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Form 1-A Issuer Information
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933
|
OMB APPROVAL
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FORM 1-A
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OMB Number:
3235-0286
Estimated average burden hours per response:
608.0
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1-A: Filer Information
| Issuer CIK | 0001558583 |
| Issuer CCC | XXXXXXXX |
| DOS File Number | |
| Offering File Number | 024-10710 |
|
Is this a LIVE or TEST Filing?
| ☒
LIVE
☐
TEST
|
|
Would you like a Return Copy?
| ☐ |
|
Notify via Filing Website only?
| ☐ |
|
Since Last Filing?
| ☐ |
Submission Contact Information
|
| Name | |
| Phone | |
| E-Mail Address | |
1-A: Item 1. Issuer Information
Issuer Infomation
|
Exact name of issuer as specified in the issuer's
charter
| Arcimoto, Inc. |
| Jurisdiction of Incorporation / Organization |
OREGON
|
| Year of Incorporation | 2007 |
| CIK | 0001558583 |
| Primary Standard Industrial Classification Code | MOTORCYCLES, BICYCLES & PARTS |
| I.R.S. Employer Identification Number | 26-1449404 |
| Total number of full-time employees | 22 |
| Total number of part-time employees | 0 |
Contact Infomation
Address of Principal Executive Offices
|
| Address 1 | 544 Blair Boulevard |
| Address 2 | |
| City | Eugene |
| State/Country |
OREGON
|
| Mailing Zip/ Postal Code | 97402 |
| Phone | 541-683-6293 |
Provide the following information for the person the
Securities
and Exchange Commission's staff should call in
connection with any
pre-qualification review of the offering
statement.
|
| Name | Andrew Stephenson |
| Address 1 | |
| Address 2 | |
| City | |
| State/Country | |
| Mailing Zip/ Postal Code | |
| Phone | |
Provide up to two e-mail addresses to which
the
Securities and
Exchange Commission's staff may send any comment
letters relating to
the offering statement. After qualification of
the offering
statement, such e-mail addresses are not required to
remain active.
|
Financial Statements
|
Industry Group (select one)
| ☐
Banking
☐
Insurance
☒
Other
|
Use the financial statements for the most recent period
contained in
this offering statement to provide the following
information about
the issuer. The following table does not include
all of the line
items from the financial statements. Long Term Debt
would include
notes payable, bonds, mortgages, and similar
obligations. To
determine "Total Revenues" for all companies
selecting "Other" for
their industry group, refer to Article
5-03(b)(1) of Regulation
S-X. For companies selecting "Insurance",
refer to Article 7-04 of
Regulation S-X for calculation of "Total
Revenues" and paragraphs 5
and 7 of Article 7-04 for "Costs and
Expenses Applicable to
Revenues".
Balance Sheet Information
|
| Cash and Cash Equivalents |
$
414405.00 |
| Investment Securities |
$
0.00 |
| Total Investments |
$
|
| Accounts and Notes Receivable |
$
583.00 |
| Loans |
$
|
| Property, Plant and Equipment (PP&E): |
$
8805.00 |
| Property and Equipment |
$
|
| Total Assets |
$
518825.00 |
| Accounts Payable and Accrued Liabilities |
$
183821.00 |
| Policy Liabilities and Accruals |
$
|
| Deposits |
$
|
| Long Term Debt |
$
325000.00 |
| Total Liabilities |
$
1144856.00 |
| Total Stockholders' Equity |
$
-626031.00 |
| Total Liabilities and Equity |
$
518825.00 |
Statement of Comprehensive Income Information
|
| Total Revenues |
$
0.00 |
| Total Interest Income |
$
|
| Costs and Expenses Applicable to Revenues |
$
0.00 |
| Total Interest Expenses |
$
|
| Depreciation and Amortization |
$
7951.00 |
| Net Income |
$
-1919479.00 |
| Earnings Per Share - Basic |
$
-0.19 |
| Earnings Per Share - Diluted |
$
-0.19 |
| Name of Auditor (if any) | dbbmckennon |
Outstanding Securities
Common Equity
|
|
Name of Class (if any) Common Equity
| Common |
|
Common Equity Units Outstanding
| 12827666 |
|
Common Equity CUSIP (if any):
| 000000N/A |
|
Common Equity Units Name of Trading Center or Quotation Medium (if any)
| N/A |
Preferred Equity
|
Preferred Equity Name of Class (if any)
| N/A |
|
Preferred Equity Units Outstanding
| 0 |
|
Preferred Equity CUSIP (if any)
| 000000N/A |
|
Preferred Equity Name of Trading Center or Quotation Medium (if any)
| N/A |
Debt Securities
|
Debt Securities Name of Class (if any)
| Convertible Debt |
|
Debt Securities Units Outstanding
| 475000 |
|
Debt Securities CUSIP (if any):
| 000000N/A |
|
Debt Securities Name of Trading Center or Quotation Medium (if any)
| N/A |
1-A: Item 2. Issuer Eligibility
Issuer Eligibility
Check this box to certify that all of the following statements
are true for the issuer(s)
☒
-
Organized under the laws of the United States or Canada, or any
State, Province, Territory or possession thereof, or the District
of Columbia.
- Principal place of business is in the United States or Canada.
-
Not subject to section 13 or 15(d) of the Securities Exchange
Act of 1934.
-
Not a development stage company that either (a) has no specific
business plan or purpose, or (b) has indicated that its business
plan is to merge with an unidentified company or companies.
-
Not an investment company registered or required to be
registered under the Investment Company Act of 1940.
-
Not issuing fractional undivided interests in oil or gas rights,
or a similar interest in other mineral rights.
-
Not issuing asset-backed securities as defined in Item 1101 (c)
of Regulation AB.
-
Not, and has not been, subject to any order of the Commission
entered pursuant to Section 12(j) of the Exchange Act (15 U.S.C.
78l(j)) within five years before the filing of this offering
statement.
-
Has filed with the Commission all the reports it was required to
file, if any, pursuant to Rule 257 during the two years immediately
before the filing of the offering statement (or for such shorter
period that the issuer was required to file such reports).
1-A: Item 3. Application of Rule 262
Application Rule 262
Check this box to certify that, as of the time of this filing,
each person described in Rule 262 of Regulation A is either not
disqualified under that rule or is disqualified but has received a
waiver of such disqualification.
☒
Check this box if "bad actor" disclosure under Rule 262(d) is
provided in Part II of the offering statement.
☐
1-A: Item 4. Summary Information Regarding the Offering and Other
Current or Proposed Offerings
Summary Infomation
|
Check the appropriate box to indicate whether you are
conducting
a Tier 1 or Tier 2 offering
| ☐
Tier1
☒
Tier2
|
|
Check the appropriate box to indicate whether the
financial statements
have been audited
| ☐
Unaudited
☒
Audited
|
|
Types of Securities Offered in this Offering Statement
(select
all that apply)
| |
| ☒Equity (common or preferred stock) |
|
Does the issuer intend to offer the securities on a
delayed or continuous basis pursuant to Rule 251(d)(3)?
| ☒
Yes
☐
No
|
|
Does the issuer intend this offering to last more than
one year?
| ☐
Yes
☒
No
|
|
Does the issuer intend to price this offering after
qualification
pursuant to Rule 253(b)?
| ☐
Yes
☒
No
|
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Will the issuer be conducting a best efforts offering?
| ☒
Yes
☐
No
|
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Has the issuer used solicitation of interest
communications in
connection with the proposed offering?
| ☒
Yes
☐
No
|
|
Does the proposed offering involve the resale of
securities by
affiliates of the issuer?
| ☐
Yes
☒
No
|
|
Number of securities offered
| 4600000 |
|
Number of securities of that class outstanding
| 12827666 |
The information called for by this item below may be omitted if
undetermined at the time of filing or submission, except that if a
price range has been included in the offering statement, the midpoint
of that range must be used to respond. Please refer to Rule 251(a)
for the definition of "aggregate offering price" or "aggregate sales"
as used in this item. Please leave the field blank if undetermined at
this time and include a zero if a particular item is not applicable
to the offering.
|
Price per security
|
$
6.5000 |
|
The portion of the aggregate offering price
attributable to securities being offered on behalf of the issuer
|
$
29900000.00 |
|
The portion of the aggregate offering price
attributable to securities being offered on behalf of selling
securityholders
|
$
0.00 |
|
The portion of the aggregate offering price
attributable to all the securities of the issuer sold pursuant to a
qualified offering statement within the 12 months before the
qualification of this offering statement
|
$
0.00 |
|
The estimated portion of aggregate sales attributable
to securities that may be sold pursuant to any other qualified
offering statement concurrently with securities being sold under
this offering statement
|
$
0.00 |
|
Total (the sum of the aggregate offering price and
aggregate sales in the four preceding paragraphs)
|
$
29900000.00 |
Anticipated fees in connection with this offering and names of
service providers
|
Underwriters - Name of Service Provider
| WR Hambrecht and Co. |
Underwriters - Fees
|
$
1794000.00 |
|
Sales Commissions - Name of Service Provider
| |
Sales Commissions - Fee
|
$
|
|
Finders' Fees - Name of Service Provider
| |
Finders' Fees - Fees
|
$
|
|
Audit - Name of Service Provider
| dbbmckennon |
Audit - Fees
|
$
45000.00 |
|
Legal - Name of Service Provider
| KHLK LLP |
Legal - Fees
|
$
70000.00 |
|
Promoters - Name of Service Provider
| |
Promoters - Fees
|
$
|
|
Blue Sky Compliance - Name of Service Provider
| |
Blue Sky Compliance - Fees
|
$
|
|
CRD Number of any broker or dealer listed:
| 45040 |
|
Estimated net proceeds to the issuer
|
$
27991000.00 |
|
Clarification of responses (if necessary)
| |
1-A: Item 5. Jurisdictions in Which Securities are to be Offered
Jurisdictions in Which Securities are to be Offered
Using the list below, select the jurisdictions in which
the
issuer intends to offer the securities
|
Selected States and Jurisdictions
|
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
DISTRICT OF COLUMBIA
PUERTO RICO
ALBERTA, CANADA
BRITISH COLUMBIA, CANADA
MANITOBA, CANADA
NEW BRUNSWICK, CANADA
NEWFOUNDLAND, CANADA
NOVA SCOTIA, CANADA
ONTARIO, CANADA
PRINCE EDWARD ISLAND, CANADA
QUEBEC, CANADA
SASKATCHEWAN, CANADA
YUKON, CANADA
|
Using the list below, select the jurisdictions in which the
securities are to be offered by underwriters, dealers or sales
persons or check the appropriate box
|
None
| ☐ |
|
Same as the jurisdictions in which the issuer intends
to offer the securities
| ☒ |
|
Selected States and Jurisdictions
|
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
DISTRICT OF COLUMBIA
PUERTO RICO
ALBERTA, CANADA
BRITISH COLUMBIA, CANADA
MANITOBA, CANADA
NEW BRUNSWICK, CANADA
NEWFOUNDLAND, CANADA
NOVA SCOTIA, CANADA
ONTARIO, CANADA
PRINCE EDWARD ISLAND, CANADA
QUEBEC, CANADA
SASKATCHEWAN, CANADA
YUKON, CANADA
|
1-A: Item 6. Unregistered Securities Issued or Sold Within One
Year
Unregistered Securities Issued or Sold Within One Year
None
☐
Unregistered Securities Issued
As to any unregistered securities issued by the issuer of any of
its predecessors or affiliated issuers within one year before the
filing of this Form 1-A, state:
| (a)Name of such issuer | Arcimoto, Inc. |
| (b)(1) Title of securities issued | A-1 Preferred Stock |
| (2) Total Amount of such securities issued | 329700 |
|
(3) Amount of such securities sold by or for the
account of any person who at the time was a director, officer,
promoter or principal securityholder of the issuer of such
securities, or was an underwriter of any securities of such issuer.
| 329700 |
|
(c)(1) Aggregate consideration for which the securities
were issued and basis for computing the amount thereof.
| $1,648,500 @ $5.00 per share |
|
(2) Aggregate consideration for which the securities
listed in (b)(3) of this item (if any) were issued and the basis
for computing the amount thereof (if different from the basis
described in (c)(1)).
| $1,648,500 @ $5.00 per share |
Unregistered Securities Act
|
(e) Indicate the section of the Securities Act or
Commission rule or regulation relied upon for exemption from the
registration requirements of such Act and state briefly the facts
relied upon for such exemption
| Reg D 506(b) |
PRELIMINARY OFFERING CIRCULAR DATED
AUGUST 7, 2017
Arcimoto, Inc.
544 Blair Blvd.
Eugene, OR 97402
www.arcimoto.com
UP TO 4,600,000 SHARES
OF COMMON STOCK
SEE “SECURITIES BEING OFFERED”
AT PAGE 38
Common
Shares
|
|
Price Per Share
to Public
|
|
|
Total Number of
Shares Being
Offered
|
|
|
Underwriter
Discounts
and Commissions**
|
|
|
Proceeds to Issuer
Before Expenses, Discounts
and Commissions**
|
|
|
Total Minimum
|
|
$
|
6.50
|
*
|
|
|
160,000
|
|
|
$
|
62,400
|
|
|
$
|
1,040,000
|
|
|
Total Maximum
|
|
$
|
6.50
|
|
|
|
4,600,000
|
|
|
$
|
1,794,000
|
|
|
$
|
29,900,000
|
|
** The company has engaged W.R. Hambrecht & Co., LLC
to serve as its sole and exclusive underwriter to assist in the placement of its securities. If the underwriter identifies all
the investors and the maximum amount of shares are sold, the maximum amount the company would pay the underwriter is $1,794,000.
The company has also agreed to reimburse certain expenses incurred by the underwriter in connection with the offering. In addition
to the commission and expense reimbursements, the company anticipates the underwriter will have the right to acquire warrants
to purchase shares of the company’s common stock equal to 5.0% of the aggregate shares sold in the offering. These warrants
have an exercise price of $7.475 per share. See “Underwriting and Plan of Distribution; Selling Securityholders” for
details of compensation paid to the Underwriter on page 40.
The company expects that the amount of expenses of the offering
that it will pay will be approximately $115,000 not including state filing fees.
In the event the Company raises enough capital and acquires
enough round lot investors to qualify for a listing on Nasdaq or another exchange, the Company intends to file an amendment to
this Form 1-A to follow the disclosure format of Form S-1 and subsequently to file a Form 8-A in order to register the Company’s
Common Stock with the Commission and list publicly following the conclusion of this offering.
The company executed a two for one common stock split on
July 21, 2017, and converted all preferred stock to common on July 25, 2017. Unless otherwise stated all share prices and quantities
are post-split. The audited financial statements have been adjusted to reflect
post-split quantities of shares outstanding and exercise prices of convertible securities, and to reflect the preferred conversion
to common as of the ending balance sheet, December 31, 2016.
The company has engaged Prime Trust, LLC as an escrow
agent (the “Escrow Agent”) to hold funds tendered by investors, and assuming we sell a minimum of $1,040,000 in shares,
we may hold a series of closings at which we receive the funds from the escrow agent and issue the shares to investors. The offering
will terminate at the earlier of: (1) the date at which the maximum offering amount has been sold, (2) the date which is one year
from this offering being qualified by the Commission, or (3) the date at which the offering is earlier terminated by the company
in its sole discretion. The offering is being conducted on a best-efforts basis. The company may undertake one or more closings
on a rolling basis. After each closing, funds tendered by investors will be available to the company.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES
NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE
ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN
EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES
OFFERED ARE EXEMPT FROM REGISTRATION
GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF
THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY
TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE
THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE
YOU TO REFER TO www.investor.gov.
