fuv20220331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2022

☐ 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 May 13, 2022, there were approximately 38,779,766 shares of the registrant’s common stock issued and outstanding.

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ARCIMOTO, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2022

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Condensed Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Condensed Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION	27

Item 1.	Legal Proceedings	27
Item 6.	Exhibits	27

	SIGNATURES	28

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PART I - FINANCIAL INFORMATION

ARCIMOTO, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

Item 1. Financial Statements

	*March 31, 2022*			*December 31, 2021*
ASSETS
Current assets:
Cash and cash equivalents	$	5,228,416		$	16,971,320
Accounts receivable, net		124,133			127,860
Inventory		8,986,727			7,856,105
Prepaid inventory		2,895,916			2,637,688
Other current assets		2,934,019			2,440,322
Total current assets		20,169,211			30,033,295

Property and equipment, net		25,645,122			24,338,907
Intangible assets, net		9,675,201			9,885,680
Deferred offering costs		—			24,000
Operating lease right-of-use assets		1,674,614			—
Security deposits		117,468			117,468
Total assets	$	57,281,616		$	64,399,350

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable	$	1,024,595		$	2,016,283
Accrued liabilities		2,640,663			2,352,034
Customer deposits		1,104,088			817,137
Notes payable		1,659,417			2,039,367
Current portion of finance lease obligations		386,127			352,294
Current portion of equipment notes payable		490,785			493,160
Current portion of warranty reserve		347,437			331,485
Current portion of deferred revenue		112,566			111,166
Current portion of operating lease liabilities		578,055			—
Deferred rent		—			101,550
Total current liabilities		8,343,733			8,614,476

Finance lease obligations		580,489			712,511
Equipment notes		1,088,590			1,185,060
Warranty reserve		311,567			330,015
Operating lease liabilities		1,177,931			—
Long-term deferred revenue		6,750			9,000
Total long-term liabilities		3,165,327			2,236,586

Total liabilities		11,509,060			10,851,062

Commitments and contingencies (Note 11)

Stockholders’ equity:
Common Stock, no par value, 100,000,000 shares authorized; 38,225,674 and 37,643,591 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		154,283,555			150,502,566
Additional paid-in capital		8,434,961			7,038,124
Accumulated deficit		(116,945,960	)		(103,992,402	)
Total stockholders’ equity		45,772,556			53,548,288
Total liabilities and stockholders’ equity	$	57,281,616		$	64,399,350

See accompanying notes to condensed financial statements.

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ARCIMOTO, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	*Three Months Ended March 31,*
	*2022*			*2021*
Revenue	$	650,233		$	1,393,975
Cost of goods sold		4,047,272			3,244,507
Gross loss		(3,397,039	)		(1,850,532	)

Operating expenses:
Research and development		3,906,585			2,407,695
Sales and marketing		2,926,505			964,447
General and administrative		2,698,953			2,420,613
Total operating expenses		9,532,043			5,792,755

Loss from operations		(12,929,082	)		(7,643,287	)

Other (income) expense:
Interest expense		49,735			52,227
Other income		(25,259	)		(14,154	)

Loss before income tax benefit		(12,953,558	)		(7,681,360	)

Income tax benefit		—			2,938,848

Net loss	$	(12,953,558	)	$	(4,742,512	)

Weighted average common shares - basic and diluted		37,966,972			35,327,316
Net loss per common share - basic and diluted	$	(0.34	)	$	(0.13	)

See accompanying notes to condensed financial statements.

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ARCIMOTO, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	*Common Stock*				*Additional*						*Total*
	*Number of Shares*		*Amount*		*Paid-In Capital*			*Accumulated Deficit*			*Stockholders’ Equity*
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 accounts 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

Balance at December 31, 2021		37,643,591	$	150,502,566	$	7,038,124		$	(103,992,402	)	$	53,548,288

Issuance of common stock for cash, net of offering costs of $204,763		560,291		3,713,650		—			—			3,713,650
Exercise of stock options		21,792		67,339		(14,274	)		—			53,065
Stock-based compensation		—		—		1,411,111			—			1,411,111
Net loss		—		—		—			(12,953,558	)		(12,953,558	)
Balance at March 31, 2022		38,225,674	$	154,283,555	$	8,434,961		$	(116,945,960	)	$	45,772,556

See accompanying notes to condensed financial statements.

