible assets:
March 31, 2021
Estimated
Useful Life
(Years) Gross
Carrying
Amount at December 31,
2020 Assets
Acquired
Pursuant to
Business
Combination
(1) Accumulated
Amortization Net Book
Value
Tradename and trademarks 14 years $ — $ 2,052,000 $ (22,684 ) $ 2,029,316
Proprietary technology 13 years — 7,010,000 (83,452 ) 6,926,548
Customer relationships 10 years — 1,586,000 (24,545 ) 1,561,455
$ — $ 10,648,000 $ (130,681 ) $ 10,517,319
(1) On January 23, 2021 the Company acquired various assets of Tilting Motor Works, Inc. (See Note 3)
NOTE 6: GOODWILL
The following table summarizes the Company’s goodwill as of March 31, 2021:
Total
Goodwill
Balance as of January 1, 2021 $ —
Goodwill additions through Tilting Motor Works acquisition 6,824,209
Less: impairment charge recorded —
Balance as of March 31, 2021 $ 6,824,209

NOTE 6:7: CAPITAL LEASE OBLIGATIONS

As of ~~September 30, 2020,~~March 31, 2021, the Company has financed through lease agreements a total of approximately ~~$3,190,000~~$1,250,000 of its capital equipment purchases with monthly payments ranging from ~~$362~~$437 to $8,582, repayment terms ranging from 48 to 7260 months, and effective interest rates ranging from 4.52% to ~~9.90%~~9.52%. Total monthly capital lease payments as of ~~September 30, 2020~~March 31, 2021 are ~~$47,267.~~$25,223. These lease obligations mature ranging from ~~January 2022~~December 2021 through ~~July 2027~~November 2023 and are secured by approximately ~~$2,909,000~~$1,427,000 in underlying assets which have approximately ~~$687,000~~$475,000 in accumulated depreciation as of ~~September 30, 2020.~~March 31, 2021. The balance of capital lease obligations was approximately ~~$1,920,000~~$594,000 and ~~$1,614,000~~approximately $781,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

NOTE 7:8: 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 nine-month period ended September 30, 2020 was $164,572. The discount amortized for the nine-month period ended September 30, 2020 was the remaining discount on the notes of $310,508. The discount amortized for the nine-month period ended September 30, 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 nine months ended 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. 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 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 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. As of March 31, 2021, the balance on the loan was $1,068,686. As of April 27, 2021 all of the outstanding principal and interest of $1,068,686 and $10,568 were forgiven. The entire loan balance was presented as noncurrent on the balance sheet as of March 31, 2021.

As of March 31, 2021, the Company has financed a total of approximately $2,440,000 of its capital equipment purchases with monthly payments ranging from $362 to $11,749, repayment terms ranging from 60 to 72 months, and effective interest rates ranging from 1.99% to 9.90%. Total monthly payments as of March 31, 2021 are $47,376. These equipment notes mature ranging from January 2023 through October 2026. The balance of equipment financing notes payable was approximately $1,832,000 and $1,590,000 as of March 31, 2021 and December 31, 2020, respectively.
11

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

NOTE 8:9: STOCKHOLDERS’ EQUITY

Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, no par value, of which 1,500,000 shares were designated as Series A-1 Preferred Stock and 2,000,000 are designated as Class C Preferred Stock.
The Series A-1 Preferred Stock is convertible at any time after issuance at the option of the holder into shares of common stock at the original issue price of the Series A-1 Preferred Stock. The Series A-1 Preferred Stock was also subject to mandatory conversion provisions upon an initial public offering raising $15 million or more and is not redeemable. To prevent dilution, the conversion price of the Series A-1 Preferred Stock is to be adjusted for any issuance of securities, excluding exempt securities, which change the number of shares of common stock outstanding. The Series A-1 Preferred Stockholders are entitled to equal voting rights to common stockholders on an as-converted basis and receive preference to the common stockholders upon liquidation.
Except as otherwise required by law or expressly provided in the Company’s Second Amended and Restated Articles of Incorporation, as amended, each share of Class C Preferred Stock has one vote for the election of directors and on all matters submitted to a vote of shareholders of the Company. The Company is not obligated to redeem or repurchase any shares of Class C Preferred Stock. Shares of Class C Preferred Stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.
Common Stock

The Company has reserved a total of ~~5,095,289~~4,876,580 shares of its common stock pursuant to the equity incentive plans (see Note 9)10). The Company has ~~4,037,929~~3,938,824 and ~~3,293,135~~4,058,791 stock units, options and warrants outstanding under these plans as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

The Company has ~~693,667~~122,238 and ~~2,109,839~~593,667 shares of its common stock reserved for warrants issued outside of the equity incentive plans as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

~~Common Stock Issued~~Issuance of common stock for ~~Accounts Payable~~settlement of payable

The Company issued ~~60,591~~11,000 common shares for investor relations consulting services ~~or materials~~ with a fair value of ~~$181,329~~$146,300 during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, the Company issued ~~10,947 restricted~~32,749 common shares for services with a fair value of ~~$36,782.~~$56,328. 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~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were to settle existing accounts payable.

Exercise of Stock Options and Warrants

A total of ~~5,225~~54,985 employee options, with exercise prices ranging from ~~$4.33~~$1.71 to $4.52 per share were exercised for total proceeds to the Company of ~~$22,706~~$127,987 during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. During the ~~nine~~three months ended ~~September 30, 2019, a total of 3,388~~March 31, 2020, no employee options were exercised ~~at a price~~for cash.
A total of 15,000 employee warrants, with an exercise prices of $0.50 per share ~~of $3.10~~were exercised for total proceeds to the Company of ~~$10,502.~~$7,500 during the three months ended March 31, 2021. During the three months ended March 31, 2020, no employee warrants were exercised for cash.