This offering is inherently risky. See “Risk Factors”
on page 2.
Sales of these securities will commence on approximately
[________], 2017.
The company is following the “Offering Circular”
format of disclosure under Regulation A.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR
IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT
FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION
TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S
SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR
WAS FILED MAY BE OBTAINED.
TABLE OF CONTENTS
In this Offering Circular, the term “Arcimoto,” “we,”
“us,” “our,” or “the company” refers to Arcimoto, Inc.
THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS
AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT.
WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,”
“INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS
REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE
THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY
DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER
SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
SUMMARY
Arcimoto® was founded in 2007 to catalyze
the shift to a sustainable transportation system. The name Arcimoto means “Future I Drive,” and it is our aspiration:
to devise new technologies and patterns of mobility that raise the bar for environmental efficiency, footprint and affordability.
Arcimoto plans to achieve its mission by replacing the global urban and suburban use of 4,000 lb. internal combustion engine vehicles
for regular daily trips with the SRK®, a pure electric solution that is a quarter of the weight, a third the cost of purchase
and ten times as efficient as the US fleet average passenger car.
Arcimoto’s SRK defines the Fun Utility
Vehicle™ category. The SRK delivers a thrilling ride experience, exceptional maneuverability, full comfort for two passengers
with gear, optimal urban parkability, and ultra-efficient operation, at an affordable target base model price of $11,900. Arcimoto
has taken the SRK from a napkin sketch, through eight generations of product development, to a refined design on the cusp of series
production. As we shift to a self-driving future, Arcimoto’s platform will provide the low cost, ultra-efficient foundation
for urban fleet autonomy as well.
Arcimoto’s business model is entirely
focused on low-end market disruption. Other electric vehicle market entrants such as Tesla, Fisker, Faraday Future and Lucid have
executed or articulated strategies that start at the now-crowded and capital intensive luxury end of the EV marketplace, where
they compete for a small pool of well-heeled customers. Arcimoto, by contrast, is focused entirely on a capital efficient pathway
to a product solution for the other end of the market. We are targeting customers who cannot or will not participate in today’s
market due to the lack of affordable clean daily vehicle purchase options.
The Offering
|
Securities offered
|
Minimum of 160,000 and a Maximum of 4,600,000 shares of Common Stock
|
|
|
|
|
Common Stock outstanding before the Offering
|
12,827,666 shares
|
|
Common Stock outstanding after the Offering
|
Up to 17,427,666 shares
|
Use of Proceeds
The net proceeds of this offering will be used
to repay debt, cover capital expenditures, and fund operating expenses, including research and development, costs of our production
facilities, product, advertising, sales, marketing and business development, and the cost of the offering. The details
of our plans are set forth in the “Use of Proceeds” section.
Selected Risks Associated with our Business
Our business is subject to a number of risks
and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary.
These risks include, but are not limited to, the following:
|
|
·
|
Our auditor has issued a “going concern” opinion;
|
|
|
·
|
We are an early stage company and have not yet generated consistent revenues;
|
|
|
·
|
We have a significant working capital deficiency;
|
|
|
·
|
We face significant market competition;
|
|
|
·
|
We have debt, which is secured by all of our assets, including manufacturing equipment;
|
|
|
·
|
We may not be able to obtain adequate financing to continue our operations;
|
|
|
·
|
Our success is dependent upon consumers’ willingness to adopt the vehicles we build;
|
|
|
·
|
The discovery of defects in vehicles may negatively affect our business;
|
|
|
·
|
There is no current market for any of our shares of stock;
|
|
|
·
|
Motor vehicles, like those produced by Arcimoto, are highly regulated and subject to regulatory changes.
|
RISK FACTORS
The SEC requires the company to identify risks
that are specific to its business and its financial condition. The company is still subject to all the same risks that all companies
in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political
and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage
companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks
when deciding whether to invest.
Our auditor has issued a “going concern”
opinion.
We may not have enough funds to sustain the
business until it becomes profitable. Even if we raise funds through this financing round, we may not accurately anticipate how
quickly we may use the funds and if it is sufficient to get the business to profitability.
We are an early stage company and have not
yet generated any significant revenues.
Arcimoto has incurred a net loss in the last
fiscal year, has fewer than ten years of operating history and has generated limited revenues since inception. Our limited operating
history makes evaluating our business and future prospects difficult, and may increase the risk of your investment. Arcimoto
was founded in 2007 and has only recently unveiled its first SRK vehicle prototypes. We have not yet begun producing or delivering
our first vehicles. To date, we have no revenues from operations. We intend in the longer term to derive substantial revenues
from the sales of our SRK vehicles but we do not expect to start delivering to customers until the third quarter of 2017 at the
earliest. Our vehicle requires significant investment prior to commercial introduction, and may never be commercially successful.
At
December 31, 2016, our working capital deficit was $349,836 (audited). As of May 31, 2017, working capital was a surplus of $101,562
(unaudited). We have been raising funds through equity investment and convertible notes to meet our cash needs, but
there is no guarantee that we will be able to raise enough additional capital before becoming profitable.
We have debt, which is secured by all of
our assets, including our manufacturing equipment.
As of December 31, 2016, we had outstanding
secured loans totaling $250,000 and convertible notes of $325,000. As of May 31, 2017, we have added convertible debt of $150,000.
All our accounts receivable and general intangibles, including all inventory, machinery, equipment, furniture and fixtures and
the products and proceeds of all the foregoing, have been pledged as collateral to secure the repayment of our loans. If we are
unable to repay these secured loans or if another type of event of default occurs, a decision by the lenders to foreclose on their
security interest would materially and adversely affect our future.
We may not be able to obtain adequate financing
to continue our operations.
The design, manufacture, sale and servicing
of vehicles is a capital-intensive business. Even if we successfully raise $10,000,000 from this offering, we estimate
that we will need to raise an additional $18 million within 15 months to reach our vehicle production goals and to be operationally
cash flow positive. We will need to raise additional funds through the issuance of equity, equity-related, or debt securities
or through obtaining credit from government or financial institutions. This capital will be necessary to fund ongoing
operations, continue research, development and design efforts, establish sales centers, improve infrastructure, and make the investments
in tooling and manufacturing equipment. We cannot assure anyone that we will be able to raise additional funds
when needed. If we are able to raise additional financing, that financing may be on terms that are better than we are offering
to investors in this offering.
Recent political trends in the United States have created new
uncertainty regarding the continuation of the ATVMLP.
Recent announcements regarding budgeting and
appropriations from the federal government have created uncertainty regarding whether the Advanced Technology Vehicles Manufacturing
Loan Program (“ATVMLP”) will continue to exist in its current form. We intend to submit an application to the ATVMLP
in mid-2017. The ATVMLP program provides for low-cost loans that can be used to reequip, expand, or establish manufacturing facilities
for advanced technology vehicles in the United States. There is no guarantee that we would receive such a loan and are not dependent
on receiving such a loan. If we do not receive financing under the ATVMLP, we may be required to seek financing from other sources
at terms that are not as favorable to the Company.
Future disruptive new technologies could
have a negative effect on our business.
We are subject to the risk of future disruptive
technologies. If new vehicle technologies (electric or otherwise) develop that are superior to our vehicles, or are perceived to
be superior by consumers, it could have a material adverse effect on the company.
We face significant market competition.
We compete with other electric vehicle manufacturers
such as Tesla Motors and others. We run the risk that these other electric vehicle manufacturers will develop a product similar
to our vehicles before we complete development of our vehicles (in particular, the SRK electric vehicle) or will develop a product
that resonates better with consumers. We also compete with the automotive industry in general, including manufacturers of non-electric
vehicles and hybrid vehicles. The automotive industry is intensely competitive, with manufacturing capacity far exceeding current
demand. Industry overcapacity has resulted in many manufacturers offering marketing incentives on vehicles in an attempt to maintain
and grow market share; these incentives historically have included a combination of subsidized financing or leasing programs, price
rebates, and other incentives. As a result, we are not necessarily able to set our prices to offset higher costs. Continuation
of or increased excess capacity could have a substantial adverse effect on our financial condition and results of operations.
Our success is dependent upon consumers’
willingness to adopt three-wheeled, tandem-seated two-passenger vehicles.
If we cannot
develop sufficient market demand for three-wheeled vehicles, we will not be successful. Factors that may influence the
acceptance of three-wheeled vehicles include:
|
|
·
|
Perceptions about three-wheeled vehicles’ comfort, quality, safety, design, performance and
cost;
|
|
|
·
|
The availability of alternative fuel vehicles, including plug-in hybrid electric and all-electric
vehicles;
|
|
|
·
|
Improvements in the fuel economy and cost of service of the internal combustion engine;
|
|
|
·
|
The environmental consciousness of consumers;
|
|
|
·
|
Volatility in the cost of oil and gasoline; and
|
|
|
·
|
Government regulations and economic incentives promoting fuel efficiency and alternate forms of
transportation.
|
We may experience lower-than-anticipated
market acceptance of our vehicles.
Although we have conducted some market
research regarding our electric vehicles, accumulating over 1,600 pre-order reservation deposits as of July 24, 2017, many factors
both within and outside our control, affect the success of new vehicles in the marketplace. At this time, it is difficult to measure
consumers’ willingness to adopt electric vehicles as a mode of transportation, particularly three-wheeled electric vehicles.
Offering fuel-efficient vehicles that consumers want and value can mitigate the risks of increasing price competition and declining
demand, but vehicles that are perceived to be less desirable (whether in terms of price, quality, styling, safety, overall value,
or other attributes) can exacerbate these risks. For example, if a new vehicle were to experience quality issues at the time of
launch, the vehicle’s perceived quality could be affected even after the issues had been corrected, resulting in lower than
anticipated sales volumes, market share, and profitability. Moreover, if a new vehicle is not accepted by consumers based on size,
styling, or other attributes, we would experience lower than anticipated sales volumes, market share, and profitability.
Our distribution model may result in lower
sales volumes.
Our present distribution model is different
from the distribution models used by other vehicle manufacturers, except for Tesla Motors. Like Tesla, we plan to sell vehicles
directly to our customers over the internet or via company-owned retail stores, rather than through traditional dealer franchises.
This direct sales model may result in lower sales due to customer reluctance to rely on web-based vehicle purchasing. We are unable
to evaluate the effectiveness of our present distribution model and it may result in lower or higher sales volumes, market share,
and profitability.
The discovery of defects in vehicles resulting
in delays in new model launches, recall campaigns, reputational damage, or increased warranty costs may negatively affect our business.
Meeting or exceeding many government-mandated
safety standards is costly and often technologically challenging. Government safety standards also require manufacturers to remedy
defects related to vehicle safety through safety recall campaigns, and a manufacturer is obligated to recall vehicles if it determines
that the vehicles do not comply with a safety standard. Should we or government safety regulators determine that a safety or other
defect or a noncompliance exists with respect to certain of our vehicles prior to the start of production, the launch of such vehicle
could be delayed until such defect is remedied. The costs associated with any protracted delay in new product launches necessary
to remedy such defects, or the cost of recall campaigns or warranty costs to remedy such defects in vehicles that have been sold,
could be substantial. Further, adverse publicity surrounding actual or alleged safety-related or other defects could damage our
reputation and adversely affect sales of our vehicles.
Increased safety, emissions, fuel economy,
or other regulations may result in higher costs, cash expenditures, and/or sales restrictions.
The motorized vehicle industry is governed
by a substantial amount of government regulation, which often differs by state and region. Government regulation has arisen, and
proposals for additional regulation are advanced, primarily out of concern for the environment, vehicle safety, and energy independence.
In addition, many governments regulate local product content and/or impose import requirements as a means of creating jobs, protecting
domestic producers, and influencing the balance of payments. The cost to comply with existing government regulations is substantial,
and future, additional regulations could have a substantial adverse impact on our financial condition.
Unusual or significant litigation, governmental
investigations or adverse publicity arising out of alleged defects in our vehicles, or otherwise may derail our business.
We plan to ensure that we comply with governmental
safety regulations, mobile and stationary source emissions regulations, and other standards. Compliance with governmental standards,
however, does not necessarily prevent individual or class actions, which can entail significant cost and risk. In certain circumstances,
courts may permit tort claims even where our vehicles comply with federal law and/or other applicable law. Furthermore, simply
responding to actual or threatened litigation or government investigations of our compliance with regulatory standards, whether
related to our vehicles or business or commercial relationships, may require significant expenditures of time and other resources.
Litigation also is inherently uncertain, and we could experience significant adverse results if litigation is ever brought against
us. In addition, adverse publicity surrounding an allegation of a defect, regulatory violation or other matter (with or without
corresponding litigation or governmental investigation) may cause significant reputational harm that could have a significant adverse
effect on our sales.
Limited intellectual property protection
may cause us to lose our competitive advantage and adversely affect our business.
We have been granted two patents, and have
filed six additional non-provisional utility patent applications. These patent applications and/or any patent applications we may
file in the future may not be successful. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality
procedures and licensing arrangements, to establish and protect intellectual property rights to our technologies and vehicles.
We typically enter into confidentiality or license agreements with employees, consultants, consumers and vendors in an effort to
control access to and distribution of technology, software, documentation and other information. Policing unauthorized use of this
technology is difficult and the steps taken may not prevent misappropriation of the technology. In addition, effective protection
may be unavailable or limited in some jurisdictions outside the United States, Canada and the United Kingdom. Litigation may be
necessary in the future to enforce or protect our rights or to determine the validity and scope of the rights of others. Such litigation
could cause us to incur substantial costs and divert resources away from daily business, which in turn could materially adversely
affect the business.
Our failure to
obtain or maintain the right to use certain intellectual property may negatively affect our business.
Our future success
and competitive position depends in part upon our ability to obtain or maintain certain proprietary intellectual property used
in our principal products. This may be achieved, in part, by prosecuting claims against others who we believe are infringing our
rights and by defending claims of intellectual property infringement brought by others. While we are not currently engaged in any
material intellectual property litigation, in the future we may commence lawsuits against others if we believe they have infringed
our rights, or we may become subject to lawsuits alleging that we have infringed the intellectual property rights of others. For
example, to the extent that we have previously incorporated third-party technology and/or know-how into certain products for which
we do not have sufficient license rights, we could incur substantial litigation costs, be forced to pay substantial damages or
royalties, or even be forced to cease sales in the event any owner of such technology or know-how were to challenge our subsequent
sale of such products (and any progeny thereof). In addition, to the extent that we discover or have discovered third-party patents
that may be applicable to products or processes in development, we may need to take steps to avoid claims of possible infringement,
including obtaining non-infringement or invalidity opinions and, when necessary, re-designing or re-engineering products. However,
we cannot assure you that these precautions will allow us to successfully avoid infringement claims. Our involvement in intellectual
property litigation could result in significant expense to us, adversely affect the development of sales of the challenged product
or intellectual property and divert the efforts of our technical and management personnel, whether or not such litigation is resolved
in our favor. In the event of an adverse outcome in any such litigation, we may, among other things, be required to:
|
|
•
|
pay substantial damages;
|
|
|
•
|
cease the development, manufacture, use, sale or importation
of products that infringe upon other patented intellectual property;
|
|
|
•
|
expend significant resources to develop or acquire non-infringing
intellectual property;
|
|
|
•
|
discontinue processes incorporating infringing technology;
or
|
|
|
•
|
obtain licenses to the infringing intellectual property.
|
We cannot assure you
that we would be successful in any such development or acquisition or that any such licenses would be available upon reasonable
terms, if at all. Any such development, acquisition or license could require the expenditure of substantial time and other resources
and could have a material adverse effect on our business, results of operations and financial condition.