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ARCIMOTO, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	*Three Months Ended*
	*March 31,*
	*2022*			*2021*
OPERATING ACTIVITIES
Net loss	$	(12,953,558	)	$	(4,742,512	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		707,459			429,561
Non-cash operating lease costs		134,683			—
Stock-based compensation		1,411,111			660,479
Deferred income tax benefit		—			(2,938,848	)
Changes in operating assets and liabilities:
Accounts receivable		3,727			3,235
Inventory		(1,130,621	)		(196,362	)
Prepaid inventory		(258,228	)		83,498
Other current assets		(493,698	)		(85,698	)
Accounts payable		(1,328,013	)		1,001,434
Accrued liabilities		288,628			98,007
Customer deposits		286,951			(81,108	)
Operating lease liabilities		(136,165	)		—
Warranty reserve		(2,496	)		76,052
Deferred revenue		(850	)		148,040
Net cash used in operating activities		(13,471,070	)		(5,544,222	)

INVESTING ACTIVITIES
Purchase of property and equipment		(1,485,565	)		(598,461	)
Security deposits		—			(24,083	)
Cash paid for acquisition of Tilting Motor Works		—			(1,754,083	)
Net cash used in investing activities		(1,485,565	)		(2,376,627	)

FINANCING ACTIVITIES
Proceeds from the sale of common stock		3,942,413			14,070,035
Payment of offering costs		(204,763	)		(543,523	)
Proceeds from exercise of warrants		—			1,657,501
Proceeds from the exercise of stock options		53,065			127,987
Payment on finance lease obligations		(98,189	)		—
Payment on equipment notes		(119,927	)		(61,156	)
Proceeds from equipment notes		21,082			204,661
Repayment of equipment notes		—			(88,583	)
Repayment of notes payable		(379,950	)		(247,331	)
Net cash provided by financing activities		3,213,731			15,119,591

Net (decrease)/increase in cash and cash equivalents during the period		(11,742,904	)		7,198,742
Cash and cash equivalents at beginning of period		16,971,320			39,451,401
Cash and cash equivalents at end of period	$	5,228,416		$	46,650,143

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	53,948		$	—

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common shares issued for Tilting Motor Works acquisition	$	—		$	13,038,355
Issuance of common stock for settlement of accounts payable	$	—		$	146,300
Accounts payable for purchase of property and equipment	$	317,630		$	—

See accompanying notes to condensed financial statements.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: NATURE OF OPERATIONS

Arcimoto, Inc. (the “Company”, “We”, “Us”, or “Our”) 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 14 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 six 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; the Arcimoto Roadster, an unparalleled pure-electric on-road thrill machine, and the Arcimoto Flatbed that has a pick-up style flatbed instead of an enclosed cargo area.

Concentration risk

The Company is dependent on one supplier for its battery supply that is a key component of its main product line. Any disruption in supply chain or significant price increase may impact Arcimoto's production volume and costs, which will affect the Company's long-term goal of sustainable profitability.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The accompanying financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred significant losses since inception and management expects losses to continue for the foreseeable future. The Company has its standing ability to generate additional funds through its remaining at-the-market (“ATM”) offering of up to approximately $93,700,000, which is in excess of cash needed for the next twelve months. In the event that additional funding is needed to sustain the business, the Company anticipates being able to obtain such funds through the capital markets and/or by re-financing its long-lived assets.

Basis of Presentation

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 March 31, 2022, and the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. Results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022. 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, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2022.

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

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. See Note 3 - TMW Acquisition for additional information related to our acquisition that concluded in the first quarter of 2021.

Inventory

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

	*March 31,*		*December 31,*
	*2022*		*2021*
Raw materials	$	8,376,312	$	7,089,033
Work in progress		83,489		70,243
Finished goods		526,926		696,829
Total	$	8,986,727	$	7,856,105

The Company is required to remit partial prepayments for some purchases of its inventories acquired from overseas vendors which are included in prepaid inventory. The Company is currently selling vehicles below the base cost of a finished unit. Accordingly, the Company expensed all labor and overhead as period costs and recorded an allowance to reduce inventories to net realizable value of approximately $933,000 and $826,000 as of March 31, 2022 and December 31, 2021, respectively. The amount expensed for all labor and overhead was approximately $3,050,000 and $1,785,000 for the three months ended March 31, 2022 and March 31, 2021, respectively.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Intangible Assets

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

Net Loss per Share

The Company’s computation of loss per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the 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.