A total of 171,470 employee options with exercise prices ranging from $2.0605 to $4.52 per share were exercised in cashless transactions at market prices ranging from $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 53,684 shares of the Company’s common stock.
A total of 5,546 director deferred stock units were converted to common shares during the nine months ended September 30, 2020. During the nine months ended September 30, 2019, no director deferred stock units were converted to common shares.
A total of 50,004 employee warrants with an exercise price of $0.50 per share were exercised in a cashless transaction at a market 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 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~~471,429 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~~$1,650,001 during the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, no warrants issued to investors were ~~exercised.~~exercised for cash.

ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Offerings of Common Stock
On ~~June 11, 2020,~~January 25, 2021, the Company entered into ~~a Securities Purchase~~an Equity Distribution Agreement (“EDA”) with ~~certain institutional investors pursuant~~Canaccord Genuity LLC (“Canaccord”) under which we may offer and sell shares of our common stock in connection with the ATM in an aggregate offering amount of up to ~~which~~$80,000,000 from time to time through Canaccord, acting exclusively as our sales agent (the “Offering”). We intend to use the net proceeds of the Offering primarily for working capital and general corporate purposes.
We issued and sold 581,782 shares of common stock during the three months ended March 31, 2021, in connection with the ATM at per share prices between $19.35 and $32.50, resulting in net proceeds to 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~~$13,500,000, after subtracting 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.expenses.
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.
~~Aggregate other cost of the three offerings for legal and accounting was approximately $59,000.~~
NOTE 9:10: STOCK-BASED PAYMENTS

The Company ~~grants~~has common stock, common stock units, and common stock purchase options and warrants reserved 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,~~stock options, warrants and stock issued for compensation and services is included in the statements of operations as follows:
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
~~Consulting Agreement with Common Stock Compensation~~

Three Months Ended
March 31,
2021 2020
Research and development $ 162,447 $ 53,700
Sales and marketing 98,589 21,157
General and administrative 218,623 163,884
Cost of goods sold 180,520 66,224
Total $ 660,479 $ 304,965
During the nine months ended September 30, 2020, the Company issued 60,591 common shares for accounts payable with a fair value of $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 September 30, 2020 and 2019, we paid this investor relations consultant $94,500 and $0 respectively. During the nine-month periods ending September 30, 2020 and 2019, we paid the same investor relations consultant $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 ~~September 30, 2020,~~March 31, 2021, the Company had a remaining reserve of ~~1,051,915~~932,311 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 nine~~ months ended ~~September 30, 2020~~March 31, 2021 was ~~$474,174~~$638,907 and ~~$1,143,127,~~$267,641, respectively.
~~Employee stock-based compensation expense under the 2018 Plan included in operating expenses for the three and nine months ended September 30, 2019 was $132,335 and $338,278, respectively.~~
Total compensation cost related to non-vested awards issued under the 2018 Plan not yet recognized as of ~~September 30, 2020~~March 31, 2021 was approximately ~~$4,160,423~~$4,380,134 and will be recognized on a straight-line basis through ~~September~~December 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 five 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 nine months ended September 30, 2020, a total of 143,644 stock units with a value of $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. 34,901 of the stock units were valued with a price per share of $6.58 based on the closing stock price on the last trading day of the third quarter of 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 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 nine months ended September 30, 2020, qualified options to purchase 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 September 30, 2020, 667,303 shares of common stock were reserved for issuance pursuant to stock options that are outstanding, and 5,444 shares remain available for issuance pursuant to future awards that might be made under the 2015 Plan.
During the nine months ended 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 nine months ended September 30, 2019, 141,600 options were granted 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 nine months ended September 30, 2020 related to the 2015 Plan was $25,747 and $89,392, respectively.~~
~~Employee stock-based compensation expense included in operating expenses for the three and nine months ended September 30, 2019 related to the 2015 Plan was $48,681 and $124,928, respectively.~~
Total compensation cost related to non-vested awards not yet recognized as of September 30, 2020 was $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 September 30, 2020, 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:~~11: CUSTOMER DEPOSITS

The Company has received customer deposits ranging from $100 to ~~$10,100~~$500 per vehicle for Retail Series production ~~vehicles and $42,000 per vehicle for Signature Series~~ vehicles for purposes of securing a vehicle production ~~slot.~~slot As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s balance of deposits received was approximately ~~$561,000~~$616,000 and ~~$794,000,~~$606,000, respectively. As of ~~September 30, 2020,~~March 31, 2021 and December 31, ~~2019, $393,524~~2020, $409,724 and ~~$374,524,~~$403,624, respectively, of these deposits were refundable upon demand. Deposits are included in current liabilities in the accompanying balance sheets. When a customer’s order is ready to enter the production process, the customer is notified that if they would like to proceed with the purchase of a vehicle, their deposit will no longer be refundable and any additional deposit required must be paid prior to the start of the manufacturing process. There were $100 and ~~$11,200~~no customer deposits from related parties as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