Developments and improvements in alternative
technologies such as hybrid engine or full electric vehicles or in the internal combustion engine, or continued low retail gasoline
prices may materially and adversely affect the demand for our three-wheeled vehicles.
Significant developments in alternative technologies,
such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion
engine, may materially and adversely affect our business and prospects in ways that we do not currently anticipate. If
alternative energy engines or low gasoline prices make existing four-wheeled vehicles with greater passenger and cargo capacities
less expensive to operate, we may not be able to compete with manufacturers of such vehicles.
We may be affected by uncertainty over government
purchase incentives.
Arcimoto’s vehicle cost thesis strongly
benefits from purchase incentives at the state and national government levels. The existence or lack of tax incentives will affect
the adoption velocity of our products in the marketplace. An inability to take advantage of tax incentives may negatively affect
our revenues.
Motor vehicles, like those produced by Arcimoto,
are highly regulated and are subject to regulatory changes
Arcimoto is aware that the National Highway
Transportation Safety Administration is reviewing whether to adopt new safety regulations pertaining to three-wheeled motor vehicles.
Currently, US motorcycle regulations apply to such vehicles. New regulations could impact the design of the SRK and our ability
to produce those vehicles, possibly negatively affecting our financial results. Additionally, state level regulations are inconsistent
with regard to whether a helmet is required to operate an Arcimoto vehicle. Sales may be negatively impacted should any state alter
its requirements with regard to customer use of helmets.
There is no current market for any of our
shares of stock.
There is no formal marketplace for the resale
of the shares. Our common stock may be traded on the over-the-counter market to the extent any demand exists. Investors should
assume that they may not be able to liquidate their investment for some time, or be able to pledge their shares as collateral.
We are dependent on our suppliers, the majority
of which are single source suppliers, and the inability of these suppliers to deliver necessary components of our products in a
timely manner at prices, quality levels, and volumes acceptable to us, or our inability to efficiently manage these components,
could have a material adverse effect on our financial condition and operating results.
Our products contain numerous purchased parts
which we source globally from hundreds of direct suppliers, the majority of whom are currently single source suppliers despite
efforts to qualify and obtain components from multiple sources whenever feasible. Any significant unanticipated demand would require
us to procure additional components in a short amount of time, and in the past we have also replaced certain suppliers because
of their failure to provide components that met our quality control standards. While we believe that we will be able to secure
additional or alternate sources of supply for most of our components in a relatively short time frame, there is no assurance that
we will be able to do so or develop our own replacements for certain highly customized components of our products. If we encounter
unexpected difficulties with key suppliers, and if we are unable to fill these needs from other suppliers, we could experience
production delays and potential loss of access to important technology and parts for producing, servicing and supporting our products.
There is no assurance that suppliers will ultimately
be able to meet our cost, quality and volume needs. Furthermore, as the scale of our vehicle production increases, we will need
to accurately forecast, purchase, warehouse and transport to our manufacturing facilities components at much higher volumes than
we have experience with. If we are unable to accurately match the timing and quantities of component purchases to our actual production
plans or capabilities, or successfully implement automation, inventory management and other systems to accommodate the increased
complexity in our supply chain, we may have to incur unexpected storage, transportation and write-off costs, which could have a
material adverse effect on our financial condition and operating results.
DILUTION
Dilution means a reduction in value, control,
or earnings of the shares the investor owns.
Immediate dilution
An early-stage company typically sells its
shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect,
putting their “sweat equity” into the company. Occasionally, strategic partners are also interested in investing at
an early stage. When the company seeks cash investments from outside investors, like you, the new investors typically pay a much
larger sum for their shares than the founders, early employees, or investors from prior financings, which means that the cash value
of your stake is diluted because each share of the same type is worth the same amount, and you paid more for your shares than earlier
investors did for theirs. Dilution may also be caused by pricing securities at a value higher than book value or expenses incurred
in the offering.
While investors in this offering are
paying $6.50 per share, the company has issued 329,700 shares of its Series A-1 Preferred Stock in the past twelve months at a
price of $5.00 per share. All A-1 Preferred Stock was converted to Common Stock on July 25, 2017. Additionally, the Company has
267,700 stock options outstanding that were issued in October 2015 with an exercise price of $2.061, 455,000 stock options issued
to employees in March 2017 with an exercise price of $2.50, and an additional 20,000 options with an exercise price of $2.75.
810,004 outstanding warrants with an exercise price of $0.50 per share were issued in 2012 and 2013, 170,000 with an exercise
price of $0.938 per share were issued in 2013, and 8,000 with an exercise price of $2.50 per share were issued in 2017.
The following table demonstrates the
dilution that new investors will experience upon investment in the Company. This table uses the Company’s net tangible
book value deficit as of December 31, 2016 of $(626,031), which is derived from the net equity of the Company per the audited
financial statements presented in this filing. This tangible net book value is then adjusted to contemplate conversion of all
other convertible instruments outstanding at current that would provide proceeds to the Company, which assumes exercise of all
options (742,700 shares) and warrants (988,004 shares) currently outstanding. Such conversions would provide $2,328,473
of proceeds and result in the issuance of 1,730,704 shares of common stock, which are considered in the figures used in the calculations
presented in the table. $325,000 of the $475,000 in convertible notes in the table are also included in the net tangible book
value as of December 31, 2016. Assuming that they will be converted at 90% of this offering price, the notes will result in an
additional 81,197 shares.
The table presents three scenarios
for the convenience of the reader: the minimum offering 160,000 shares ($1,040,000) raise from this offering, mid-point 2,380,000
shares ($15,470,000) raise from this offering, and a fully subscribed 4,600,000 shares ($29,900,000) raise from this offering
(maximum offering).
On Basis of Full Conversion of Issued Instruments
|
|
|
|
|
|
|
$1.0
Million Raise
|
|
|
|
|
|
|
$15.5
Million Raise
|
|
|
|
|
|
|
$29.9
Million Raise
|
|
|
Price per Share
|
|
|
|
|
|
$
|
6.50
|
(3)
|
|
|
|
|
|
$
|
6.50
|
(3)
|
|
|
|
|
|
$
|
6.50
|
(3)
|
|
Shares issued
|
|
|
|
|
|
|
160,000
|
|
|
|
|
|
|
|
2,380,000
|
|
|
|
|
|
|
|
4,600,000
|
|
|
Warrants issued as broker compensation for this offering
|
|
|
|
|
|
|
8,000
|
(4)
|
|
|
|
|
|
|
119,000
|
(4)
|
|
|
|
|
|
|
230,000
|
(4)
|
|
Capital raised
|
|
|
|
|
|
$
|
1,099,800
|
|
|
|
|
|
|
$
|
16,359,525
|
|
|
|
|
|
|
$
|
31,619,250
|
|
|
Less: Offering costs
|
|
|
|
|
|
$
|
(177,400
|
)
|
|
|
|
|
|
$
|
(1,043,200
|
)
|
|
|
|
|
|
$
|
(1,909,000
|
)
|
|
Net offering proceeds
|
|
|
|
|
|
$
|
922,400
|
|
|
|
|
|
|
$
|
15,316,325
|
|
|
|
|
|
|
$
|
29,710,250
|
|
|
Adjusted net tangible book value pre-financing (as of 12/31/2016)
|
|
|
|
|
|
$
|
1,852,441
|
(2)
|
|
|
|
|
|
$
|
1,852,441
|
(2)
|
|
|
|
|
|
$
|
1,852,441
|
(2)
|
|
Adjusted net tangible book value post-financing
|
|
|
|
|
|
$
|
2,774,841
|
(3)
|
|
|
|
|
|
$
|
17,168,766
|
(3)
|
|
|
|
|
|
$
|
31,562,691
|
(3)
|
|
Shares issued and outstanding pre-financing, assuming full conversion
|
|
|
|
|
|
|
14,639,567
|
(1)
|
|
|
|
|
|
|
14,639,567
|
(1)
|
|
|
|
|
|
|
14,639,567
|
(1)
|
|
Post-financing shares issued and outstanding
|
|
|
|
|
|
|
14,807,567
|
|
|
|
|
|
|
|
17,138,567
|
|
|
|
|
|
|
|
19,469,567
|
|
|
Net tangible book value per share prior to offering
|
|
|
|
|
|
$
|
0.127
|
|
|
|
|
|
|
$
|
0.127
|
|
|
|
|
|
|
$
|
0.127
|
|
|
Increase/(Decrease) per share attributable to new investors
|
|
|
|
|
|
$
|
0.061
|
|
|
|
|
|
|
$
|
0.875
|
|
|
|
|
|
|
$
|
1.495
|
|
|
net tangible book value per share after offering
|
|
|
|
|
|
$
|
0.187
|
|
|
|
|
|
|
$
|
1.002
|
|
|
|
|
|
|
$
|
1.621
|
|
|
Dilution per share to new investors ($)
|
|
|
|
|
|
$
|
6.313
|
|
|
|
|
|
|
$
|
5.498
|
|
|
|
|
|
|
$
|
4.879
|
|
|
Dilution per share to new investors (%)
|
|
|
|
|
|
|
97.12
|
%
|
|
|
|
|
|
|
84.59
|
%
|
|
|
|
|
|
|
75.06
|
%
|
Convertible instruments outstanding at current:
|
|
|
|
|
|
Exercise
Price
|
|
|
|
|
|
Number
of shares
|
|
|
|
|
|
Proceeds
|
|
|
Warrants issued 3/9/2012 to 8/20/2012
|
|
|
|
|
|
$
|
0.500
|
|
|
|
|
|
|
|
810,004
|
|
|
|
|
|
|
$
|
405,002
|
|
|
Warrants issued 6/1/2013
|
|
|
|
|
|
$
|
0.938
|
|
|
|
|
|
|
|
170,000
|
|
|
|
|
|
|
$
|
159,375
|
|
|
Warrants issued 5/1/2017
|
|
|
|
|
|
$
|
2.500
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
$
|
20,000
|
|
|
Options issued October 2015
|
|
|
|
|
|
$
|
2.061
|
|
|
|
|
|
|
|
267,700
|
|
|
|
|
|
|
$
|
551,596
|
|
|
Options issued March 2017
|
|
|
|
|
|
$
|
2.500
|
|
|
|
|
|
|
|
455,000
|
|
|
|
|
|
|
$
|
1,137,500
|
|
|
Options issued March 2017
|
|
|
|
|
|
$
|
2.750
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
55,000
|
|
|
Convertible notes issued 10/13/2016 to 3/28/2017
|
|
|
|
|
|
$
|
5.850
|
|
|
|
|
|
|
|
81,197
|
|
|
|
|
|
|
$
|
475,000
|
|
|
Total
|
|
|
|
|
|
$
|
1.547
|
|
|
|
|
|
|
|
1,811,901
|
|
|
|
|
|
|
$
|
2,803,473
|
|
(1) Assumes conversion of all convertible
notes to common stock, conversion of 742,700 outstanding stock options (providing proceeds of $1,744,096 to net tangible book
value as of December 31, 2016), and conversion of 988,004 outstanding stock warrants (providing proceeds of $584,377 to net tangible
book value as of December 31, 2016), and conversion of convertible notes at 90% of this offering price per share resulting in
81,197 shares ($325,000 of proceeds are included in the December 31, 2016 net tangible book value).
(2) Net tangible book value as of December
31, 2016, is adjusted for conversion proceeds for the outstanding warrants, stock options, and convertible notes issued after
December 31, 2016, as discussed in note (1).
(3) Assumes conversion of Warrants
issued as broker compensation at 5% of amount raised from this offer.
(4) 5% of the total shares sold in
the offering issued as Warrants for broker compensation at a strike price of 115% of the offering price.
Future dilution
Future actions by the company may also
cause dilution. The investor’s stake in a company could be diluted due to the company issuing additional shares. If the
company issues more shares, the percentage of the company that you own will go down, even though the value of the company and
your shareholding may go up. This increase in number of shares outstanding could result from a stock offering (such as an initial
public offering, another private security offering round, a venture capital round, angel investment), employees exercising stock
options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.
If the company decides to issue more shares,
an investor could experience value dilution, with each share being worth less than before, and will experience control dilution,
with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the
amount earned per share (though this typically occurs only if the company offers dividends, and most early stage companies are
unlikely to offer dividends, preferring to invest any earnings into the company).
The type of dilution that hurts early-stage
investors most occurs when the company sells more shares in a “down round,” meaning at a lower valuation than in earlier
offerings. This type of dilution might also happen upon conversion of convertible notes into shares, if any. Typically, the terms
of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the
convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e.,
they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap”
on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get
more shares for their money than new investors. In the event that the financing is a “down round” the holders of the
convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for
their money. Investors should pay careful attention to the amount of convertible notes that the company has issued (and may issue
in the future), and the terms of those notes.
If you are making an investment expecting to
own a certain percentage of the company or expecting each share to hold a certain amount of value, it’s important to realize
how the value of those shares can decrease by actions taken by the company. Dilution can make drastic changes to the value of each
share, ownership percentage, voting control, and earnings per share.
USE OF PROCEEDS TO ISSUER
The net proceeds of a fully subscribed
offering to the issuer, after the expenses of the offering (payment to the underwriter, WR Hambrecht and Co. and legal, accounting
and related expenses), will be approximately $27,991,000. We estimate that, at a per share price of $6.50 the net proceeds from
the sale of the 4,600,000 shares in this offering will be approximately $27,991,000, after deducting the estimated offering expenses
of approximately $1,909,000.