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.

During the three months ended March 31, 2022 and 2021, 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*
	*March 31,*
	*2022*		*2021*
Options and other instruments under the 2012, 2015, and 2018 Plans to purchase common stock	$	1,267,697	$	3,094,548
Underwriters and investors warrants issued outside of an EEP		—		76,402
Total	$	1,267,697	$	3,170,950

Accounting Pronouncements Recently Adopted

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 finance 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 adopted 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. Most of the Company's operating lease commitments are subjected to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption of Topic 842, which increased the total assets and total liabilities that the Company reports relative to such amounts prior to adoption. The adoption of ASU 2016-02 did not have a material impact on Arcimoto’s Statement of Operations. Upon adoption on January 1, 2022, the Company recorded an operating lease right-of-use asset for approximately $1,800,000 and an operating lease liability of approximately $1,900,000. See Note 8 "Leases" for further disclosures.

Accounting Pronouncements Not Yet Adopted

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

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which replaces the current incurred loss methodology with an expected loss methodology which is referred to as the current expected credit loss (“CECL”) methodology. The measurement of credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans receivables and trace accounts receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees and other similar instruments) and net investment in leases recognized by a lessor in accordance with Accounting Standards Codification (“ASC”) Topic 842 – Leases. ASU 2016-13 also made changes to the accounting for available-for-sale debt securities and requires credit losses to be presented as an allowance rather than as a write-down on such securities management does not intend to sell or believes that it is more likely than not they will be required to sell. The Company is required to adopt ASU 2016-13 on January 1, 2023 and has not completed its assessment of ASU 2016-13’s impact on its financial statements.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3: TMW ACQUISITION

On January 23, 2021, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Tilting Motor Works, Inc. (“TMW”), a Washington corporation (the “Seller”) and its owner. TMW engages in the design, production, sales, and installation of a bolt on kit that converts a two wheeled motorcycle into a tilting three wheeled motorcycle. TMW was acquired to utilize the tilting technology in new three wheeled micro-mobility vehicles.

Pursuant to the terms and conditions of the Agreement, the Company paid cash of $1,754,083 and issued 436,339 shares of Company common stock and assumed certain liabilities as consideration for substantially all of the TMW’s assets. The common shares issued were unregistered and are subject to sales restrictions under the Securities Act of 1933. The Company valued the shares issued in the transaction at the average of opening and closing price on the date of acquisition with a 12.5% discount for lack of marketability. The acquisition closed on February 4, 2021 and was recorded as a business combination as the set of assets and activities acquired met the definition of a business.

The purchase price allocation was finalized in the first quarter of 2021 and is as follows:

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

The following unaudited proforma financial information presents the consolidated results of operations of the Company and TMW for the three months ended March 31, 2021, as if the acquisition had occurred as of the beginning of the first period presented instead of on February 4, 2021. The proforma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

The proforma financial information for the Company and TMW is as follows:

	*For the Three Months Ended*
	*March 31,*
	*2021*
Revenues	$	1,403,954
Net loss attributable to common stockholders	$	(7,911,783	)
Net loss per basic and diluted common share	$	(0.22	)
Weighted average common shares outstanding:
Basic and diluted		35,327,316

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4: PROPERTY AND EQUIPMENT

As of March 31, 2022 and December 31, 2021, our property and equipment consisted of the following:

	*March 31,*			*December 31,*
	*2022*			*2021*
Land	$	4,743,526		$	4,743,526
Buildings		8,006,474			8,006,474
Machinery and equipment		7,496,683			7,282,960
Fixed assets in process		4,433,881			3,269,532
Leasehold improvements		1,178,979			1,165,231
FUV fleet		1,471,534			1,471,534
FUV rental fleet		1,704,532			1,315,980
Computer equipment and software		258,309			258,309
Vehicles		577,598			419,661
Furniture and fixtures		52,007			52,007
Total property and equipment		29,923,523			27,985,214
Less: Accumulated depreciation		(4,278,401	)		(3,646,307	)
Total	$	25,645,122		$	24,338,907