NOTE ~~11:~~12: COMMITMENTS AND CONTINGENCIES

On December 6, 2019, we entered into a lease for a property approximately six blocks east of the AMP that contains two buildings. The initial term of the lease is 25 months and began on December 6, 2019. There is an option for a three-year extension. The main building is 6,508 square feet of office and warehouse space and the auxiliary building is 4,318 square feet of warehouse space. The office space is being used by marketing and sales. The warehouse is being used for R&D and battery module manufacturing. On March 3, 2020, we amended the lease to include the adjacent building which has 10,752 square feet of office and warehouse space on the ground floor plus second floor office and storage space. This location is being used for service will be used for further expansion. Rent is $11,750 per month and subject to a 3% increase per year.
14
ARCIMOTO, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
As of December 31, 2020, we occupied 1,700 square feet of office area, 32,000 square feet of warehouse space and 125,000 square feet of asphalt paving and undeveloped greenfield. The original lease expiring in 2021 has been extended until 2024. We believe that our current facilities are sufficient for our needs.
On November 18, 2020, we entered into a lease for a 106 square foot space in Orlando Florida. The term of the lease is month to month which began on December 1, 2020 and auto renews each month unless one months’ notice of cancellation is given. Total rent is $2,490 per month. The space is being used for Arcimoto’s Florida dealer showroom.
On February 8, 2021, we entered into a lease for a 15,124 square foot office space on the second floor of 155 Blair Boulevard, Eugene, Oregon 97402 that will be used for office and general use and warehouse space located at 135 Blair Boulevard, Eugene, Oregon 97402 that will be used for a dealer and rental location. The term of the lease is 60 months which began on March 1, 2020. There is an option for two successive five-year extension periods. Rent is $17,500 per month and subject to a 2.5% increase per year.
See the following table for future annual minimum rent payments as of December 31, 2020:
Remaining payments for years ending December 31:
2021 640,619
2022 543,246
2023 517,945
2024 340,840
2025 229,916
Thereafter 77,267
Total $ 2,349,833
Rent expense is recognized on a straight-line basis. Total rent expense for the three months ended March 31, 2021 and 2020 was $140,413 and $62,042, respectively.
In February 2021, a statement of work for approximately $3,750,000 was signed with Munro and Associates for development activities through the end of the year to develop the FUV high volume production platform. Munro and Associates research and development expense invoiced in the three months ended March 31, 2021 was $874,500.
Litigation

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~~alleged that Ayro’s 311 two-seater electric vehicles infringe U.S. Patent 8,985,255 (the “255 Patent”). The Complaint ~~asks~~asked 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 held~~During the first quarter of 2021, the parties reached a ~~Markman Hearing on October 15, 2020~~settlement and submitted a request to ~~construe~~ the ~~meaning of certain disputed claim terms. At~~court to dismiss the ~~Markman hearing the Court adopted four of six constructions proposed by Arcimoto. Discovery on the litigation has begun and the Court set a jury trial for July 19, 2021~~ case.
NOTE 13: INCOME TAXES
The Company ~~remains committed~~recorded a tax benefit of $2,938,848 for the period ended March 31, 2021 related to ~~protecting~~a partial release of its ~~valuable intellectual property.~~valuation allowance stemming from the acquisition of TMW (See Note 3). The acquisition of TMW created a deferred tax liability position, and those deferred tax liabilities can be used as a source of income for our existing deferred tax assets.

NOTE ~~12:~~14: SUBSEQUENT EVENTS
~~On November 4, 2020 the Company financed $440,754 of its Director and Officers insurance annual renewal premium at 4.64% for nine monthly payments of $49,924.~~

On April 19, 2021, the Company closed and completed the purchase of properties commonly known as 311 Chambers Street and 1480 West 3rd Avenue for the sum of $10,250,000. The Company also purchased and closed an additional property commonly known as 1593 W. 5th Ave. Eugene, Oregon for related purposes for the sum of $2,500,000. Approximately $11,500,000 was paid in cash. $1,250,000 is due one year from the closing and is secured by a promissory note at a zero-interest rate.
Between April 9 and April 20, 2021, 15,000 employee warrants were exercised for cash at a grant price of $0.50 per share. Net proceeds to the Company were $7,500.
Between April 29 and May 5, 2020, 10,333 employee incentive stock options were exercised for cash at grant prices ranging from $1.71 to $4.52. Net proceeds to the Company were $35,389.

15

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~~closures of our facility ~~due to COVID-19;~~that might be required as a result of the continuing COVID-19 pandemic;

● our dependence on our suppliers, whose ability to supply us may be negatively impacted by, among other things, 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~~ability to ~~date in manufacturing~~manufacture vehicles at the high volumes that we anticipate;

● our reliance on as well as our ability to attract and retain key personnel;

● changes in the price of oil and electricity;

● changes in laws or regulations governing our business and operations;

● our ability to maintain adequate liquidity and financing sources and an appropriate level of debt, if any, on terms favorable to our company;

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

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

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

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

● changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could have an effect on earnings 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 nine~~ months ended ~~September 30,~~March 31, 2021 and 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~~2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on ~~April 14, 2020.~~March 31, 2021. 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 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 incorporated in the State of Oregon on November 21, 2007.
~~2019 was~~ The Company’s mission is to catalyze the global shift to a ~~watershed year for~~sustainable transportation system. Over the past 13 years, the Company ~~which saw us complete compliance testing required~~has developed a new vehicle platform designed around the needs of everyday drivers. Having approximately one-third the weight and one-third of the footprint of the average car, the Arcimoto platform’s purpose is to ~~produce and sell retail vehicles; outfit~~bring the ~~scalable, automated, vertically-integrated Arcimoto Manufacturing Plant for retail production; begin retail production~~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); develop our post-production programs including service, support, recall~~Vehicle® (“FUV®”), for everyday consumer trips; the Deliverator® for last-mile delivery 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~~general fleet utility; the Rapid ~~Responder~~Responder™ for emergency services and ~~Deliverator platform concepts targeted at fleet verticals.~~security; the Cameo™ for film, sports and influencers; and the Arcimoto Roadster, an unparalleled pure-electric on-road thrill machine.

Retail production began on September 19, 2019. In total, Arcimoto produced 57 model year 2019 vehicles, 46 of which were delivered to customers by December 31, 2019. InDuring the ~~nine months ending September 30,~~year ended December 31, 2020, Arcimoto produced 79117 model year 2020 vehicles, and delivered 6997 vehicles to customers. During the three months ended March 31, 2021, Arcimoto produced 84 model year 2021 vehicles, and delivered 60 vehicles to customers, a 122% improvement over the 27 vehicles delivered to customers in the three months ended March 31, 2020.