We plan to use these proceeds as follows:
The first use of any net proceeds from
this offering will be to pay off our existing debt of $250,000 at 5% interest incurred on April 1, 2016, due at the time of completion
of this Offering and in any event no later than September 1, 2017. We have received a modification of the loan to extend the repayment
period from July 1, 2017 to September 1, 2017. In the event of default, all amounts owed will become due upon 5 days notice. The
proceeds of this loan were used for fundraising, research and development. The creditor is the City of Eugene Oregon Business
Development Fund, which is not affiliated with the company. The following table illustrates how we will use the proceeds depending
on the amount we raise. We are showing three scenarios: minimum offering amount of $1 million, midpoint of $15.5 million, and
maximum offering amount of $29.9 million.
|
Use of Proceeds:
|
|
Minimum
Raise
|
|
Mid-Point
Raise
|
|
Maximum
Raise
|
|
Capital Raised
|
|
$
|
1,040,000
|
|
|
$
|
15,470,000
|
|
|
$
|
29,900,000
|
|
|
Less: Offering Costs
|
|
$
|
(177,400
|
)
|
|
$
|
(1,043,200
|
)
|
|
$
|
(1,909,000
|
)
|
|
Net Offering Proceeds
|
|
$
|
862,600
|
|
|
$
|
14,426,800
|
|
|
$
|
27,991,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Repayment
|
|
$
|
(250,000
|
)
|
|
$
|
(250,000
|
)
|
|
$
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CapEx for Phase 1 manufacturing facility
|
|
$
|
(280,000
|
)
|
|
$
|
(280,000
|
)
|
|
$
|
(280,000
|
)
|
|
CapEx for Phase 2 manufacturing facility
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(14,340,000
|
)
|
|
CapEx for R&D
|
|
|
|
|
|
$
|
(75,000
|
)
|
|
$
|
(75,000
|
)
|
|
CapEx for Retail locations
|
|
|
—
|
|
|
|
(1,175,000
|
|
|
$
|
(1,175,000
|
)
|
|
CapEx for Admin/Office
|
|
|
—
|
|
|
$
|
(161,000
|
)
|
|
$
|
(1,515,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of SRK's Produced
|
|
|
6
|
|
|
|
1,976
|
|
|
|
2,056
|
|
|
Revenue From Sales of SRK's
|
|
$
|
252,000
|
|
|
$
|
30,302,000
|
|
|
$
|
31,502,000
|
|
|
Variable Costs of Production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials
|
|
$
|
(210,000
|
)
|
|
$
|
(27,016,847
|
)
|
|
$
|
(27,856,847
|
)
|
|
Labor
|
|
$
|
(14,404
|
)
|
|
$
|
(1,478,701
|
)
|
|
$
|
(1,539,827
|
)
|
|
Product Warranty Reserve
|
|
$
|
(6,000
|
)
|
|
$
|
(1,976,000
|
)
|
|
$
|
(2,016,000
|
)
|
|
Net Revenue
|
|
$
|
21,596
|
|
|
$
|
(169,548
|
)
|
|
$
|
89,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months of Operating Expenses
|
|
|
1.75
|
|
|
|
18
|
|
|
|
18
|
|
|
Salaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Compensation
|
|
$
|
(20,417
|
)
|
|
$
|
(540,000
|
)
|
|
$
|
(540,000
|
)
|
|
Other Compensation
|
|
$
|
(242,629
|
)
|
|
$
|
(4,458,228
|
)
|
|
$
|
(4,458,228
|
)
|
|
Assembly/Facilities
|
|
$
|
(34,090
|
)
|
|
$
|
(415,410
|
)
|
|
$
|
(415,410
|
)
|
|
R&D
|
|
$
|
(4,481
|
)
|
|
$
|
(3,207,575
|
)
|
|
$
|
(3,207,575
|
)
|
|
S&M
|
|
$
|
(4,481
|
)
|
|
$
|
(833,333
|
)
|
|
$
|
(833,333
|
)
|
|
G&A
|
|
$
|
(48,098
|
)
|
|
$
|
(990,781
|
)
|
|
$
|
(990,781
|
)
|
|
Operating Expenses
|
|
$
|
(354,196
|
)
|
|
$
|
(10,445,327
|
)
|
|
$
|
(10,445,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Use of Proceeds
|
|
$
|
(862,600
|
)
|
|
$
|
(12,555,875
|
)
|
|
$
|
(27,991,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Use of Proceeds
|
|
$
|
0
|
|
|
$
|
1,870,925
|
|
|
$
|
0
|
|
If we raise the midpoint or maximum
amount, the approximately $10.4 million in operating expenses includes employee salaries in the amount of $5 million for the 18
months following the offering. Of the total employee compensation, $540,000 will go towards compensation of executive officers.
Those figures will be reduced as detailed above if we raise less.
In the event we raise less than $13.5 million, we will use the proceeds to complete development of
the SRK and begin delivery of retail SRK units to customers. We’ll also continue acquiring pre-order reservation deposits,
thus showing scale market demand, which we think will allow us to raise additional capital in the future.
Should we raise less than the maximum, or should
revenue fall short of expectations, we can reduce variable cost by adjusting the number of vehicles manufactured, and reduce up
to 72% of operating expenses by freezing headcount at its current level.
The company reserves the right to change
the above use of proceeds if management believes it is in the best interests of the company.
THE COMPANY’S BUSINESS
The Problem
The world’s current transportation system
relies on oversized, overweight vehicles powered by fossil fuels and antiquated drive train technology. Consumers increasingly
feel the impact of congested urban traffic and sense the urgency of looming climate crises. Still, existing manufacturers and new
entrants alike have failed to introduce viable, clean, mass-market urban solutions: new full-size electric cars generally cost
too much, and alternative form vehicles such as BMW’s C-1, Renault’s Twizy and Toyota’s iRoad lack critical features
required for mass market customer utility. The capital intensity of the traditional automotive development approach makes exploring
new vehicle platforms cost-prohibitive.
The Solution
“Disruption is continuously
afoot in every industry but especially in autos. It is how Toyota, Nissan, and Honda bloodied Detroit: they did not start their
attack with Lexus, Infiniti, and Acura, but with low-end subcompact models branded Corona, Datsun, and CVCC.”
- Clayton Christensen
Originator of Disruption Theory
Arcimoto® was founded in 2007 to catalyze
the shift to a sustainable transportation system. The name Arcimoto means “Future I Drive,” and it is our aspiration:
to devise new technologies and patterns of mobility that raise the bar for environmental efficiency, footprint and affordability.
Arcimoto plans to achieve its mission by replacing the global urban and suburban use of 4,000 lb. internal combustion engine vehicles
for regular daily trips with the SRK®, a pure electric solution that is a quarter of the weight, a third the cost of purchase,
and ten times as efficient as the US average passenger car. We believe that the SRK best addresses the tradeoffs inherent to the
vehicle marketplace and will be the ideal transportation solution for the global urban driver.
Arcimoto’s SRK defines the Fun Utility
Vehicle™ category. The SRK delivers a thrilling ride experience, exceptional maneuverability, full comfort for two passengers
with gear, optimal urban parkability, and ultra-efficient operation, at an affordable target base model price of $11,900. Arcimoto
has taken the SRK from a napkin sketch, through eight generations and nine and a half years of product development, to a refined
design on the cusp of series production.
Arcimoto’s business model is entirely
focused on low-end market disruption. Other electric vehicle market entrants such as Tesla, Fisker, Faraday Future and Lucid have
executed or articulated strategies that start at the now-crowded and capital intensive luxury end of the EV marketplace, where
they compete for a small pool of well-heeled customers. Arcimoto, by contrast, is focused entirely on a capital efficient pathway
to a product solution for the other end of the market. We are targeting customers who cannot or will not participate in today’s
market due to the lack of affordable, clean, daily vehicle purchase options.
Arcimoto’s thesis is supported by six
broad factors:
|
|
·
|
Disruptive Product: Existing manufacturers have not provided a viable vehicle in this class.
|
|
|
·
|
Disruptive Price Point: Arcimoto is targeting an end user price below $10,000 USD inclusive
of purchase incentives. An urban-focused vehicle must be ultra-affordable to fundamentally shift the marketplace. We believe our
product is more affordable than our competition’s offerings.
|
|
|
·
|
Daily Utility: Unlike other small-form electric
vehicles in the market, such as neighborhood electric vehicles (NEVs) that are limited to neighborhood roads, the SRK’s
80 mph top speed allows it to be used both on city streets and high-speed expressways, and SRK’s right-sized footprint allows
three to be parked in a single space, while still providing two comfortable seats, plenty of room for groceries, safety features,
optional doors, storage options, solo access to the carpool lane and delivery capability.
|
|
|
·
|
Capital Efficient Development: Arcimoto’s lean operations have designed and brought
the SRK to pre-production ready with approximately $10 million invested. Arcimoto’s capital-efficient philosophy influences
every aspect of the business.
|
|
|
·
|
Capital Efficient Production: Arcimoto’s use of design patterns that leverage flexible, advanced manufacturing equipment means a significant reduction in capital cost to start serial production versus typical automotive programs.
|
|
|
·
|
Incredibly Fun: Hundreds of customer
test drives performed in our generation 8 alpha vehicles have shown that consumers are consistently impressed with the SRK’s
handling and fun factor. The SRK provides full torque right off the line and accelerates from 0 to 60 mph in approximately
seven and a half seconds. The SRK’s three-wheeled vehicle architecture has been refined through the development of eight
fully functional vehicle prototype generations and features a low-and-forward center of gravity and dual-motor front-wheel
drive.
|
Fundamentally, the SRK is a three-wheeled
electric motorcycle that blends the efficiency, maneuverability and thrill of two-wheeled transportation solutions with the stability,
weather protection and carrying capacity features needed to be a functional daily replacement for a full-sized car.
|
10x
|
1/4
|
1/3
|
|
Efficiency
|
Footprint
|
Price
|
Principal Product Development
The company’s principal product is the
SRK, an all-electric three-wheeled motorcycle designed for daily transportation use.
Arcimoto unveiled the Generation 8 SRK alpha
prototype electric vehicle on November 14, 2015, and has shown these prototypes publicly as part of its preorder sales campaign
at the Consumer Electronics Show, the NY Auto Show, and test drive events in Oregon, Washington, California, DC, Maryland, New
York, Michigan, and Nevada.
Arcimoto will build a fleet of beta and pilot
vehicles in 2017, some of which will go to paying customers. Arcimoto is targeting early 2018 to begin scale production of the
SRK.
The current status of development of the Generation
8 SRK is as follows:
|
|
·
|
Engineering Test platform vehicle completed August 2015.
|
|
|
·
|
Two “Alpha” prototype vehicles completed and revealed to the public in November 2015.
These vehicles are currently being used for market validation through test drives and display opportunities.
|
|
|
·
|
Beta vehicles are currently being built, including six pre-sold pre-retail (signature series)
vehicles to be delivered to customers Summer 2017.
|
|
|
·
|
Pre-production pilot vehicles are expected to be built by the second half of 2017.
|
|
|
·
|
Retail production and manufacturing of vehicles is expected to start at the beginning of 2018.
|
Concurrent with the development of
the SRK, Arcimoto is developing integrated custom platform technologies to further reduce cost. Specifically, Arcimoto has developed
a new packaging architecture for battery cells to drive down the cost of the electric vehicle battery system, as well as a unique
dual-motor front wheel drive gearbox that forms the backbone of Arcimoto’s FutureDrive propulsion system. As outlined in
“Use of Proceeds to Issuer,” if the maximum amount of this offering is raised, $3.2 million of the proceeds will be
dedicated to research and development to improving this technology. We intend to complete these improvements within the 12 months
following completion of the offering.
We intend to market our vehicle components
to other vehicle original equipment manufacturers (OEMs). We do not currently have any agreements in place with OEMs and intend
to begin marketing to them following successful completion of this offering.
SRK Target Specifications
|
Weights & Measures
Length: 109" (9'1")
Width: 61"
Height from Ground: 61"
Ground Clearance: 5.75"
Wheelbase: 77.5"
Track Width: 56.5"
Performance
Acceleration Target: 0-60 in 7.5 s
Top Speed: 80 mph
Turning Circle: 27 feet
Range (12 kWh pack): 70 miles
Range (20 kWh pack): 130 miles
Power Plant (kW): Dual 25 kW
Power Plant (HP): 67 HP
|
|
|
Features
Battery System: Li-ion
On-Board Charger: 120V & 240V
Passengers: 2
Brakes: Regenerative
& Hydraulic
Controls: Standard Motorcycle
Seat Belts: 3+2 Dual Harness
Direction: Forward & Reverse
Visibility: Single wiper and defrost
Heating: Heated seats and grips
Options
Cooling: Full HVAC
Hard Shell: Panel enclosure
Soft Shell: Panel enclosure
Storage: Rear tailbox
Audio: Bluetooth speakers
Additional Charging Capability: Solar panel roof
Battery: 130-mile extended range 20kWh battery pack
Deliverator: Panel enclosure with heated or chilled rear
storage
Bolt-On Accessories: Bike or surfboard
rack, golf bag or luggage holder
Fit & Finish: Dashboard, upholstery,
and color
|
|
Technology
Arcimoto’s technology platform enables
the SRK urban vehicle. The Arcimoto Platform comprises four core technologies:
|
|
·
|
Arcimoto Battery System: a set of patent-pending architectures for packaging lithium-ion
batteries. Arcimoto’s battery technology has two main components: a novel high conductivity interconnect for mechanically
and electrically interconnecting battery cells, and a novel cooling structure that reduces the cost and complexity of thermal management.
Versus some other approaches, the Arcimoto Battery System decreases overall battery system weight, reduces material and assembly
costs, and provides additional driving range for the customer.
|
|
|
·
|
FutureDrive: Arcimoto’s electric drive train technology. FutureDrive combines
two electric motors, a custom dual-motor front wheel direct drive gearbox and vehicle power electronics.
|
SRK Generation
8: the culmination of Arcimoto’s vehicle platform development efforts to date, packaging two comfortable passengers,
electric vehicle drive train components and vehicle body features in a lightweight, ultra compact form. We have two issued utility
patents covering novel aspects of the vehicle architecture and have a third utility patent application in process covering the
specific advances made to the platform on generation 8.
|
|
·
|
Arcimoto Switchboard: Arcimoto’s on-board and back-end service platform for data and
controls. On the vehicle systems level, Switchboard controls the SRK’s auxiliary power system and tracks vehicle performance
data over time, while providing the foundation for integration of autonomous driving capabilities. On the back end, Switchboard
allows for seamless vehicle sharing services using the Arcimoto mobile app currently in development (see prototype app images below).
|
Arcimoto will use the proceeds of this offering
to complete the development of the core platform technologies, pursue patent protection for their key innovations and begin marketing
them for license to other electric vehicle OEMs. See the status of our patent applications in the “Intellectual Property”
section beginning on page 25.
Core Products
The Arcimoto Platform is the base of the SRK,
consisting of the FutureDrive dual motor gearbox assembly, packaged battery system, controllers and suspension. Consumers can select
add-on options in the online purchase process. Pre-configured models with select option variations will also be available, ensuring
a product line capable of solving for a wide range of transportation needs:
|
|
·
|
Adventurer: The base model SRK, our open-air vehicle
is perfect for everyday use in mild and warm climates, or year-round in less forgiving climates for the brave and appropriately
attired. Ideal domestically for urban commutes, cart communities, or as a get-around towed behind the RV, the Adventurer will also
be an appealing solution for emerging third world cities that are currently crowded with noisy and polluting two-stroke motorcycles
and tuk tuks.
|
|
|
·
|
Transporter: Adding
the hard-panel enclosure and extended range battery pack greatly expands the utility of the SRK in colder climates, sprawling
cities, and rural environments.
|
|
|
·
|
Deliverator: Replacing
the rear seat section with an expanded cargo storage area for various delivery applications creates the Deliverator. A low cost,
ultra-efficient, small form delivery platform that is easier to park is well suited to improve the bottom line for the many businesses
in the delivery space.
|
|
|
·
|
GoGoMoto: The lowest cost, most efficient “last mile” autonomous solution for
the future. We imagine urban center transportation needs being served by small-form, ultra-efficient driverless SRKs: the most
appropriately designed machine for moving people in congested city centers. Our current design concepts will be compatible with
designated thoroughfares and future transportation network fleets. Our base model will be capable of taking drive/brake/steer commands
from 3rd party hardware/software autonomous package solutions.
|
Distribution
Arcimoto’s sales and distribution model
is direct: our customers will place vehicle orders on the company’s website and the vehicle product is delivered directly
to the end user via common carrier. We plan to augment this direct web purchase process with small-footprint retail in select key
markets. This retail model will give prospective customers a direct experience with the physical product before purchasing. Although
our initial focus is on delivery to the U.S. market, we plan to expand worldwide. We believe that the SRK is well suited to European
and emerging markets in terms of size, cost, capabilities and environmental efficiency. We plan on moving to mass production globally
via joint venture and/or design and brand licensing.
“The reason why it is
so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that
make them good at the existing business actually make them bad at competing for the disruption.”
- Clayton Christensen
Originator of Disruption Theory
Market
Nearly every major automotive manufacturer
in the world is developing an electric vehicle, and a handful of small companies are doing the same. This broad development of
electric vehicles supports the concept of electric vehicles and provides evidence that the future of transportation technology
is electric drive.