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

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 3^rd 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 commonly known as 1593 W. 5^th Ave. Eugene, Oregon was added to the purchase agreement totaling $2,500,000. The total sales price was increased to $12,750,000. The purchase was contingent upon the Company’s complete and unconditional approval of: (i) the property and 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 the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"); and (v) anything else the Company deems necessary. On March 15, 2021, the due diligence was completed 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 at a rate of $50,000 per month plus all utilities, taxes, insurance, and maintenance expenses. $25,000 was deducted 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. The payment was deferred to July 2022. This sum is secured by a zero interest note. The Company intends to utilize these properties to improve its production capabilities. The new facility became operational during the first quarter of 2022, and is expected to be completed by the end of 2023. The purchases described above are allocated to property and equipment as land and buildings.

Depreciation expense was approximately $497,000 and $299,000 during the three months ended March 31, 2022 and three months ended March 31, 2021, respectively.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5: INTANGIBLE ASSETS

The following table summarizes the Company’s intangible assets:

			*March 31, 2022*
	*Estimated*
	*Useful Life (Years)*		*Gross Amount*		*Accumulated Amortization*			*Net Book Value*
Tradename and trademarks		14	$	2,052,000	$	(166,971	)	$	1,885,029
Proprietary technology		13		7,010,000		(622,683	)		6,387,317
Customer relationships		10		1,586,000		(183,145	)		1,402,855
			$	10,648,000	$	(972,799	)	$	9,675,201

			*December 31, 2021*
	*Estimated*
	*Useful Life (Years)*		*Gross Amount*		*Accumulated Amortization*			*Net Book Value*
Tradename and trademarks		14	$	2,052,000	$	(130,950	)	$	1,921,050
Proprietary technology		13		7,010,000		(487,875	)		6,522,125
Customer relationships		10		1,586,000		(143,495	)		1,442,505
			$	10,648,000	$	(762,320	)	$	9,885,680

Amortization expense was approximately $210,000 and $131,000 during the three months ended March 31, 2022 and 2021, respectively.

NOTE 6: CUSTOMER DEPOSITS

The Company has received refundable customer pre-orders ranging from $100 to $500 per vehicle for purposes of securing a place in a line to order its utility vehicle. As of March 31, 2022 and December 31, 2021, these refundable pre-orders total $412,300 and $424,300, respectively. In addition, Arcimoto also receives non-refundable customer deposits of $2,500 that are required for the Company to start production of their vehicles. When a customer’s order is ready to enter the production process, the customer is notified that if they would like to proceed with the purchase of a vehicle, their pre-orders will no longer be refundable and additional deposit required must be paid prior to the start of the manufacturing process to completion. As of March 31, 2022 and December 31, 2021, these non-refundable deposits total $455,737 and $125,000, respectively.

The Company has also received approximately $175,300 and $227,400 of refundable deposits related to its TMW product line at March 31, 2022 and December 31, 2021, respectively. Arcimoto also receives non-refundable deposits as final payment prior to delivery of the final product line. These non-refundable deposits total approximately $60,751 and $40,400 at March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022 and December 31, 2021, the Company’s balance of deposits received was $1,104,088 and $817,137, respectively. Deposits are included in current liabilities in the accompanying condensed balance sheets. The Company also has customer deposits from its employees. However, the balances of these deposits at March 31, 2022 and December 31, 2021 are not material.

NOTE 7: NOTES PAYABLE

As of March 31, 2022, the Company has financed a total of approximately $2,618,000 of its capital equipment purchases with notes payable having monthly payments ranging from approximately $300 to $12,000, repayment terms ranging from 60 to 72 months, and effective interest rates ranging from 1.99% to 9.90%. Total monthly payments as of March 31, 2022 are approximately $51,000. These equipment notes mature ranging from January 2023 through February 2028. The balance of equipment financing notes payable was approximately $1,579,000 and $1,678,000 as of March 31, 2022 and December 31, 2021, respectively.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8: LEASES

Operating Leases

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

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

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

The components of operating lease expense recorded in the statement of operations were as follows:

	*Three Months Ended March 31, 2022*
Operating lease cost	$	172,465
Short-term lease cost		17,731
Total lease cost	$	190,196

Variable lease cost for the three months ended March 31, 2022 was not material. The Company previously recorded rent expense on a straight-line basis and recognized rent expense of $140,413 for the three months ended March 31, 2021.