In March 2020, Arcimoto launched production pilots of the Rapid Responder and Deliverator product lines. 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~~portions of ~~the first three~~all four quarters of 2020, Arcimoto’s production operations were suspended in response to the COVID-19 pandemic. The Company restarted limited production and resumed deliveries to customers in the third ~~quarter.~~quarter of 2020.

The Company’s focus is now squarely on volume production planning in order to push to sustainable profitability and fulfill the thousands of pre-orders in our queue, as well as to meet the demand generated by our pilot fleet vehicles in the field. In December 2020, the Company entered into a purchase agreement for an approximately 220,000 square foot facility, which closed on April 19, 2021, to expand production capabilities. The Company is currently ~~preparing an application~~in the final stages of applying for the Advanced Technology Vehicle Manufacturing Loan Program to secure the funds necessary to execute our growth strategy.
19

Platform and Technologies

Arcimoto spent its first decade developing and refining eight generations of a new three-wheeled electric vehicle platform: a light-footprint, nimble reverse-trike architecture that features a low center of gravity for stability on the road; dual-motor front-wheel drive for enhanced traction; can 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. As announced on June 10, 2020, Arcimoto has teamed with Munro & Associates 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. This project which is estimated to take two years has progressed in the first quarter of 2021, with a statement of work signed for the next phase.

Products

Arcimoto’s 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 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.

We 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.

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.

~~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.

Cameo (™(™)

Arcimoto completed a prototype of the Cameo, an FUV equipped with a 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~~driving footage since its on-roading. Development of the Cameo is still in the planning stages.

The Cameo is aimed at the film industry, as well as 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.~~aerodynamics. We announced the formal development of the Roadster product, in collaboration with industry partners on November 16, 2020.

Autonomous Arcimoto
Our long-term goal is to offer the market one of the lowest cost, most efficient “last mile” human and goods transport solutions for the robotically-driven world. We intend that our platform will provide a ready foundation for self-driving technology deployment.
Sales and Distribution Model
Arcimoto’s sales and distribution model is direct. Customers place vehicle orders on our website, and the vehicle product will be delivered directly to the end user via common carrier or our own delivery fleet. The website ordering and vehicle configuration system is functional, with further development planned to become more fully automated.
On October 26, 2020, we announced a partnership with DHL to provide nationwide home delivery of the FUV. They are currently handling the bulk of our customer deliveries.
Rental Model
We plan to augment this direct web purchase process with small-footprint experience rental in select key markets. This rental model will give prospective customers a direct experience with the physical product before purchasing. We intend to open rental operations in San Diego, California and Eugene, Oregon in Q2 2021.
Service
We are pursuing three different models for service of the FUV:
Service-on-demand
Our initial model is on-demand and on-site vehicle service by Arcimoto technicians or Arcimoto-authorized technicians. Service-on-demand will likely be the primary model during our West Coast release as the majority of the vehicles will be geographically located relatively near the factory or a mobile technician. We intend for customers to request service either through the Arcimoto mobile app or by calling a 24-hour service number.
In-market partnership
We are currently reviewing potential service partners located in our key distribution regions. We have contracted with Agero Driver Assistance Services, Inc. to provide our customers with roadside assistance. We are currently reviewing Agero’s network of pre-approved third-party service providers, as well as other third-party service providers, to perform service on Arcimoto vehicles. We will be selecting and certifying providers near our customers based on our planned expansion.
Retail facility service
We plan to employ Arcimoto service technicians at some of our rental locations, depending on the dealer laws in the state. Customers near those rental locations would be able to deliver their vehicle to that location for service needs.

Management Opportunities, Challenges and Risks

Demand, Production and Capital

Demand for the Retail Series Arcimoto FUV has continued to increase. As of ~~September 30, 2020,~~March 31, 2021, we had ~~4,566~~4,833 net FUV pre-orders placed with small refundable deposits or fleet order commitments, representing an increase of ~~369,~~116, or approximately 9%2%, from the ~~4,197~~4,717 pre-orders as of December 31, ~~2019.~~2020.

We consider pre-orders to be strong sales leads, and use these leads as an indicator of market demand. Pre-orders are made up of small refundable cash deposits from individual retail customers and distribution agreements or nonbinding letters of intent from commercial customers that may or may not have deposited cash. The distribution of pre-orders as of March 31, 2021, is presented in the table below:
Retail Commercial Total
Vehicles Dollars Vehicles Dollars Vehicles Dollars
Vehicles/Deposits 4,680 $ 474,224 800 $ 30,000 5,480 $ 504,224
Refunds (647 ) (64,700 ) — — (647 ) (64,700 )
Total net pre-orders 4,033 409,524 800 30,000 4,833 439,524
Less purchases (192 ) (19,300 ) (6 ) (10,500 ) (198 ) (29,800 )
Remaining 3,841 $ 390,224 794 19,500 4,635 409,724

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~~For portions of all four quarters of 2020, Arcimoto’s production operations were suspended ~~production~~ in ~~March 2020 due~~response to the COVID-19 pandemic. ~~Though conditions in Lane County have worsened since, we resumed~~The Company restarted limited production ~~in Q2, implementing significant safety measures. We~~and resumed ~~customer~~ deliveries to customers in the third quarter of 2020.
With limited FUV production ~~currently limited,~~through 2020 and now extending into 2021, we are focusing on pilot programs for the Deliverator and 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~~original equipment manufacturing (“OEM”) volume production, ~~(10,000+ units/year),~~ engaging sales efforts focused on fleet deployments, building and testing our rental operations, and expanding our service network.