Arcimoto’s urban thesis fits the SRK
into the “Non-homologated Micro EV” market segment, which includes products such as most Chinese three- and four-wheeled
neighborhood electric vehicles, the Renault Twizy, and the Toyota iRoad. According to IDTechEx’s market report, “Hybrid
and Pure Electric Cars 2014-2024: Technologies, Markets, Forecasts,” the market segment for on-road 3-wheeled vehicles is
expected to reach 2,000,000 units globally by 2024. Although most of the current market for Micro EVs is in the developing world,
the domestic success of the Can Am Spyder and preorder velocity of the Elio three-wheeled vehicle demonstrates that the tandem
reverse three-wheeled vehicle layout is a viable form factor for U.S. mass market adoption as well.
Market Entry Strategy
We will deliver the first production SRKs to
customers in the three west coast states of Washington, Oregon and California. This geography was chosen both for proximity to
Arcimoto’s headquarters as well as for these states’ status as leading adopters for efficient transportation solutions.
We’ll hit three “tastemaker” zones: the film and television capital of southern California, Silicon Valley, the
world’s leading technology hub, and the Pacific Northwest’s centers of sustainability leadership. The current top five
U.S. cities for electric vehicle adoption are San Francisco, Atlanta, Los Angeles, San Diego and Seattle. Four of these five cities
lie within Arcimoto’s initial deployment region. Oregon and California are currently leading the nation in electric vehicle
adoption and, as important, are acting aggressively on a governmental level to spur adoption. Targeting west coast states will
allow Arcimoto to efficiently distribute the first production vehicles, result in lower costs of early product service, and provide
an early-adoption region halo. Although we have pre-order reservations in all 50 states, California, Oregon, and Washington residents
comprise almost half of the total. Once in full production, the company will progress to nation-wide distribution as expeditiously
as possible.
Target Customers
From a design perspective, Arcimoto SRK is
targeted at young hip men and women who live in medium-to-large cities in temperate climates. These target customers are age 30-49,
middle and upper-middle class, with at least some higher education. They may be single or a family with multiple vehicles, but
they typically commute alone. They are big thinkers who care about the planet, don't want the eco-guilt of burning oil, and believe
that their purchasing decisions can have a global impact given a viable solution in the marketplace. They want a vehicle that is
clean and green, looks cool, allows them to travel solo in commuter lanes and park anywhere, uses cutting-edge technology, integrates
with their phones, requires little maintenance, and feels great on the road.
According to census data there are approximately
20.3 million potential customers in the U.S. who fit in this core target demographic. The data indicates there are 45.1 million
workers aged 30-49 who earn at least $50,000 a year, and over half of these individuals live in the top 49 metro areas; 77 per
cent of them commute alone.
Targeting this market demographic via social
media advertising has shown that there is a strong spillover appeal among older men age 50-65, particularly retirees looking for
a fun vehicle to accompany their RV, and motorcyclists who are growing more concerned with vehicle stability and safety with age.
Arcimoto also plans to target commercial
and government fleet markets for both organization adoption and with purchase plans for employees. Arcimoto will continue to refine
its marketing messages and target customer concepts as multi-year sales data become available. We measure our market development
performance based on several metrics: total newsletter subscribers (weak leads), total reservation deposits (strong leads), and
cost of preorder acquisition. Arcimoto now has 12,230 weak leads, 1,603 strong leads and has driven the average direct advertising
cost of preorder acquisition below $50.
Competitive Landscape
Nearly every major automotive manufacturer
in the world is developing electric or ultra-efficient vehicles, and a handful of new entrants are doing the same. Further, the
traditionally staid transportation marketplace is facing disruption from the rapid advent of disruptive technologies: vehicle sharing,
autonomous driving and the rapidly declining cost of energy storage.
The following case studies compare and contrast
the approaches and products of adjacent market players with those of Arcimoto.
Tesla
Over the span of 14 years, Tesla Motors has
advanced from a clean sheet startup to the undisputed electric car leader worldwide. Tesla adopted a sequential three-product development
strategy to achieve the completion and imminent release of the Model 3, its first mass-market adoptable vehicle. With over 400,000
reservations since it was unveiled on March 31, 2016, the Model 3 demonstrates both the pent-up demand for affordable, high-quality
electric vehicles and the high price/performance sensitivity of the electric car marketplace.
We believe the Arcimoto SRK will take advantage
of both of these market factors: with its $12,000 base price, the SRK opens up the electric vehicle market to an even wider base
of adopters, and its feature set and ride experience have been finely-tuned to the needs and desires of everyday drivers. Like
Tesla, Arcimoto has adopted a direct sales model to provide both a lower cost of sales and a cohesive, hassle-free purchasing experience.
Tesla's pathway to the world's dominant clean
transportation company has been capital intensive: the company raised more than $1B in private, public and loan financing through
the launch of its first mass production car, the Model S, and has raised billions more to make the Model 3 scale production ready.
Like Tesla, Arcimoto has timed its first general public stock offering to fuel a significant go-to-production push.
Elio Motors
Founded in 2009, Elio is developing a gas-powered
three-wheeled vehicle. The key Elio platform advantages are efficiency and low cost: 84 MPG and a $7,450 projected price. Through
a combination of online advertising and experience tours, Elio has garnered more than 65,000 preorders for its vehicle.
While we see Elio's significant reservation
traction as a positive indicator of the accelerating market interest in lightweight three-wheeled vehicles, Elio's significant
spending on pre-production marketing and focus on capital-intensive automotive-scale initial production illustrate the perils of
their approach.
According to their latest public filing, despite
successfully raising nearly $16 million, net of offering costs, in a Tier 2 Regulation A offering that closed February 16, 2016,
Elio has yet to deliver a customer vehicle, the company estimates it needs to raise an additional $376 million to fund production
activities, and their current operations have been significantly curtailed due to lack of capital.
Arcimoto's focus on a motorcycle-class product
line and power-sport construction methods, by contrast, offer a market entry pathway with a small fraction of the capital intensity
of either Tesla's "luxury-first" or Elio's automotive-style product introduction strategies. Our capital-efficient approach
has allowed us to bring the SRK from a clean sheet in 2007 to this summer's planned delivery of first customer units, and begin
production ramp-up with the proceeds of this offering.
Uber, Lyft, Getaround, Zipcar, Waymo, etc.
The rapid proliferation of app-capable mobile
devices over the last decade, alongside advances in computing capability and artificial intelligence, have led to the rise of a
slew of new models for vehicle ownership and sharing, from ride-hailing startups such as Uber and Lyft, to autonomous driving innovators
including Waymo, Cruise Automation and Comma.ai.
Arcimoto’s six pillars of transportation
disruption
Arcimoto's long-term vision is to offer the
low-cost, ultra-efficient platform for the shared autonomous fleets of the future. As such, we see the advent of this new wave
of transportation disruptors as offering a diverse range of partnership opportunities, from Arcimoto's participation in the Uber
Electric pilot initiative in Portland, Oregon starting this summer, to longer-term sensor-and-software integrations with self-driving
technology vendors.
Toyota iRoad, Renault Twizy, Smart Car
Toyota and Renault have made initial forays
into the urban vehicle market space with the iRoad and Twizy, respectively. Compared to both, Arcimoto’s SRK features a superior
ride, higher top speed (classified as a NEV, the Twizy is limited to 25mph in the U.S. market), more aggressive industrial design
and comparable cost and efficiency. Arcimoto stays competitive on footprint and wins on function: greater range, comfortable seating
for two, and delivery capability.
The Smart Fortwo further exemplifies the automotive
approach to vehicle downsizing: after driving the electric version, Forbes vehicle analyst Matthew de Paula reflected that it “doesn’t
handle like a small car should. The steering ratio is too slow. The brake and accelerator pedals are mushy and oddly positioned.
The suspension can feel a bit ponderous and floaty. Some of that is by design. With such a short wheelbase, an overly edgy or aggressive
ride could make the car unstable.”
While its overall length is similar to the
Smart, the SRK’s wheelbase is longer, and the placement of mass elements gives the SRK the feel of a small sports car: agile,
stable, smooth, zippy, and powerful. And although the Smart can technically fit when parked nose-in in parallel parking spots,
many domestic jurisdictions don’t allow automobile-class vehicles to park this way. With its motorcycle class and tapered
reverse-trike form, the SRK also has a park-ability advantage over the Smart Car.
Competitive Feature Analysis - Urban Vehicles
The following chart compares the SRK’s key features with a sample of current and future concept
competitive offerings. The SRK’s unique feature combination sets it apart from other products and creates the opportunity
to fundamentally disrupt the vehicle marketplace.
Arcimoto’s
Key Differentiators
|
|
·
|
Fun: Stable, agile, and an absolute joy to drive. Instant torque accelerates you from 0-60
mph in 7.5 seconds and provides the thrill of driving a motorcycle with the stability of a passenger vehicle on every trip to the
grocery store.
|
|
|
·
|
Utility: The form factor allows for two riders to be seated in comfort, with enough storage
space for their gear. Fit into any parking space, drive in the HOV lane, and accessorize the expandable frame with a variety of
bolt-on and attachable options.
|
|
|
·
|
Efficiency: The next evolution in urban transportation: 10x the fuel efficiency (230 MPGe),
¼ the weight (1,100 lbs.), and ⅓ the cost ($11,900) of the average passenger vehicle. Right-sizing the vehicle for
daily driving needs means you can drive and park in congested urban areas with ease and incur minimal wear and tear on the road,
and we can build them more efficiently than typical vehicle manufacturers.
|
Government Regulation and Government Relations
Many governmental standards and regulations
relating to safety, fuel economy, emissions control, noise control, vehicle recycling, substances of concern, vehicle damage, and
theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe,
and elsewhere. In addition, manufacturing and other automotive assembly facilities in the United States, Europe, and elsewhere
are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances.
In addition, regulations in this area are constantly evolving, especially with the entry of new vehicles into the market.
The most significant of the standards
and regulations affecting us are discussed below:
Motor Vehicle Safety
The National Highway Traffic Safety Administration
(NHTSA) defines a motorcycle as “a motor vehicle with motive power having a seat or saddle for the use of the rider and designed
to travel on not more than three wheels in contact with the ground.” In order for a manufacturer to sell motorcycles in the
US, the manufacturer has to self-certify to meet a certain set of regulatory requirements promulgated by the NHTSA in its Federal
Motor Vehicle Safety Standards (FMVSS).
The Arcimoto SRK is designed to meet FMVSS
requirements for motorcycles.
Operator’s License and Helmet Requirements
Since the SRK is a motorcycle by NHTSA definition,
laws and regulations pertaining to the operation of a motorcycle and wearing a helmet apply to Arcimoto’s customers. As of
the date of this Offering Circular, five states require the use of helmets while operating an enclosed three-wheel vehicle if the
operator is under a specified age (generally under 18, although one state requires a helmet if under the age of 21) and two states
require the use of helmets regardless of age. However, the strong majority of states have some form of exemption for helmet requirements
and motorcycle endorsements for three-wheeled vehicles. In our initial market states of California and Oregon, for example, the
law exempts riders in “fully-enclosed” and “enclosed cab” three-wheelers respectively. Washington’s
helmet law, by contrast, requires compliance with rollover safety regulations and the presence of a steering wheel to exempt riders.
Arcimoto’s advocacy strategy is to work with state legislatures to advocate the normalization of these rules to reduce consumer
confusion in the marketplace that comes from conflicting state-by-state regulations.
Pollution Control Costs
We are required to comply with stationary source
air pollution, water pollution, and hazardous waste control standards that are now in effect or are scheduled to come into effect
with respect to our future manufacturing operations. We do not yet have an estimate of the cost of compliance.
Motor Vehicle Manufacturer and Dealer Regulation
State laws regulate the manufacture, distribution,
and sale of motor vehicles, and generally require motor vehicle manufacturers and dealers to be licensed in order to sell vehicles
directly to consumers in the state. Our distribution model may require that in some instances we have to obtain a dealer license.
In any event, we plan to conduct sales out of the state using our website, phone or mail. We do not yet have an estimate of the
cost of compliance with motor vehicle manufacturer and dealer regulations.
Tesla Motors has faced considerable opposition
in some states from existing motor vehicle dealer associations. Arcimoto will work proactively in market entry points to ensure
our direct business model is allowed. Because the company’s products don’t directly compete with existing motorcycle
class vehicles, we expect significantly less initial resistance from established motorcycle dealers.
Upon completion of this funding round, the
company will initiate a 50-state survey of the regulatory landscape surrounding the direct sales of motorcycles. Once the survey
is complete, we intend to pursue a legislative approach to amend current laws, which would permit motorcycle manufacturers such
as Arcimoto to sell motorcycles directly to consumers. We plan to augment online sales with small retail locations where customers
would be able to view and test drive the vehicles and then would be directed to the company’s website to complete their purchase.
We expect that certain customers may in fact be deterred from purchasing exclusively online.
Arcimoto will initially focus advocacy efforts
at the federal level and at the state level in the market launch states of Washington, Oregon and California for maintenance and
improvement of purchase tax incentives. Although both state and national governments have moved aggressively to support the growth
of the electric vehicle market, not all of these incentives apply or apply equally to motorcycle class vehicles. The company will
employ pilot ride-and-drive days as well as direct discussion to help educate lawmakes about the advantages of this new class of
vehicles.
Suppliers
We rely on a range of suppliers for the development
and production of the SRK. During the prototype development phase, we developed supplier relations with vendors that offer high
cost, high quality parts at low volumes. Many of these vendors specialize in developing prototype components that meet our specific
vehicle needs, while at the same time knowing that we will partner with larger capacity vendors in the near future. Many of these
firms specialize in boutique services that do not include a business model that depends on further, high volume sales to cover
initial development costs. These costs are passed directly to Arcimoto, and many of these vendors are local to the Eugene operations.
As we move into scale production, we will selectively
transition away from the low-volume suppliers, to mid- and high-volume suppliers. The overall objective during this phase is to
establish relationships with suppliers that specialize in low cost, high volume production. While some ideal suppliers typically
require order quantities that are beyond our immediate production needs, we’ll use market traction indicators such as preorders
to entice potential long-term supply partners to work with Arcimoto.
The third phase of the procurement plan will
focus on developing vendor relationship with high volume suppliers, at the international level. The overall goal will be locate
and engage with vendors that provide the lowest price, with the highest response rate and quality. These Tier One suppliers will
be critical players and stakeholders in the success of the company, and require focused management of accounts.
Employees
Currently, Arcimoto has 22 full-time employees
and several contractors. Additionally, we are in final negotiations to fill key roles in engineering, production management, purchasing
and inventory control. As a matter of principle, we enter into Non-Disclosure and Intellectual Property Assignment Agreements with
all of our employees and contractors.
Depending on the amount we raise from this
offering, we intend to hire a number of employees who will further our engineering, production, purchasing, financial administration,
sales and business development efforts. See Directors, Executive Officers and Key Employees section for further details on staffing.
Research and Development
During the last three fiscal years, the company
has invested in company-sponsored research and development activities. During the fiscal years ended December 31, 2016, 2015, and
2014, we spent $974,806, $845,419 and $491,334, respectively.
Intellectual Property
Patents
The company has two issued utility patents: one covering novel aspects
of the vehicle architecture of the SRK through generation 7, and one covering Arcimoto’s novel dual-motor gearbox design.
We’ve filed two additional non-provisional utility patent applications covering the advances made to the platform through
the generation 8 SRK, and one additional non-provisional utility patent application covering advances in the dual-motor gearbox.
As discussed above, the Arcimoto Battery System is a patent pending
architecture for packaging lithium-ion batteries. The company has filed three utility patent applications covering novel approaches
to battery cell interconnection, housing, and thermal management.