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

	*March 31, 2022*

Operating lease right-of-use assets	$	1,674,614
Operating lease liabilities, current	$	578,055
Operating lease liabilities, long-term		1,177,931
Total operating lease liabilities	$	1,755,986

The weighted-average remaining lease term for operating leases was 3.1 years and the weighted-average incremental borrowing rate was 8.7% as of March 31, 2022.

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

		*Three Months Ended March 31, 2022*
Cash paid for amounts included in the measurement of operating lease liabilities		$	173,509

As of March 31, 2022, future minimum lease payments required under operating leases are as follows:

2022 (remainder)	$	525,507
2023		683,041
2024		500,457
2025		230,858
2026		58,433
Thereafter		-
Total minimum lease payments		1,998,296
Less: imputed interest		(242,310	)
Total	$	1,755,986

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 8: LEASES (Continued)

Finance leases

As of March 31, 2022, the Company has financed through lease agreements a total of approximately $1,956,000 of its capital equipment purchases with monthly payments ranging from approximately $600 to $9,000, repayment terms ranging from 48 to 60 months, and effective interest rates ranging from 3.87% to 9.52%. Total monthly finance lease payments as of March 31, 2022 are approximately $39,000. These lease obligations mature ranging from June 2022 through September 2026 and are secured by approximately $2,326,000 in underlying assets which have approximately $847,000 in accumulated depreciation as of March 31, 2022. The balance of finance lease obligations was approximately $966,616 and $1,065,000 as of March 31, 2022 and December 31, 2021, respectively.

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

	*March 31, 2022*

Property and equipment, net	$	1,760,984
Finance lease liabilities, current	$	386,127
Finance lease liabilities, long-term		580,489
Total finance lease liabilities	$	966,616

The weighted-average remaining lease term for finance leases was 3.21 years and the weighted-average incremental borrowing rate was 5.96% as of March 31, 2022.

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

	*Three Months Ended March 31, 2022*
Operating cash flows from finance leases	$	15,275
Financing cash flows from finance leases	$	(98,189	)

As of March 31, 2022, future minimum lease payments required under finance leases are as follows:

2022 (remainder)	$	323,977
2023		312,058
2024		165,241
2025		165,241
2026		93,185
Thereafter		-
Total minimum lease payments	$	1,059,702
Less: imputed interest		(93,086	)
Total	$	966,616

NOTE 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. As of March 31, 2022 and December 31, 2021, there were no shares issued or outstanding.

Common Stock

The Company has reserved a total of 6,240,686 and 6,262,478 shares of its common stock pursuant to the equity incentive plans (see Note 10) as of March 31, 2022 and December 31, 2021, respectively. The Company has 5,192,416 and 3,973,629 stock units, options, and warrants outstanding under these plans as of March 31, 2022 and December 31, 2021, respectively.

The Company has 122,238 shares of its common stock reserved for warrants issued outside of the equity incentive plans as of March 31, 2022 and December 31, 2021.

Issuance of common stock for settlement of payable

The Company issued 11,000 common shares to an external party for services related to investor relations activities with a fair value of $146,300 during the three months ended March 31, 2021. 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 three months ended March 31, 2021 were to settle existing accounts payable. The Company did not issue any common shares for such activities during the three months ended March 31, 2022.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 9: STOCKHOLDERS’ EQUITY (Continued)

Exercise of Stock Options and Warrants

A total of 21,792 employee options, with exercise prices ranging from $1.71 to $2.50 per share were exercised for total proceeds to the Company of $53,065 during the three months ended March 31, 2022. A total of 54,985 employee options, with exercise prices ranging from $1.71 to $4.52 per share were exercised for total cash proceeds to the Company of $127,987 during the three months ended March 31, 2021.

A total of 15,000 employee warrants, with an exercise price of $0.50 per share were exercised for total proceeds to the Company of $7,500 during the three months ended March 31, 2021.