The average sales price, including custom upgrade options, for the three months ended ~~September 30, 2020~~March 31, 2021 was ~~$22,693, $2,793~~$20,853, $2,953 or ~~14%~~16.5% 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,~~the third quarter of 2020, we began taking $2,500 non-refundable deposits for the second 100 FUV’s with a starting price point of $17,900. During the three months ended March 31, 2021, Arcimoto produced 5784 model year ~~2019 FUVs, 46 of which were~~2021 vehicles, and delivered 60 vehicles 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.~~customers.

We have contracted with a lean design ~~consultant~~consulting company 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. To date, substantial progress has been made understanding the cost models for future vehicles based on the current supply chain condition, ergonomic studies, failure modes and effects analysis (“FMEA”), baseline ride-drive characteristics, mapping out EU certification, cost reduction for manufacturing, lean manufacturing analysis and the technology roadmap for future vehicles and marketing roadmap.

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~~(“ESFD”) completed on March 31, 2021, and ESFD has provided us with valuable feedback for future product development ~~for ESFD with a single seat for more cargo capacity.~~and marketing. We are evaluating upfitters and defining the process for installation of non-compliant accessories such as lights and sirens and ~~are planning to release~~we released pricing and availability for the Rapid Responder in Q1the first quarter of 2021.

We have several ongoing Deliverator pilot programs with individuals, municipalities, and corporate fleets. We ~~are building~~have completed the first phase of tool-up for manufacture and production of the Deliverator, and we will continue to build Deliverators in low volume through the remainder of ~~2020, delivering~~2021, with the intent to ~~individuals, as well as targeting additional~~deliver them to new pilot ~~programs, as we tool-up for manufacture and production in 2021.~~programs.

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 50113 reservations is ~~$21,762.~~$21,893. While the beta Configurator has been an effective tool for converting early preorders to purchased vehicles, we are working on the next iteration, to improve user interface and experience.

On February 4, 2021, the Company closed and completed the Asset Purchase Agreement with Tilting Motor Works, Inc. (“TMW”). The Company believes the TMW product line will continue to flourish under Arcimoto, as we are able to bring considerable marketing and manufacturing efforts to bear, and the underlying technology will be beneficial to future Arcimoto products. Authorized dealer/installers of the TMW products are potential partners for providing product support services to FUV owners in certain areas. TMW delivered 10 of their existing product line bolt on front end kits that convert a two wheeled motorcycle to a three wheeled tilting reverse trike, generating $92,106 in revenue with a 27% gross margin, during the three months ended March 31, 2021.
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. We are bringing the thermo forming of body panels ~~inhouse~~in-house and ordered approximately ~~$1,749,000~~$1,741,000 in equipment for ~~this.~~this process. Approximately ~~$571,000~~$1,150,000 of this amount has been financed at interest rates ranging from 5.56% to ~~5.99%~~9.0% and terms of 7260-72 months. We anticipate a savings of $780 per FUV produced with this automation. We ~~are purchasing two additional welding cells~~purchased a multi-directional rotary brush machine at a total cost of ~~$553,791~~$142,200 to automate the deburr and finishing of sheet metal. This was financed at an interest rate of 9.86% and term of 60 months. We purchased an additional CNC mill at a total cost of $173,860 to increase production capacity. This was financed at an interest rate of 4.11% for 60 months. We are purchasing an additional welding cell at a total cost of $286,674 for welding the two sides of the upper frame together, and ~~lower frames.~~a wire bonding machine at a cost of $211,524 for next generation battery module production. We anticipate securing low interest debt for these equipment purchases. We anticipate a savings of $390 per FUV produced with ~~this~~the welding automation. The Company is preparing ~~a significant~~an ATVMLP application to finance ~~high~~OEM volume production.

Operating expenses ~~decreased~~increased by approximately ~~24%~~154%, or ~~$2,458,000,~~$3,510,000, for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared to the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This ~~decrease~~increase was mostly due to ~~manufacturing overhead being allocated to cost of goods sold~~increased R&D expense associated with developing the 2.0 FUV platform that is planned for OEM production volumes. Other factors are an increase in sales and marketing efforts and G&A expense associated with the ~~start~~integration of ~~production in September 2019.~~TWM. The number of employees increased by approximately ~~24%~~55%, from 94110 as of ~~September 30, 2019~~March 31, 2020 to ~~117~~170 employees as of ~~September 30, 2020.~~March 31, 2021. The increased staff was needed to build out all parts of the Company for selling and 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 32 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.~~March 31, 2021.

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

Results of Operations

Three Months Ended ~~September 30, 2020~~March 31, 2021 versus three months ended ~~September 30, 2019~~March 31, 2020

Revenues

We had approximately ~~$684,000~~$1,394,000 in revenue, comprising of approximately ~~$620,000~~$1,245,000 in revenue from the sales of our vehicles, approximately ~~$53,000~~$92,000 in TMW revenue and approximately $57,000 in revenue from parts, delivery fees, merchandise and outside metal fabrication ~~and approximately $10,000 in revenue from grants~~ during the three months ended ~~September 30, 2020.~~March 31, 2021. We had approximately ~~$33,000~~$617,000 in revenue, comprising of approximately ~~$20,000~~$598,000 in revenue from the sales of our vehicles, and approximately ~~$13,000~~$19,000 in revenue from merchandise and outside metal fabrication during the three months ended ~~September 30, 2019.~~March 31, 2020.