Current status of our non-provisional patent
applications:
|
Patent Group
|
|
Applicable Products /
Inventive Concepts
|
|
Application
Number
|
|
Status
|
|
Filing Date
|
|
Issue Date
|
|
Group 1
(Platform)
|
|
Patent - Platform 1 Utility
|
|
13204364
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|
Patented
|
|
8/5/11
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|
3/24/15
|
|
Group 1
(Platform)
|
|
Platform
|
|
14985683
|
|
Awaiting Examination
|
|
12/31/15
|
|
-
|
|
Group 1
(Platform)
|
|
Platform
|
|
15188061
|
|
Awaiting Examination
|
|
6/21/16
|
|
-
|
|
Group 2
(Battery)
|
|
Battery Pack / Battery Interconnection
|
|
14960289
|
|
Awaiting Examination
|
|
12/4/15
|
|
-
|
|
Group 2
(Battery)
|
|
Manifolds for Battery Enclosure, Battery Enclosure, Modular Wall Portions
|
|
14962929
|
|
Awaiting Examination
|
|
12/8/15
|
|
-
|
|
Group 2
(Battery)
|
|
Battery Enclosure, Modular Wall Portions
|
|
14954650
|
|
Awaiting Examination
|
|
11/30/15
|
|
-
|
|
Group 4
(Powertrain)
|
|
Dual-Independent Transmission
|
|
14860502
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|
Patented
|
|
9/21/15
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|
3/14/17
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|
Group 4
(Powertrain)
|
|
Dual-Independent Transmission
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|
15457993
|
|
Awaiting Examination
|
|
3/13/17
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|
N/A
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|
Trademarks
We have registered the following with the United
States Patent and Trademark Office:
“The Everyday Electric”
(mark consisting of standard characters without claim to any particular font, style, size or color) – registered on October
23, 2012, Registration number 4230594
“SRK” (mark
consisting of standard characters without claim to any particular font, style, size or color) – registered on July 16, 2013,
Registration number: 4369026
“ARCIMOTO”
(mark consisting of standard characters without claim to any particular font, style, size or color) – application filed May
3, 2017, Trademark application serial number 87435643.
“FUV” (mark
consisting of standard characters without claim to any particular font, style, size or color) – registration applied for,
no conflicting marks noted on office action received. Registration Number: 87166994.
“Fun Utility Vehicle”
(mark consisting of standard characters without claim to any particular font, style, size or color) – registration applied
for, no conflicting marks noted on office action received. Registration Number: 87260318.
Litigation
The company is not involved in any litigation, and its management
is not aware of any pending or threatened legal actions relating to its intellectual property, conduct of its business activities,
or otherwise.
The Company’s Property
We do not currently own any significant property.
We are leasing our principal office and development
shop located at 544 Blair Blvd., Eugene, Oregon 97402 from Centre Camp LLC. We are also leasing storage space for excess inventory
and prototype storage.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Since our incorporation in 2007, we
have been engaged primarily in developing the design of the SRK and obtaining loans and funds from investors to fund that development.
We are considered to be a development stage company, since we are devoting substantially all of our efforts to establishing our
business and planned principal operations have not commenced. We began accepting pre-reservations online in September 2009. Between
2009 and the unveiling of the Generation 8 design in October of 2015, we acquired 161 deposits. Since the launch of Generation
8 we have acquired 1,442 deposits, an increase of 896% over the previous 6 years.
Operating Results
Year Ended December 31, 2016 Compared to
Year Ended December 31, 2015
We have not yet generated any revenues from
the production of vehicles and do not anticipate doing so until the third or fourth quarter of 2017.
Operating expenses increased from $1,375,147
in fiscal year 2015 to $1,906,904 in fiscal year 2016, a 39% increase. This reflected an increase in our activity and efforts
to develop the design of the Generation 8 SRK for serial production. The primary components of our operating expenses are R&D
on which we spent $845,000 in 2015 and $975,000 in 2016; sales and marketing, on which we spent $165,000 in 2015 and $472,000
in 2016; and general administrative costs amounting to $365,000 in 2015 and $460,000 in 2016. The expense increase in 2016 is
a result of a few factors. The primary factor was the hiring of additional employees and management responsible for meeting our
goal of generating revenue for the production of vehicles in the second half of 2017 and to increase marketing. This accounted
for an increase of $368,000 to our salary and benefit expenses. An additional factor involved in the increase in expenses from
2015 to 2016 was an increase of $122,000 in marketing expenses related to ad spending, public relations, and a road show for the
SRK.
Our net loss increased from $1,349,292 in
fiscal year 2015 to $1,919,479 in fiscal year 2016.
As of July 24, 2017, we have 1,603
pre-order customers of whom six pre-paid $42,000 each for an early release signature series vehicle. (These customers include
Mark Frohnmayer.) Accordingly, our customer deposits have increased from $204,628 in fiscal year 2015 to $386,035 in fiscal year
2016.
Liquidity and Capital Resources
Funding for the company to date has
come primarily from the issuance of equity securities. Since June 2013, we have received $5,058,433 from accredited investors
acquiring our preferred stock. We have received funds from each investor that has acquired our preferred stock.
On December 4, 2015, the company entered
into a loan agreement with the City of Eugene Business Development Fund. On April 1, 2016, the company received disbursement of
this loan, with a principal balance of $250,000 at 5% interest per annum from the date of disbursement. Payments of interest only
are due on the first of the month. The entire principal balance of the loan plus accrued but unpaid interest, if any, is due and
payable upon an offering made under Regulation A (so repayment would be triggered by this offering), or September 1, 2017. Between
October 2016 and April 2017, the company entered into convertible loan agreements with various investors totaling $475,000 at
6% interest with a due date of March 31, 2018, subject to prior conversion. The holders of the notes can convert into Preferred
Stock at the greater of $5.00 per share or 90% of the current per-share price. The holders of $450,000 of the convertible notes
have irrevocably elected to convert their notes to Preferred Stock at 90% of the share price in this offering at final qualification
from the SEC and to convert the subsequent Preferred Stock to Common Stock at a rate of one share of Common for each share of
Preferred.
Need for Additional Funds
The level of funding in this offering
is intended to be sufficient to get the company to the point of funding its growth through reinvestment of internally generated
cash flow. To achieve a cash flow positive status, we anticipate the need to raise at least $28 million.
We plan to pursue multiple options for additional funding if needed, rather than
relying on one source. These sources may include, but are not limited to, the Advanced Technology Vehicles Manufacturing Loan
Program (“ATVMLP”) under Section 136 of the Energy Independence and Security Act of 2007, subsequent public stock
offering(s), private equity, as well as more traditional sources such as venture debt arrangements and capital leasing on equipment.
We plan on submitting an ATVMLP application
in the third quarter of 2017.
Plan of Operations
Arcimoto’s high-level objectives for the next 18 months are:
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·
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Complete design and testing of the SRK.
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Launch Signature Series and pilot fleet vehicles.
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Build in the Phase 1 production facility to start retail manufacturing.
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Design and
build the Phase 2 manufacturing facility to enable stepped-up scale production.
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·
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Initiate
additional fund raising activities, including application to the ATVMLP.
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·
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Demonstrate self-driving functionality on the Arcimoto platform.
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Explore strategic partnership opportunities for international markets.
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Lobby for EV state tax credits and uniform regulation of three wheeled motorcycles.
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Develop scale production supply chain.
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·
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Launch new website capable of configuring and processing SRK orders.
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Expenditures
Our current monthly cash burn rate
is $200,000.
If we raise the full offering amount of $29.9 million, after $1.9 million in
estimated offering costs, we will have approximately $28 million available to the company. As described in the Use of Proceeds
section, $17.4 million will go towards our capital expenditures, manufacturing and sales of 2,056 vehicles will provide $89,000
net of revenue, and $10.4 million will go to operating expenses. Anticipated minimum monthly gross cash burn rate through the
next 18 months, excluding inventory and optional spending on capital expenditures, R&D materials and testing, and retail operating
expense and payroll, steadily grows to $736,000 per month for an 18 month total of $9.6 million. After factoring in an additional
$26.9 million for inventory offset by $31.4 million in sales, the net burn for the next 18 months is $5.1 million. During these
next 18 months, the company expects to spend approximately $5 million for employee salaries, including $540 thousand for compensation
of executive officers.
Should we raise less than the maximum, or should
revenue fall short of expectations, we intend to reduce our capital outlay to match available cash. We can reduce variable cost
by adjusting the number of vehicles manufactured, and reduce up to 72% of operating expenses by freezing headcount at its current
level.
In all scenarios, we plan to use the proceeds towards completion
of development of the SRK and delivery of retail SRK units to customers. We’ll also continue acquiring pre-order reservation
deposits, thus showing scale market demand, which we think will assist us in raising additional capital in the future.
Our manufacturing plans for 2017-2018/twelve
months following the commencement of this offering:
We are based in Eugene, Oregon. We are currently
able to pursue our initial material handling strategy, which will use Arcimoto primarily as a final assembly operation, where all
the parts are brought into the production line from outside vendors and fabrications. The company has identified several viable
manufacturing site locations to serve as the first base of operations. During Phase 1 assembly, Arcimoto will take advantage of
pre-existing vendor infrastructure and so will have very limited need for fabrication capacity within its own operations.
Arcimoto is currently searching for a new leased
location that would replace the three locations currently leased. Arcimoto is finalizing lease negotiations on approximately 30,000
square feet warehouse and office space, located on 3.5 acres of land near our current headquarter location.
The second phase of production, planned to
commence within 18 months of this offering, will vertically integrate the manufacturing of key components, as the company outgrows
prototype/limited run vendor capacity. This production transition will focus primarily on tooling upgrades and sheet metal and
tube frame fabrication.
Building up a high-volume Phase 2 manufacturing
facility is estimated to take 12 months to reach maximum capacity as the supply chain and automated manufacturing equipment are
established. The first of these facility build-ins is planned to start 12 months from the completion of this offering. During the
unit ramp-up, we plan to keep in close contact with pre-order and prospective customers through awareness events and meetups, in
order to maximize sales opportunities during this critical phase. This will also help build the “community” attachment
of the Arcimoto customer base, an intangible brand feature.
Our Research and development plan in 2017-2018/12 months
following the beginning of the offering is to focus on:
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·
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Battery System Finalization and Testing: We intend to complete and validate Arcimoto’s
patent-pending next generation battery system in both module and full vehicle form.
|
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·
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Safety Systems – In 2017 the company will incorporate enhanced safety systems in the
SRK. The alpha SRK units feature 3-point seat belts with an additional shoulder belt, attached to the other side of the seat. This
approach has been used successfully by both Renault (the Autoliv 3+2 seatbelt system used in the Twizy) and BMW in the dual belt
system used in the semi-enclosed C-1 commuting scooter. This basic restraint system will be further augmented with a simulation-verified
roll cage, crumple zones and side impact buffers.
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|
|
·
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Gearbox optimization and cost reduction – the gear box is the first significant component
of FutureDrive. The Alpha SRK prototype gear boxes use loose pattern cast housing and expensive off-the-shelf gears. The design
has been upgraded to production-tooled gears and match-plated sand castings. This operational upgrade has reduced the cost of the
gear box, improved efficiency and longevity, and addressed the need for higher volume production demands. A 100,000 mile bench
test of the new gearbox was successfully completed in April 2017.
|
|
|
·
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Electronics Configuration and optimization – The driver interface, battery monitoring
system and Switchboard electronics will be developed to product-ready completion. These systems will be tuned in parallel with
the build of the Generation 8 beta and pilot vehicles, as the electronics system will be identical between these revisions.
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|
|
·
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Autopilot/Autonomous Program – the Arcimoto SRK and vehicle platform are being made
autopilot-ready. This involves making the Arcimoto Switchboard electronics capable of accepting drive, steering and braking commands
from an external software and sensors package. The SRK will be autonomous-capable at launch, serving as the least cost, most efficient
platform for daily autonomous mobility. Arcimoto plans to offer a lane-following autopilot option in the production version and
hopes to offer door-to-door commute autonomy by about 2020, although there can be no assurance that we will meet this target date.
|
Business team
efforts during the 12 months following the beginning of the offering will focus on:
|
|
·
|
Sales and Marketing: We revealed the Generation 8 SRK and announced the target purchase
price for the vehicle via the www.arcimoto.com web site. Over the next twelve months, we will continue our online and tour
based awareness and pre-order campaign. Our near-term pre-sales target is 2,000 deposits to further validate product/market fit
and pre-fill 2018’s production queue.
|
|
|
·
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Scale
Capital Raise: We will plan for and execute a Federal ATVMLP application within 12
months of this offering to supplement the build out of our Phase 2 automated manufacturing
line and deliver production vehicles to the general public.
|
|
|
·
|
International Market Development: The final step in the manufacturing plan is to franchise
production globally. The automated Phase 2 production facilities will be designed to support the manufacture of 20,000+ units/year.
In the globalization phase, four additional production facilities will be sited in key market regions around the world. We anticipate
that this production process will increase the capacity of Arcimoto’s global production footprint to 100,000+ per year by
June 2022.
|
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
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Name
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Position
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Age
|
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Term of Office (if
indefinite, give date
appointed)
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Approximate hours per
week (if part-time)/full-
time
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Executive Officers:
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Mark Frohnmayer
|
|
President
|
|
43
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Indefinite, appointed November 21, 2007
|
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Full-time/40 hours
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Douglas Campoli
|
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CFO
|
|
53
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|
Indefinite, appointed June 15, 2015
|
|
Full-time/40 hours
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Directors:
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Mark Frohnmayer
|
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Chair
|
|
43
|
|
Indefinite, appointed November 21, 2007
|
|
Full-time/40 hours
|
|
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Thomas Thurston
|
|
Director
|
|
39
|
|
Indefinite, appointed May 8, 2015
|
|
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Terry Becker
|
|
Director
|
|
57
|
|
Indefinite, appointed May 8, 2015
|
|
|
|
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|
|
Jeff Curl
|
|
Director
|
|
56
|
|
Indefinite, appointed May 8, 2015
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Arcimoto has built a team that embraces our
mission to create an ultra-efficient transportation product missing from today’s consumer market. The organic nature of Team
Arcimoto’s growth has cultivated a group of extremely dedicated individuals who wield passion, ingenuity and expertise in
equal measure, skillfully executing a well-conceived vision to create a thriving business and help reboot the globe’s broken
transportation system.
Leadership Team Bios
Mark Frohnmayer, President and Founder,
Director
Mark Frohnmayer is currently our President
and Founder. He has served in this position since day one. Previously, he was one of the founders of GarageGames.com, a software
development company successfully sold to IAC, Inc. in 2007. He holds a BS in Electrical Engineering and Computer Science from UC
Berkeley.
Terry Becker, Director
Terry Becker is currently a Director. He has
served in this position for two years, from May 8th 2015 to the present date. He has also concurrently held the position of Director
of Engineering and Global Product Support at Peterson Pacific Corporation since February 2014, where he established design processes
to grow the market share of the company. From February 2007 to the present, he has also served as Board Chairman of Oregon Pattern
& Foundry, a non-ferrous foundry and rapid prototype/pattern making company. From 2008 to 2012, he was Deputy Director of Operations
of JBT AeroTech, where he improved processes between the operations departments including engineering, manufacturing, purchasing,
material control, planning, service and project management. He holds a BSME from Walla Walla University.
Thomas Thurston, Director
Thomas Thurston is currently a Director. He
has served in this position for two years, from May 2015 to the present date. He has also concurrently held the position of Managing
Director of WR Hambrecht Ventures since January 2014, a venture capital firm that uses data science to target early-stage growth
companies. From February 2013 to the present, he has also served as Board Member of Ironstone Group, Inc., a publicly traded investment
corporation. He holds a BA from the University of Oregon, and MBA from the Thunderbird School of Global Management, a JD from the
Santa Clara University School of Law and was a research fellow at the Harvard Business School.