A total of 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 $1,650,001 during the three months ended March 31, 2021.

No warrants were exercised during the three months ended March 31, 2022.

Offerings of Common Stock

On January 25, 2021, the Company entered into an Equity Distribution Agreement (“EDA”) with Canaccord Genuity LLC (“Canaccord”) under which we may offer and sell shares of our common stock in connection with the EDA in an aggregate offering amount of up to $80,000,000 from time to time through Canaccord, acting exclusively as our sales agent (the “Offering”).

We issued and sold 581,782 shares of common stock during the three months ended March 31, 2021, in connection with the EDA at per share prices between $19.35 and $32.50, resulting in net proceeds to the Company of approximately $13,500,000 after subtracting offering expenses.

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

We issued and sold 560,291 shares of common stock during the three months ended March 31, 2022, in connection with the Sales Agreement at per share prices between $6.82 and $7.18, resulting in net proceeds to the Company of $3,713,650 after subtracting offering expenses.

NOTE 10: STOCK-BASED PAYMENTS

The Company 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”).

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

	*Three Months Ended*
	*March 31,*
	*2022*		*2021*
Research and development	$	329,900	$	162,447
Sales and marketing		281,440		98,589
General and administrative		405,344		218,623
Cost of goods sold		394,427		180,520
Total	$	1,411,111	$	660,479

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. On June 11, 2021 the Company held its annual meeting of shareholders, and the board of directors approved an increase from 4,000,000 to 6,000,000 shares, the increase was approved by a majority of the shareholders.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 10: STOCK-BASED PAYMENTS (Continued)

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 March 31, 2022, the Company had 1,037,991 shares of common stock available to be issued under the 2018 Plan. Awards that are forfeited generally become available for grant under the 2018 Plan.

Stock-based compensation expense under the 2018 Plan for the three months ended March 31, 2022 and three months ended March 31, 2021 was approximately $1,392,380 and $638,907, respectively.

During the first quarter of 2022, qualified options to purchase 1,240,799 shares of common stock were granted under the 2018 Plan with a grant date fair value of approximately $5,435,000. The options were valued using the Black-Scholes option pricing model with approximately a 6.1 year expected term, risk free interest rate of 1.7%, a dividend yield of 0%, and an annualized standard deviation of stock price volatility of 96.98%. These options vest over three years.

During the first quarter of 2022, 29,645 restricted stock were issued to certain personnel with a grant date fair value of approximately $173,063. These shares were valued by using the closing date of Arcimoto’s stock price on the date of the grant. These awards vest immediately upon issuance.

Total compensation cost related to non-vested awards issued under the 2018 Plan not yet recognized as of March 31, 2022 was approximately $11,801,000 and will be recognized on a straight-line basis through 2.37 years based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or forfeitures.

2015 Stock Incentive Plan

The 2015 Plan provides the Company the ability to grant to employees, directors, consultants, or advisors shares of common stock of the Company through the grant of options that are incentive stock options or NQSOs and/or the grant of restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. One million shares of common stock were authorized for issuance under the 2015 Plan.

Employee stock-based compensation expense for the three months ended March 31, 2022 and three months ended March 31, 2021 related to the 2015 Plan was approximately $18,731 and $21,572, respectively.

Total compensation cost related to non-vested awards not yet recognized as of March 31, 2022 was approximately $18,700. The amounts 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.

NOTE 11: COMMITMENTS AND CONTINGENCIES

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 alleged that Ayro’s 311 two-seater electric vehicles infringe U.S. Patent 8,985,255 (the “255 Patent”). The Complaint 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. During the first quarter of 2021, the parties reached a settlement and submitted a request to the court to dismiss the case.