Cost of Goods Sold

We had approximately ~~$2,046,000~~$3,245,000 in cost of goods sold (“COGS”), comprising approximately ~~$1,280,000~~$1,805,000 in labor and overhead and underutilized factory capacity, ~~$692,000~~$1,253,000 in FUV parts from the sale of our vehicles, ~~$9,000~~approximately $67,000 from Tilting Motor Works operations, approximately $1,000 in FUV delivery cost, approximately ~~$32,000~~$150,000 in service cost and warranty reserves, approximately ~~$11,000~~$6,000 in COGS from merchandise and outside metal fabrication, and ~~approximately $22,000 in COGS due to an adjustment to inventory~~$38,000 for ~~loss, obsolescence, purchase price variance and scrap~~lower of cost or market reserves during the three months ended ~~September 30, 2020.~~March 31, 2021. We had ~~$66,280~~approximately $1,690,000 in COGS comprising approximately $1,218,000 in overhead and underutilized factory capacity, $650,000 in FUV parts from the sale of our vehicles, approximately $29,000 in warranty reserves and approximately $17,000 in COGS from merchandise and outside metal fabrication during the three months ended ~~September 30, 2019.~~March 31, 2020.

Operating Expenses

Research and Development Expenses

Research and development (“R&D&D”) expenses consist primarily of ~~personnel costs for our pre-production manufacturing, engineering~~prototyping new variants of the 1.0 FUV platform, developing the 2.0 platform, and ~~research teams, external lab testing costs, and prototyping materials expense, as discussed above.~~developing new three wheeled tilting micro mobility platforms. R&D expenses for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were approximately ~~$1,314,000~~$2,408,000 and ~~$2,343,000,~~$449,000, respectively. The primary reason for the ~~decrease~~increase in R&D expenses of ~~$1,029,000,~~$1,959,000, or ~~44%~~436%, resulted from ~~pre-production materials cost reduction with~~development the ~~start of~~2.0 FUV platform that is planned for OEM production ~~in September 2019.~~volumes.

Sales and Marketing Expenses

Sales and marketing (“S&M”) expenses for the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were approximately ~~$362,000~~$964,000 and ~~$309,000,~~$337,000, respectively. The primary reasons for the increase in sales and marketing expenses during the three months ended ~~September 30, 2020~~March 31, 2021 of approximately ~~$52,000,~~$628,000, or ~~17%~~186%, as compared to the prior period was ~~an increase~~increased marketing activities to ramp sales in ~~personnel and public relations, marketing and travel~~line with planned production increases.

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 ~~September 30, 2020~~March 31, 2021 were approximately ~~$1,576,000~~$2,421,000 as compared to approximately ~~$1,076,000~~$1,497,000 for the same period last year, representing an increase of approximately ~~$500,000,~~$924,000, or ~~46%~~62%. The primary reasons for the increase in the current period was due to ~~$210,000~~cost associated with the integration 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 public company—investor relations, insurance, and professional fees.TMW.

Interest Expense

Interest expense for the three months ended ~~September 30, 2020~~March 31, 2021 was approximately ~~$29,000,~~$52,000, as compared to ~~$262,000~~$247,000 during the three months ended ~~September 30, 2019. Interest~~March 31, 2020. The decrease in interest expense ~~decreased~~was due to paying off all non-equipment financing in June 2020.

~~Nine Months Ended September 30, 2020 versus nine months ended September 30, 2019~~
~~Revenues~~
We had approximately $1,569,000 in revenue, comprising of approximately $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 $24,000 in revenue from merchandise and outside metal fabrication during the nine months ended September 30, 2019.
~~Cost of Goods Sold~~
We had approximately $4,945,000 in COGS, comprising approximately $3,269,000 in overhead and underutilized factory capacity, $1,574,000 in FUV parts from the sale of our vehicles, approximately $31,000 in delivery COGS, approximately $70,000 in warranty reserves and approximately $15,000 in COGS from merchandise and outside metal fabrication during the nine months ended September 30, 2020. This was offset by an approximately $15,000 reduction in COGS due to an adjustment to inventory for loss, obsolescence, purchase price variance and scrap. We had $71,000 in COGS from merchandise and outside metal fabrication during the nine months ended September 30, 2019.
~~Operating Expenses~~
~~Research and Development Expenses~~
Research and 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 nine months ended September 30, 2020 and 2019 were approximately $2,047,000 and $5,440,000, respectively. The primary reason for the decrease in R&D expenses of $3,393,000, or 62%, resulted from approximately $184,000 in personnel cost allocated to manufacturing overhead cost, a $2,026,000 reduction in pre-production material cost, a $138,000 reduction in tools and equipment, a $50,000 reduction in computer and software expense and a $39,000 reduction in regulatory testing.
23
~~Sales and Marketing Expenses~~
Sales and Marketing expenses for the nine months ended September 30, 2020 and 2019 were approximately $1,004,000 and $831,000, respectively. The primary reasons for the increase in sales and marketing expenses during the nine months ended September 30, 2020 of approximately $172,000, or 21%, as compared to the prior period was the cost of developing the sales, franchise and rental business.
~~General and Administrative Expenses~~
General and 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 nine months ended September 30, 2020 were approximately $4,830,000 as compared to approximately $4,068,000 for the same period last year, representing an increase of approximately $762,000, or 19%. The primary reasons for the increase in the current period was due to a $744,000 increase in the cost of being a public company—investor relations increased $392,000, insurance increased $127,000, legal cost increased $123,000 and professional fees increased $101,000. Non-cash compensation increased $487,000 but this was offset by a $206,000 decrease in salaries and $262,000 decrease in other expense.
~~Interest Expense~~
Interest expense for the nine months ended September 30, 2020 was approximately $692,000, as compared to $650,000 during the nine months ended September 30, 2019. The increase was due to the convertible notes that were issued between August 14 and September 27, 2019 and paid off in June 2020.
Liquidity and Capital Resources

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 for more than 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 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.
As of ~~September 30, 2020,~~March 31, 2021, we had approximately ~~$16,971,000~~$46,650,000 in cash and cash equivalents, representing an increase in cash and cash equivalents of approximately ~~$11,138,000~~$7,199,000 from December 31, ~~2019.~~2020. In ~~July 2020,~~connection with our ATM, we ~~raised~~issued and sold 581,782 shares of common stock during the first quarter of 2021, resulting in net proceeds to the Company of approximately ~~$15,366,000~~$13,500,000, net of ~~additional cash.~~offering costs. On April 19, 2021, we disbursed $12,750,000 cash for the purchase of the buildings on Chambers Ave. 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~~more than 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.
Since inception, we have invested approximately $6,520,000 into tooling and manufacturing capital expenditures for our current FUV production facility. As we ramp up production, we may identify opportunities for reducing cost of goods sold that will require additional capital expenditures.