Jeff Curl, Director
Jeff Curl is currently a Director. He has served
in this position for two years, from May 2015 to the present date. He also holds the position of CFO/COO, Senior Partner and Architect
ACA Service Model at Summit Benefit and Actuarial Services, Inc. from 1994 to the present date. He holds a BS from the United States
Military Academy at West Point and a MBA from the University of Oregon – Charles H. Lundquist College of Business.
Douglas Campoli, Chief Financial Officer
Douglas Campoli is currently our Chief Financial
Officer. He has served in this position from June 2015 to the present date. Prior to joining Arcimoto, he was the Founder of Strategic
Financial Consulting from February 2013 to June 2015, providing financial consulting services for startup and existing businesses.
From September 2012 to September 2013, he was Chief Financial Officer of ManaFuel, bringing energy independence to Pacific Island
Nations. From May 2007 to February 2011, he was Chief Financial Officer of GarageGames.com, Inc. From 2004 to May 2007, he was
Chief Financial Officer of SeQuential Biofuels. Prior to 2007, he held various financial positions at Genuity, GTE, and AT&T.
He holds a BS in Business and Finance from the University of South Florida and an MBA with a concentration in Finance from the
University of Tampa.
Jesse Fittipaldi, Vice President
Jesse brings 20 years of engineering project
management and team building experience to Arcimoto. Prior to joining the venture in 2015, Jesse designed, managed, and commissioned
large-scale public and private sector building engineering projects throughout Oregon. His specialty projects were those requiring
expertise in solar, geothermal, energy efficiency, LEED and complicated control strategy.
David Boyd, Vehicle Development Lead
David brings 27 years of vehicle product development
experience to the venture, including the design of the world’s first Neighborhood Electric Vehicle (GEM), vehicle power electronics
development as the co-founder of Synkromotive, and most recently developing an electric microbus for developing nations from napkin
sketch to full prototype in 6 months at Pangaea Motors.
Jove Lachman-Curl, Mechanical Engineering Lead
Jove brings a passion for environmentally
conscious light transportation, coupled with a broad love of engineering. Jove comes from the bicycle industry, particularly focusing
on trailers and child-related products, and incorporating innovative design, safety standards and testing, overseas manufacturing,
quality control and problem solving Jove joined Arcimoto in 2015 to work on suspension and brakes but his eye for design simplicity
and excellent communication skills quickly landed him in the mechanical engineering lead role.
Travis Travelstead, Electrical
Engineering Lead
Travis
has spent nearly a decade in electric vehicle related product development and manufacturing, with a focus on bridging the electrical,
mechanical and software design disciplines. After getting his start with plug in hybrid kit design and manufacturing of the Zilla
high performance motor controllers, Travis moved on to electric vehicle and truck stop electrification infrastructure development
with nationwide deployments. Before joining Arcimoto, Travis worked with Pangaea Motors to bring a fully electric mini bus from
the drawing board into series production in the Philippines.
Tim Hynes, Manufacturing Lead
Tim has been involved in manufacturing for
25 years. His expertise is with high volume manufacturing and plant management, through state-of-the-art processes. His recent
consulting project was with Winchester Gun Safes. His management, implementation of automated machinery, and increased product
flow resulted in a reduction of 50 percent in direct labor costs. He has engineered facilities to compete with the foreign market,
equipping plants with the right tools to create efficient, effective ways to make manufacturing profitable. As a business owner
he understands the day to day operation to compete and bring a great product to the consumer.
Nathan Gustafson, Online Software Lead
Nathan has spent over a decade
in the software and IT industries developing and implementing enterprise software with a focus on the human processes behind those
solutions. Nathan has been the technical adviser and systems architect for several organizations, acting to help them implement
their chosen software management platform. As the CTO and co-founder of Manage My Co-op and Bushel Box, Nathan helped design and
implement products that serve both small and large community buying clubs. Previously, at the International Association of Technology
in Education, Nathan assisted with the marketing implementation of Aptify, an association management solution.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
For the fiscal year ended December 31, 2016, we compensated our
executive officers as follows:
|
Name
|
|
Capacities in
which
compensation
was received
|
|
Cash
compensation
($)
|
|
|
Other
compensation
($)
|
|
|
Total
compensation
($)
|
|
|
Mark D. Frohnmayer
|
|
President
|
|
$
|
65,000.00
|
|
|
$
|
0
|
(1)
|
|
$
|
65,000.00
|
|
|
Douglas M. Campoli
|
|
CFO
|
|
$
|
54,439.93
|
|
|
$
|
0
|
(2)
|
|
$
|
54,439.93
|
|
|
Terry Becker
|
|
Director
|
|
$
|
0
|
|
|
$
|
0
|
(3)
|
|
|
|
|
|
Ironstone Group Inc. (Thomas Thurston)
|
|
Director
|
|
$
|
0
|
|
|
$
|
0
|
(4)
|
|
|
|
|
|
Jeff Curl
|
|
Director
|
|
$
|
0
|
|
|
$
|
0
|
(5)
|
|
|
|
|
(1) Mark Frohnmayer was issued 20,000 options March 1, 2017
and October 2, 2015 in addition to 300,000 warrants issued March 9, 2012.
(2) Douglas Campoli was issued 46,000 options March 1, 2017
in addition to 19,000 options October 2, 2015.
(3) Terry Becker was issued 5,000 options on October 2,
2015 in addition to 170,000 warrants issued June 1, 2013 and 30,000 warrants issued August 20, 2012.
(4) Ironstone Group on behalf of Thomas Thurston was issued
5,000 options on October 2, 2015.
(5) Jeff Curl was issued 5,000 options on October 2, 2015.
The Board of Directors decided on the compensation packages
for the Board members. Mark Frohnmayer determined the compensation package of the non-Board member officer.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
Title of
class
|
|
Beneficial
owner
|
|
Name and
address of
beneficial
owner
|
|
Amount
and nature
of beneficial
ownership
|
|
Amount and
nature of
beneficial
ownership
acquirable
|
|
Percent
of class
(1)(2)(3)
|
|
|
Common
|
|
Mark Douglas Frohnmayer
|
|
Mark Douglas
Frohnmayer, 1263
West 5th St., Eugene,
OR 97402
|
|
|
6,983,882
|
|
|
312,184
|
|
|
55.5
|
%
|
|
Common
|
|
All Executive officers and directors as a group (including
Mr. Frohnmayer)
|
|
|
|
|
7,592,156
|
|
|
538,758
|
|
|
60.8
|
%
|
(1) Based on 12,827,666 shares of common
stock outstanding prior to this offering.
(2) This calculation is the amount the person
owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the outstanding amount
of securities in that class if no other person exercised their rights to acquire those securities. The result is a calculation
of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in
this column may not add up to 100% for each class.
(3) Thomas Thurston, a Director of Arcimoto
and Managing Director of WR Hambrecht Ventures III, L.P. owns 0.5% of the Common shares, and Hambrecht Ventures, as Arcimoto’s
lead investor owns 7.5% of the Common Shares.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
The company has the following transactions
where one or more officers, directors, or employees have an interest:
|
|
·
|
Mark
Frohnmayer, President of Arcimoto, owns the office building that Arcimoto leases. We
are leasing our principal office and development shop located at 544 Blair Blvd., Eugene,
Oregon 97402 from Centre Camp LLC, a company owned by Arcimoto’s founder and president,
Mark Frohnmayer. We currently pay $5,451 per month and lease, signed on May 1, 2013 is
in effect until April 30, 2018.
|
|
|
·
|
Terry Becker, Arcimoto Director, is also the owner of Oregon Pattern & Foundry, the company
that made the prototype gearbox housings for the SRK. From 10/15/2012 to 4/19/2017, $26,493 was billed and paid. During 2014, 2015,
and 2016, $4,025, $18,684, $125 respectively for a total of $22,834 was billed and paid.
|
|
|
·
|
Vehicle
reservations include a $42,000 Signature Series reservation made by Mark Frohnmayer,
a $1,000 pre-order deposit made by Lynn Frohnmayer, Mark’s mother, and $100 pre-order
deposits made by team members Doug Campoli, Jesse Fittipaldi, John Friess, Jim Jordan,
Jove Lachman-Curl and Diana Standish, and by Directors Jeff Curl and Terry Becker.
|
SECURITIES BEING OFFERED
General
Our authorized capital stock consists
of 20,000,000 shares of common stock, no par value, and 5,000,000 shares of preferred stock, no par value. The company has reserved
2,000,000 shares of its common stock pursuant to the Equity Incentive Plans. 1,247,704 and 1,255,204 stock options and warrants
are outstanding as of December 31, 2016 and 2015, respectively. 475,000 additional employee incentive options were issued on March
1, 2017. Of the 5,000,000 authorized preferred shares, 1,500,000 shares were designated as Series A-1 Preferred Stock. 1,189,791,
1,095,991 and 430,465 shares of preferred stock were issued and outstanding as of December 31, 2016, 2015 and 2014, respectively.
An additional 245,100 preferred shares were issued in the first half of 2017, total preferred shares outstanding before the July
21, 2017, stock split were 1,434,891. The stock split doubled the conversion rate, resulting in an additional 2,869,782 common
shares when all outstanding preferred shares were converted on 7/25/2017. The company’s Board of Directors may designate
additional classes of Preferred Stock at any time.
In the current offering, we are offering common
stock.
The following is a summary of the rights
of our capital stock as provided in our second amended and restated articles of incorporation and bylaws. For more detailed information,
please see our amended and restated articles of incorporation and bylaws, which have been filed as exhibits to the offering statement
of which this offering circular is a part.
Common Stock
Voting Rights and Dividend Rights
Common stockholders are entitled to one vote
for each share on all matters to be voted on by the stockholders, do not have cumulative voting rights, have no preemptive rights
to purchase common stock, no conversion or redemption rights or sinking fund provisions with respect to the common stock and are
entitled to share ratably in dividends.
Right to Receive Liquidation Distributions
In the event of the company's liquidation,
dissolution, or winding up, holders of its Common Stock will be entitled to share ratably in the net assets legally available for
distribution to stockholders after the payment of all of the company's debts and other liabilities and the satisfaction of the
liquidation preferences granted to the holders of all shares of the outstanding Preferred Stock.
Series A-1 Preferred Stock
At the time of this offering no preferred stock of the company
is outstanding.
Dividend Rights
Holders of our Series A-1 Preferred Stock are
entitled to receive dividends, if any, as may be declared from time to time by the board of directors out of legally available
funds. Series A-1 Preferred Stock will receive dividends, if any, in preference to the holders of Common Stock.
The dividends are not cumulative and are available
when, as, and if declared by the Board. There is no requirement or penalty for us to declare dividends. We have never declared
or paid cash dividends on any of our capital stock and currently do not anticipate paying any cash dividends after this offering
or in the foreseeable future.
Right to Receive Liquidation Distributions
In the event of the company's liquidation,
dissolution, or winding up, holders of its Series A-1 Preferred Stock are entitled to liquidation preference superior to holders
of the Common Stock. Holders of Series A-1 Preferred Stock will receive an amount determined in accordance with the amended and
restated certificate of incorporation. If, upon such liquidation, dissolution or winding up, the assets and funds that are distributable
to the holders of Series A-1 Preferred Stock are insufficient to permit the payment to such holders of the full amount of their
liquidation preference, then all of such assets and funds will be distributed ratably among the holders of the Series A-1 Preferred
Stock in proportion to the full preferential amounts to which they would otherwise be entitled to receive.
Conversion to Common Stock
Holders of the Series A-1 Preferred stock
will have the right to convert their shares to Common Stock at any time, and will be automatically converted to common stock upon
the occurrence of an “Automatic Conversion Event” as described in the Amended and Restated Certificate of Incorporation.
The conversion rate may change from time to time if we complete a stock split, reorganization, recapitalization, or the like,
but the initial conversion rate will be one-to-one. The July 21, 2017, stock split increased the conversion rate to two-to-one.
The majority of preferred stock holders voted to convert to common stock on July 25, 2017. All outstanding preferred stock was
converted to 2,869,782 shares of common stock.
Redemption
The Series A-1 Preferred Stock is not redeemable.
Voting Rights
The Series A-1 Preferred Stockholders are entitled
to equal voting rights to common stockholders on an as-converted basis.
Rights and Preferences
Each share of the Series A-1 Preferred Stock
will automatically convert into the Common Stock of the company immediately prior to the closing of a firm commitment underwritten
public offering, registered under the Securities Act of 1933. Series A-1 Preferred stock is convertible at the option of the stockholder
at any time without the payment of additional consideration by the holder.
Holders of our Series A-1 Preferred Stock and
all other preferred stock have preference over Common Stock. The company’s Board of Directors may designate additional classes
of preferred shareholders from time to time.
UNDERWRITING AND PLAN OF DISTRIBUTION; SELLING SECURITYHOLDERS
Underwriting
The company is offering up to 4,600,000
shares of common stock, as described in this Offering Circular.
We have engaged W.R. Hambrecht + Co., LLC
(the “Underwriter”) with respect to the Offered Shares. We anticipate entering into an underwriting agreement setting
forth the definitive terms and conditions of the sale of the Offered Shares on or immediately prior to the date on which the SEC
qualifies the Offering Statement (the “Qualification Date”).
Subject to certain conditions, the Underwriter
has agreed to use its best efforts to procure potential purchasers for the Offered Shares. This offering is being undertaken on
a best efforts only basis. The Underwriter is not required to take or pay for any specific number or dollar amount of our Common
Stock. The Underwriter will have the right to engage such other Financial Industry Regulatory Authority (“FINRA”) member
firms as it determines to assist in this offering.
The Offered Shares will be issued in one
or more closings. The Underwriter and the participating broker-dealers (the “Selling Group”) must sell the minimum
number of shares set forth in this offering circular (the “Minimum Offering”) if any shares are to be sold at all.
If, on the Initial Closing date, we have sold less than the maximum number of Offered Shares (the “Maximum Offering”),
then we will hold one or more additional closings in our sole discretion for additional sales, up to the Maximum Offering, for
sixty (60) days following the Initial Closing (the “Additional Closings”, and each, an “Additional Closing”).
Following the Initial Closing, the company and the Underwriter will consider various factors in determining the timing of any
Additional Closings, including amount of proceeds received at the Initial Closing, the level of additional valid subscriptions
received after the Initial Closing, and the eligibility of additional investors under applicable laws. Accordingly, at the time
of subscription, the investor will not know the exact date on which their closing will occur, except that all closings (including
the Initial Closing), if any, will occur prior to the earlier of (i) the date on which the Maximum Offering is sold and closed
or (ii) the offering is terminated. For the initial closing and each subsequent Additional Closing, all proceeds for such closing
will be kept in an interest-bearing escrow account maintained by Prime Trust, LLC for the benefit of the investors in accordance
with Rule 15c2-4 under the Exchange Act. Upon each closing, the proceeds collected for such closing will be disbursed to the company
and the Offered Shares for such closing will be issued to investors. If a closing does not occur for any reason, the proceeds
for such closing will be promptly returned to investors without deduction and generally without interest. The escrow account will
be opened immediately prior to the Qualification Date and will remain open until the offering terminates without the Minimum Offering
having been reached, or if the Initial Closing occurs, until the last Additional Closing date(s). All funds received into the
escrow account will be held in an interest-bearing account in accordance with Rule 15c2-4 under the Exchange Act. All funds for
the purchases of the offered shares will be transmitted directly by wire or electronic funds transfer via ACH or indirectly through
a clearing agent to the specified bank account maintained by Prime Trust, LLC per the instructions in the subscription agreement.