The Company, Mark Frohnmayer and Douglas Campoli have been sued in two putative class actions in the United States District Court for the Eastern District of New York, Barnette v. Arcimoto, Inc. et al. (Case No. 21-cv-02143 filed on April 19, 2021) and Gibson v. Arcimoto, Inc. et al. (Case No. 21-cv-02870 filed on May 20, 2021). The putative class actions purported to be on behalf of all those who purchased the Company’s common stock between February 14, 2018 and March 22, 2021. The allegations in the actions are based on the research report dated March 23, 2021 produced by Bonitas Research, LLC, a short seller of the Company’s common stock. The Barnette and Gibson actions were consolidated as In re Arcimoto, Inc. Securities Litigation (Case No. 21-cv-02143) on July 14, 2021, and a consolidated amended complaint was filed on September 20, 2021. Briefing on the defendants’ motion to dismiss the consolidated amended complaint was completed on March 11, 2022. No motion to certify a class has been filed at this time. The company believes it has substantial defenses to the claims asserted in this lawsuit and intends to vigorously defend this action.

The Company is also a nominal defendant in two shareholder derivative lawsuits filed in the United States District Court for the Eastern District of New York, Liu v. Frohnmayer et al. (Case No. 21-cv-03702 filed on June 30, 2021) and Carranza v. Frohnmayer et al. (Case No. 21-cv-03888 filed on July 9, 2021), and a shareholder derivative lawsuit filed in the United States District Court for the District of Oregon, Laguerre v. Frohnmayer et al. (Case No. 21-cv-00982 filed on June 30, 2021). Mark Frohnmayer, Douglas Campoli, Terry Becker, Nancy Calderon, Joshua Scherer, and Jesse Eisler are named as defendants in all three shareholder derivative suits. Jeff Curl is named as a defendant in Laguerre and Liu. The allegations in the shareholder derivative lawsuits largely arise from the Bonitas report referenced above. The Liu and Carranza actions were consolidated on August 4, 2021 as In re Arcimoto, Inc. Derivative Litigation (Lead Case No. 21-cv-03702). These derivative actions are currently stayed. The Company believes it has substantial defenses to the claims asserted and intends to vigorously defend the actions.

The Company possesses insurance coverage to cover the litigation expenses with a deductible of $1,500,000. This amount was accrued in the previous year.

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.

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 12: RELATED PARTY TRANSACTIONS

Arcimoto may, from time to time, sell to its management and employees at a discounted price. Sales to such parties for the three months ended March 31, 2022 were not material. Also, from time to time, the Company may make certain purchases from an entity owned by the Chief Operating Officer. During the first quarter of 2022, the purchases were not material and the amount owed to the related party was zero at March 31, 2022.

On April 25, 2022, the Company entered into a $4,500,000 convertible promissory note agreement with Ducera Investments LLC, a related party because a partner at Ducera is also a member of the Board of Directors at Arcimoto. Further disclosures are presented in Note 14 - Subsequent Events.

NOTE 13: SEGMENT REPORTING

Segment

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

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

*March 31, 2022*
	*FUV*			*Rental*			*TMW*			*Total*
Revenues	$	515,317		$	12,499		$	122,417		$	650,233

Operating Loss	$	(12,202,326	)	$	(427,366	)	$	(299,390	)	$	(12,929,082	)
Interest expense, net											49,735
Other Income											(25,259	)
Net loss										$	(12,953,558	)

*March 31, 2021*
	*FUV*			*Rental*		*TMW*			*Total*
Revenues	$	1,294,620		$	7,250	$	92,105		$	1,393,975

Operating Loss	$	(7,449,367	)	$	7,250	$	(201,170	)	$	(7,643,287	)
Interest expense, net										52,227
Other Income										(14,154	)
Income tax benefit										(2,938,848	)
Net loss									$	(4,742,512	)

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ARCIMOTO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 14: SUBSEQUENT EVENTS

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

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

Subsequent to March 31, 2022, Arcimoto raised approximately $2,262,000 (net of offering costs) through its Equity Distribution Agreement (the “Sales Agreement”) with Canaccord Genuity LLC (the “Agent”), pursuant to which the Company may offer and sell, from time to time, through or to the Agent, as sales agent up to $100,000,000 of shares (“Shares”) of its common stock.