Cash Flows from Operating Activities

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

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, cash used in operating activities was approximately $5,544,000, which included a net loss of approximately $4,743,000, non-cash charge related to depreciation and amortization of approximately $430,000, non-cash charge related to stock-based compensation of approximately $660,000, non-cash income related to income tax benefit of approximately $2,939,000,and changes in accounts receivable, inventory, prepaid inventory, other current assets, accounts payable, accrued liabilities, customer deposits, warranty reserve and deferred revenue of approximately $1,047,000, of which approximately $1,001,000 relates to accounts payable.

During the three months ended March 31, 2020, cash used in operating activities was approximately ~~$10,949,000,~~$3,487,000, which ~~was primarily the result of our~~included a net loss ~~incurred~~ of approximately ~~$11,941,000, a decrease in customer deposits~~$3,595,000, non-cash charge related to depreciation and amortization of approximately ~~$233,000, a decrease in warranty accrual~~$208,000, non-cash charge related to the amortization of debt discounts of approximately ~~$15,000, and an increase in inventories of approximately $2,495,000~~$154,000, non-cash charge related to ~~materials for our electric vehicles. These increases in cash outflows were partially offset by~~ stock-based compensation of approximately ~~$1,233,000, depreciation expense of approximately $676,000, amortization of capital debt of approximately $311,000, a decrease in~~$305,000, and accounts receivable, ~~of approximately $211,000, a decrease of~~inventory, prepaid inventory, ~~of approximately $591,000, an increase in accounts payable of approximately $247,000, a decrease in accrued liabilities of approximately $102,000, and a decrease in~~ other current assets, accounts payable, accrued liabilities, customer deposits, warranty reserve and deferred revenue of approximately ~~$315,000.~~$558,000.

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 ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company paid approximately $598,000 for manufacturing equipment and fixed asset purchases, approximately $24,000 for security deposits, and $1,754,000 for cash paid for the TMW acquisition.
During the three months ended March 31, 2020, the Company paid approximately ~~$1,097,000~~$199,000, for manufacturing equipment and fixed asset purchases and approximately ~~$54,000~~$47,000 for security deposits.
~~During the nine months ended September 30, 2019, the Company paid approximately $100,000, for manufacturing equipment and tooling fixed asset purchases.~~

Cash Flows from Financing Activities

During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash provided by financing activities was approximately ~~$23,239,000,~~$15,120,000, compared to net cash ~~provided~~used in financing activities of ~~$5,663,000~~approximately $210,000 during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Cash flows provided by financing activities during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 comprised of proceeds from the issuance of common stock through our registered offerings of approximately ~~$26,501,000,~~$14,070,000, offering costs of approximately $544,000, proceeds from the ~~Paycheck Protection Program loan~~exercise of warrants of approximately ~~$1,069,000,~~$1,658,000, proceeds from the exercise of options of approximately $128,000, proceeds from equipment notes of approximately $205,000, repayments of notes payable of approximately $247,000, repayment of equipment notes of approximately $89,000, payments on capital lease obligations amounting to approximately $334,000, offering costs of approximately $1,649,000, repayment of convertible notes payable to related parties of approximately $188,000, repayment of convertible notes payable of approximately $500,000, repayments of notes payable of approximately $3,332,000, and proceeds from the exercise of warrants of approximately $1,650,000.$61,000.

During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, net cash ~~provided by~~used in financing activities was approximately ~~$5,663,000.~~$210,000. Cash flows ~~provided by~~used in financing activities during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 mainly comprised of payments on capital lease obligations amounting to approximately ~~$292,000,~~$50,000, offering costs of approximately ~~$255,000, and~~$4,000, proceeds from ~~the issuance of our common stock through the exercise of employee stock options~~equipment notes of approximately ~~$11,000, the issuance~~$70,000, repayments of ~~our common stock through registered offerings~~notes payable of approximately ~~$4,265,000~~$168,000 and ~~through a convertible note offering~~repayment of equipment notes of approximately ~~$1,950,000 exempt from registration under Section 4(a)(2) of the Securities Act.~~$58,000.

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,~~March 31, 2021, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

25

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

~~From~~On April 19, 2021, litigation styled David Barnette v. Arcimoto, Inc., Mark Frohnmayer and Douglas Campoli, was filed in the United States District Court for the Eastern District of New York. The action, in which none of the defendants has yet been served, purports to be a class action on behalf of all those who purchased our common stock between February 14, 2018 and March 22, 2021 and is based on the research report dated March 23, 2021 produced by Bonitas Research, LLC, a short seller of our common stock with the stated intention of driving down the market price of our common stock. Although the lawsuit is purportedly a class action, no motion to certify a class has been filed at this time. We believe we have substantial defenses to the claims asserted in this lawsuit and intend to vigorously defend this action.
Additionally, 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 1112 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.~~2020.