On April 25, 2022, the Company ("debtor") entered into a $4,500,000 convertible promissory note agreement with Ducera Investments LLC ("Creditor") whereby the Debtor agrees to pay the creditor the amount borrowed plus interest accrued at an annual rate of 10%. The term of this note is five years unless conversion privileges are exercised. The Creditor has the option to convert the promissory note at any time prior to the maturity date, in full or in part, into the number of shares of common stock ("Common Stock"), no par value, of the Company equal to the amount determined by dividing the principal amount of this note plus the accrued interest by $7.00 ("Conversion Price"). At any time prior to the maturity date, the debtor may convert this note, in full or in part, at the Conversion Price provided that, in order to exercise the conversion (i) the closing share price of the Common Stock on the Nasdaq Stock Market LLC (the “Closing Share Price”) for the thirty (30) consecutive trading days prior to, and including, the conversion date exceeds the per share price required to provide the Holder with shares having a market value of at least 4.5 times $4,500,000 upon conversion.

On May 6, 2022, Arcimoto made a down payment of approximately $1,372,000 and financed approximately $2,059,000 for a purchase of capital equipment at an interest rate of approximately 4.6% for a term of 48 months.

On May 10, 2022, Arcimoto financed approximately $69,000 for a purchase of capital equipment at an interest rate of approximately 7.7% for a term of 51 months.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our strategies, intentions, financial projections, beliefs, expectations, strategies, predictions, or any other statements relating to our future activities or other future events or conditions. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements generally can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”, or “anticipates”, or similar expressions. 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 United States Securities and Exchange Commission ("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 lower production costs to achieve cost-effective mass production, which we believe will be an important factor affecting adoption of the products;

●

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 closures of our facility 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;

●

our ability to secure battery cells from a foreign sole sourced vendor in order to maintain production levels due to supply chain constraints;

●

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

●

overall strength and stability of general economic conditions and specifically of the automotive industry, 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;

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●

our experience to date in manufacturing and our ability to manufacture increasing numbers of vehicles at the volumes that we need in order to meet our goals;

●

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;

●

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.

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MD&A to end of document

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 months ended March 31, 2022 and 2021 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, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2022. 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, Inc. (the “Company”, “We”, “Us”, or “Our”) was incorporated in the State of Oregon on November 21, 2007, with the mission to catalyze the shift to a sustainable transportation system. We build light, electric, ultra-efficient vehicles that are incredibly fun to drive for a reason. Put simply, our vision is an untouched planet and more livable cities.

Today’s city is dominated by the traditional four-wheeled vehicle. We pave almost half our urban land for these giant, multi-ton, extractive machines that we almost always drive alone or with just one other person and leave parked and rusting for most of their useful lives.

At Arcimoto, we believe that if we rightsize, electrify, and better utilize our vehicles, we can reclaim our shared space, help clean our skies, and make cities more livable for us all.

We have developed a new, human-scale three-wheeled electric vehicle platform, featuring dual-motor front wheel drive, a battery pack sized to meet the range needs of the vast majority of typical trips, and an optimized center of gravity for a nimble, balanced driving experience. On this platform, we currently manufacture a family of products targeting a wide range of everyday uses: the Fun Utility Vehicle® (“FUV®”), for daily driving, rideshare share and rental, the Deliverator for last-mile delivery of essential food and goods, the Rapid Responder® for emergency services and security, the Flatbed for general fleet utility, and the Roadster, a pure fun machine that drives like nothing else on the road.

We launched production of the FUV® in the third quarter of 2019, prior to the onset of the COVID-19 pandemic. In 2019, we produced 57 vehicles and sold 46 to customers. In 2020, Arcimoto produced 117 vehicles and sold 97. In 2021 Arcimoto produced 331 vehicles and sold 190 new and two pre-owned. During the first quarter ended March 31, 2022, we temporarily ceased production in order to move into our new production facilities in anticipation of future production growth. In addition, we certified a new battery module with new battery cells. In spite of the production transition and battery certification, Arcimoto produced 26 vehicles and delivered 24 new vehicles to customers during the first quarter of 2022. Production restarted in a new production line by the end of the first quarter of 2022.

The Company’s primary focus is on volume production planning in order to push to sustainable profitability. On April 19, 2021, the Company purchased an approximately 220,000 square foot facility to expand production capabilities. The Company is preparing the final draft of its application for the Federal Department of Energy’s Advanced Technology Vehicle Manufacturing Loan Program (“ATVMLP”) to secure funds necessary to execute our growth strategy.

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 secu

SEC Form 10-Q filed by Arcimoto Inc.