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 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

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
10.27 Purchase Agreement between Arcimoto, Inc. and RLA Holdings, LLC 8-K 001-38213 10.1 January 6, 2021
10.30 Asset Purchase Agreement dated January 22, 2021 between Arcimoto, Inc. and Tilting Motor Works, Inc. 8-K 001-38123 2.04 January 25, 2021
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: ~~November 16, 2020~~May 17, 2021 By: /s/ Douglas M. Campoli
Douglas M. Campoli
Principal Financial
and Chief Accounting Officer

28
26

	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

	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	)

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	46,650,143		$	39,451,401
Accounts receivable, net		13,882			17,117
Inventory		5,642,824			5,104,068
Prepaid inventory		946,119			1,029,617
Other current assets		990,608			900,827
Total current assets		54,243,576			46,503,030

Property and equipment, net		6,949,160			6,645,230
Intangible assets, net		10,517,319			—
Goodwill		6,824,209			—
Security deposits		125,771			101,688

Total assets	$	78,660,035		$	53,249,948

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	1,060,267		$	205,133
Accrued liabilities		529,173			431,166
Customer deposits		616,173			605,532
Current portion of capital lease obligations		264,220			246,524
Notes payable		231,597			478,928
Current portion of warranty reserve		177,659			161,607
Current portion of deferred revenue		281,509			127,219
Current portion of equipment financing notes payable		306,551			237,069
Current portion of note payable to bank		—			421,076
Total current liabilities		3,467,149			2,914,254

Capital lease obligations, net of current portion		330,272			534,624
Warranty reserve		126,500			66,500
Long-term deferred revenue		43,750			50,000
Equipment financing notes payable, net of current portion		1,525,026			1,352,930
Note payable to bank, net of current portion		1,068,686			647,610
Total long-term liabilities		3,094,234			2,651,664

Total liabilities		6,561,383			5,565,918

Commitments and contingencies (Note 12)

Stockholders’ equity:
Series A-1 Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		—			—
Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		—			—
Preferred Stock, no par value, 1,500,000 authorized, none issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		—			—
Common Stock, no par value, 60,000,000 shares authorized; 35,758,090 and 34,187,555 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		128,855,849			100,236,178
Additional paid-in capital		4,413,966			3,876,503
Accumulated deficit		(61,171,163	)		(56,428,651	)
Total stockholders’ equity		72,098,652			47,684,030

Total liabilities and stockholders’ equity	$	78,660,035		$	53,249,948

	Three Months Ended March 31,
	2021			2020
Revenue:
Product sales	$	1,246,363		$	598,035
Other revenue		147,612			18,760
Total revenues		1,393,975			616,795
Cost of goods sold		3,244,507			1,689,518
Gross loss		(1,850,532	)		(1,072,723	)

Operating expenses:
Research and development		2,407,695			448,974
Sales and marketing		964,447			336,898
General and administrative		2,420,613			1,496,845
Total operating expenses		5,792,755			2,282,717

Loss from operations		(7,643,287	)		(3,355,440	)

Other expense (income):
Interest expense		52,227			246,834
Other income		(14,154	)		(7,500	)

Loss before benefit for income taxes		(7,681,360	)		(3,594,774	)

Income tax benefit		2,938,848			—

Net loss	$	(4,742,512	)	$	(3,594,774	)

Weighted average common shares - basic and diluted		35,327,316			24,480,445
Net loss per common share - basic and diluted	$	(0.13	)	$	(0.15	)

	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

Cash	$	1,754,083
Add: Fair value of shares issued		13,038,355
Total consideration	$	14,792,438

Description	Fair value
Assets acquired:
Inventory	$	342,394
Prepaid expenses and other current assets		4,083
Property, plant, and equipment		4,349
Trade name		2,052,000
Proprietary technology		7,010,000
Customer relationships		1,586,000
Goodwill		6,824,209
Total assets acquired	$	17,823,035

Liabilities assumed:
Customer deposits	$	91,749
Deferred tax liability		2,938,848
Total liabilities assumed		3,030,597
Estimated fair value of net assets acquired	$	14,792,438

	For the Three Months Ended March 31,
	2021			2020
Revenues	$	1,403,954		$	828,660
Net loss attributable to common stockholders	$	(7,911,783	)	$	(3,860,541	)
Net loss per basic and diluted common share	$	(0.22	)	$	(0.15	)
Weighted average common shares outstanding:
Basic and diluted		35,327,316			24,916,784

	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

		March 31, 2021
	Estimated Useful Life (Years)	Gross Carrying Amount at December 31, 2020		Assets Acquired Pursuant to Business Combination (1)		Accumulated Amortization			Net Book Value
Tradename and trademarks	14 years	$	—	$	2,052,000	$	(22,684	)	$	2,029,316
Proprietary technology	13 years		—		7,010,000		(83,452	)		6,926,548
Customer relationships	10 years		—		1,586,000		(24,545	)		1,561,455
		$	—	$	10,648,000	$	(130,681	)	$	10,517,319

	Total Goodwill
Balance as of January 1, 2021	$	—
Goodwill additions through Tilting Motor Works acquisition		6,824,209
Less: impairment charge recorded		—
Balance as of March 31, 2021	$	6,824,209

Remaining payments for years ending December 31:
2021		640,619
2022		543,246
2023		517,945
2024		340,840
2025		229,916
Thereafter		77,267
Total	$	2,349,833

	Retail						Commercial						Total
	Vehicles			Dollars			Vehicles			Dollars			Vehicles			Dollars
Vehicles/Deposits		4,680		$	474,224			800		$	30,000			5,480		$	504,224
Refunds		(647	)		(64,700	)		—			—			(647	)		(64,700	)
Total net pre-orders		4,033			409,524			800			30,000			4,833			439,524
Less purchases		(192	)		(19,300	)		(6	)		(10,500	)		(198	)		(29,800	)
Remaining		3,841		$	390,224			794			19,500			4,635			409,724

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: ~~November 16, 2020~~May 17, 2021	By:	/s/ Douglas M. Campoli
		Douglas M. Campoli
		Principal Financial
		and Chief Accounting Officer