Prime Trust, LLC will not accept any paper checks from investors in the offering. The Underwriter will not accept or handle any
funds. The subscription agreement is/will be available at www.wrhambrecht.com/arcimoto. Prime Trust, LLC, which will be the escrow
agent, will notify the Underwriter when the full amount necessary to purchase the Minimum Offering has been received. If, on the
Termination Date, investor funds are not received in respect of the Minimum Offering, then all investor funds that were deposited
into the escrow account will be returned promptly to investors and the offering will terminate. Prime Trust, LLC will retain up
to $5,000 of interest accrued from funds deposited in the escrow account regardless of whether the offering closes as partial
compensation for serving as the escrow agent.
Commissions and Discounts
The following table shows the total discounts and commissions
payable to the Underwriter in connection with this offering:
|
|
|
Per
|
|
|
|
|
|
|
|
Share
|
|
|
Total
|
|
|
Public offering price
|
|
$
|
6.50
|
|
|
$
|
29,900,000
|
|
|
Underwriting commissions (1)
|
|
$
|
0.39
|
|
|
$
|
1,794,000
|
|
|
Proceeds, before expenses, to us
|
|
$
|
6.11
|
|
|
$
|
28,106,000
|
|
(1) The
underwriting discounts and commissions do not include the expense reimbursement, or Underwriter’s Warrants as described below.
Offered Shares sold to the public will
initially be offered at the initial public offering price set forth on the cover of this Offering Circular. Selected dealers who
participate in the offering will receive a selling concession not to exceed $0.195 per share. After the initial offering of the
shares, the offering price and the other selling terms may be subject to change. The offering of the shares is subject to receipt
and acceptance and subject to the right to reject any subscription in whole or in part, for any reason or no reason.
Selling Security Holders
No securities are being sold for the account
of security holders; all net proceeds of this offering will go to the company.
Technology and Escrow Services
FundAmerica, LLC has been engaged by
the Company to provide certain technology services in connection with this offering. The Company has agreed to pay $500 per month
to FundAmerica, LLC for the technology services provided by its affiliate in the offering, including the online platform by which
subscribers may receive, review, execute and deliver subscription agreements electronically.
We have engaged Prime Trust, LLC to
serve as escrow agent for the offering. Prime Trust, LLC is entitled to receive certain itemized administrative fees as follows:
(i) an initial set-up fee of $500; (ii) $25 per month for maintaining the escrow bank account; (iii) fees for inbound transfer
of funds of $0.50 for each ACH, $15.00 per wire transfer and a $5.00 per investor as one-time accounting fee upon receipt of the
funds; (iv) fees for outbound transfer of funds of $15.00 per wire to the company upon a closing; and (v) fees for Anti-Money
Laundering (AML) verification of $2.00 per domestic investor and $60.00 per international investor; (In no event will the foregoing
escrow administrative fees exceed $55,900. As partial compensation for serving as escrow agent, Prime Trust, LLC will retain up
to $5,000 of interest accrued from funds deposited in the escrow account whether or not the offering closes. In the event more
than $5,000 in interest accrues on funds deposited in the escrow account, the excess will be distributed to each subscriber in
the same proportion as such subscriber’s investment bears to the gross proceeds of the offering. Prime Trust, LLC is not
participating as an underwriter of the offering and will not solicit any investment in the Company, has not investigated the desirability
or advisability of investment in the Company’s securities, nor approved, endorsed or passed upon the merits of purchasing
the Company’s securities, nor will it distribute the offering circular or other offering materials to investors. All inquiries
regarding this offering or escrow should be made directly to the Company or the Underwriter.
Engagement Agreement with the Underwriter
We are currently party to an engagement
agreement with the Underwriter. The term of the engagement agreement began on April 19, 2017 and will continue for one year, until
April 19, 2018, unless one of the following events occurs prior to April 19, 2018, in which case the engagement agreement would
be terminated early:
(i) we and the Underwriter mutually agree
to terminate the engagement agreement or the engagement agreement is terminated by either us or the Underwriter upon 30 days’
prior written notice;
(ii) we execute a definitive underwriting or placement agency
agreement with the Underwriter;
(iii) we terminate the engagement agreement because of the Underwriter’s
material failure to provide the services contemplated by the engagement agreement; or
(iv) we decide not to proceed with the offering or withdraw
any offering statement filed with the SEC.
Offering Expenses.
We are responsible for all offering fees and expenses, including the following: (i) fees and disbursements of our legal counsel,
accountants, and other professionals we engage; (ii) fees and expenses incurred in the production of offering documents, including
design, printing, photography, and written material procurement costs; (iii) all filing fees, including FINRA and blue sky filing
fees; (iv) all of the legal fees related to the registration and qualification of the Offered Shares under state securities laws
and FINRA clearance (not to exceed $30,000 in the aggregate); and (v) our transportation, accommodation, and other roadshow expenses.
To the extent that any of our fees and expenses are paid by the Underwriter with our approval, we will, upon request, reimburse
the Underwriter for such fees and expenses.
Reimbursable
Expenses in the Event of Termination. In the event the offering does not close or the engagement agreement is terminated for
any reason (other than termination due to the Underwriter’s material failure to provide its services), we have agreed to
reimburse the Underwriter for all unreimbursed, reasonable, documented, out-of-pocket fees, expenses, and disbursements, including
the Underwriter’s legal fees, up to $30,000.
Strategic Transaction
Advisory Services. If, during the term of the engagement agreement and for one year following termination of the engagement
agreement without consummation of this offering, we pursue a merger or sale of control or similar strategic transaction, we have
agreed to retain the Underwriter, jointly with another firm, to provide customary advisory services in connection with such strategic
transaction. Such engagement would be subject to a fee of 3.0% of the total consideration in the strategic transaction.
Termination Fee. If
we terminate the engagement agreement and then consummate a public offering in which the Underwriter does not serve as the Underwriter
or placement agent within six months of such termination, then we have agreed to pay the Underwriter a termination fee equal to
$50,000. However, the termination fee will be reduced by the amount of reimbursable expenses we have paid to the Underwriter. See
“Reimbursable Expenses” and “Compensation for Advisory Services” above. The termination fee is not payable
in the event we terminate the engagement agreement due to the Underwriter’s material failure to provide the services contemplated
by the engagement agreement.
Underwriting Commission. We
have agreed that the definitive underwriting agreement will provide for us to pay a commission of 6.0% of the gross offering proceeds,
excluding proceeds raised from investors via alternative funding platforms, to the Underwriter as compensation immediately upon
consummation of the offering. We have agreed to pay a commission of 3.0% of the gross offering proceeds for shares purchased by
investors sourced via alternative funding platforms.
Underwriter’s Warrants
Upon the final
closing of this offering, we have agreed to issue Underwriter’s Warrants to the Underwriter to purchase a number of shares
of the Common Stock equal to 5.0% of the total shares of the Common Stock sold in such closing, excluding shares purchased by
investors sourced via alternative funding platforms. The Underwriter’s Warrants are exercisable commencing on the Qualification
Date, and will be exercisable for five years. The Underwriter’s Warrants are not redeemable by us. The exercise price for
the Underwriter’s Warrants will be the amount that is 15% greater than the offering price, or $7.475.
The
Underwriter’s Warrants and the shares of common stock underlying the Underwriter’s Warrants have been deemed compensation
by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Underwriter, or permitted assignees
under such rule, may not exercise, sell, transfer, assign, pledge, or hypothecate the Underwriter’s Warrants or the shares
of common stock underlying the Underwriter’s Warrants, nor will the Underwriter, or permitted assignees engage in any hedging,
short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Underwriter’s
Warrants or the underlying shares of common stock for a period of 180 days from the qualification date of the offering statement,
except that they may be transferred, in whole or in part, by operation of law or by reason of our reorganization, or to any Underwriter
or selected dealer participating in the offering and their officers or partners if the Underwriter’s Warrants or the underlying
shares of our common stock so transferred remain subject to the foregoing lock-up restrictions for the remainder of the time period.
The Underwriter’s Warrants will provide for adjustment in the number and price of the Underwriter’s Warrants and the
shares of common stock underlying such Underwriter’s Warrants in the event of recapitalization, merger, stock split, or other
structural transaction, or a future financing undertaken by us.
Indemnification
and Control
We
have agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act. If we are
unable to provide this indemnification, we will contribute to the payments the Underwriter and its selling agents, affiliates and
controlling persons may be required to make in respect of these liabilities.
The
Underwriter and its affiliates are engaged in various activities, which may include securities trading, commercial and investment
banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage
activities. The Underwriter and its affiliates may in the future perform various financial advisory and investment banking services
for us, for which they received or will receive customary fees and expenses.
Our Relationship
with the Underwriter
In
the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including
bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve
securities and/or instruments of the issuer. The Underwriter and its affiliates may also make investment recommendations and/or
publish or express independent research views in respect of such securities or instruments, or recommend to clients that they
acquire, long and/or short positions in such securities and instruments.
|
ARCIMOTO, INC.
|
|
Financial Statements and Independent Auditors’ Report
|
|
|
|
December 31, 2016 and 2015
|
ARCIMOTO, INC.
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
of Arcimoto, Inc.
Report on the Financial Statements
We have audited the accompanying financial
statements of Arcimoto, Inc. (an Oregon corporation), which comprise the balance sheets as of December 31, 2016 and 2015, and the
related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes
to the financial statements.
Management’s Responsibility for
the Financial Statements
Management is responsible for the preparation
and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States
of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Arcimoto, Inc. as of December 31, 2016 and
2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally
accepted in the United States of America.
Explanatory Paragraph
The accompanying financial statements have
been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and has not yet earned revenues from its intended operations, which raises
substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also
described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Emphasis of Matter
As discussed in Note 5 to the financial
statements, the accompanying financial statements have been restated to retroactively reflect a stock split and preferred stock
conversion that occurred subsequent to the issuance of our initial audit report. Our opinion is not modified with respect to this
matter.
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/s/dbbmckennon
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Newport Beach, California
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May 12, 2017, except for the paragraphs in Notes 3, 5, 6, and 10 for which the date is
August 7, 2017
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ARCIMOTO, INC.
BALANCE SHEETS
As of December 31, 2016 and
2015
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2016
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2015
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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414,405
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$
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1,000,665
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Accounts receivable
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583
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8,172
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Inventory
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26,825
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-
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Other current assets
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28,207
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26,612
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Total current assets
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470,020
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1,035,449
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Property and equipment, net
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8,805
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16,755
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Deferred offering cost
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40,000
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-
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Total assets
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$
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518,825
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$
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1,052,204
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Liabilities:
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Current liabilities
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Accounts payable
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$
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81,045
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$
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9,229
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Accrued liabilities
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102,776
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61,219
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Customer deposits
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386,035
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204,628
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Notes payable
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250,000
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-
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Total current liabilities
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819,856
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275,076
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Long-term convertible notes payable
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275,000
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-
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Long-term convertible notes payable
to related party
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50,000
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-
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Total liabilities
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1,144,856
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275,076
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Commitments and contingencies (Note 9)
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Stockholders' equity (deficit):
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Series A-1 preferred stock, no par value, 1,500,000 authorized,
0 and 1,095,991 issued and outstanding as of December 31, 2016 and 2015, respectively.
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-
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3,364,988
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Common stock, no par value, 20,000,000 authorized, 12,337,466
and 9,957,884 issued and outstanding as of December 31, 2016 and 2015, respectively.
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7,637,494
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3,804,561
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Additional paid-in capital
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336,606
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288,231
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Accumulated deficit
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(8,600,131
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)
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(6,680,652
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)
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Total stockholders' equity (deficit)
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(626,031
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)
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777,128
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Total liabilities and stockholders' equity (deficit)
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$
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518,825
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$
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1,052,204
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See accompanying notes to financial statements.
ARCIMOTO, INC.
STATEMENTS OF OPERATIONS
For the years ended December
31, 2016 and 2015
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2016
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2015
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Grant revenue
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$
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-
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$
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12,244
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Operating expenses
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Research and development
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974,806
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845,419
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Sales and marketing
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472,108
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165,190
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General and administrative
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459,990
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364,538
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Total operating expenses
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1,906,904
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1,375,147
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Loss from operations
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(1,906,904
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)
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(1,362,903
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)
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Other income and expense
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Interest expense
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(12,816
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)
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(3,331
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)
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Other income, net
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241
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16,942
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Net loss
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$
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(1,919,479
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)
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$
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(1,349,292
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)
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Weighted-average common shares outstanding
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- basic and diluted
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9,964,403
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9,957,884
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Net loss per common share
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- basic and diluted
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$
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(0.19
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)
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$
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(0.14
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)
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See accompanying notes to financial statements.
ARCIMOTO, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY (DEFICIT)
For the years ended December
31, 2016 and 2015
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Series
A-1 Preferred Stock
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Common
Stock
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Number
of
Shares
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Amount
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Number
of
Shares
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Amount
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Additional
Paid-In
Capital
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Accumulated
Deficit
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Total
Stockholder's
Equity
(Deficit)
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Balance at December 31, 2014
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430,465
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$
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917,023
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9,957,884
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$
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3,804,561
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$
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231,054
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$
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(5,331,360
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)
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$
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(378,722
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)
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Conversion of notes to A-1 preferred stock
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6,800
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28,022
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-
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-
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-
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-
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28,022
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Issuance of Series A-1 preferred stock
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658,726
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2,419,943
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-
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-
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-
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-
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2,419,943
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Stock-based compensation
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-
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|
-
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|
-
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-
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57,177
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-
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57,177
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Net loss
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-
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|
-
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-
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-
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-
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(1,349,292
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)
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(1,349,292
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)
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Balance at December 31, 2015
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1,095,991
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3,364,988
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9,957,884
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3,804,561
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288,231
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(6,680,652
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)
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777,128
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Issuance of Series A-1 preferred stock
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93,800
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467,945
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-
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-
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-
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-
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467,945
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Conversion of Series A-1 preferred stock
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(1,189,791
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)
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(3,832,933
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)
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2,379,582
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3,832,933
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Stock-based compensation
|
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|
-
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-
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-
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-
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48,375
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-
|
|
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|
48,375
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Net loss
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|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
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-
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(1,919,479
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)
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|
(1,919,479
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)
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Balance at December 31, 2016
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|
|
-
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|
$
|
-
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12,337,466
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$
|
7,637,494
|
|
|
$
|
336,606
|
|
|
$
|
(8,600,131
|
)
|
|
$
|
(626,031
|
)
|
See accompanying notes to financial statements.
ARCIMOTO, INC.
STATEMENTS OF CASH FLOWS
For the years ended December
31, 2016 and 2015
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2016
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2015
|
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OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,919,479
|
)
|
|
$
|
(1,349,292
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
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|
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Depreciation and amortization
|
|
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7,951
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|
|
|
5,756
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|
|
Gain on the sale of assets
|
|
|
-
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(16,000
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)
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Stock-based compensation
|
|
|
48,375
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|
|
|
57,177
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|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
7,589
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|
|
|
6,555
|
|
|
Inventory
|
|
|
(26,825
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)
|
|
|
-
|
|
|
Other current assets
|
|
|
(1,595
|
)
|
|
|
(26,612
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)
|
|
Deferred offering cost
|
|
|
(40,000
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)
|
|
|
-
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|
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Accounts payable
|
|
|
71,816
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|
|
|
(39,321
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)
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Accrued liabilities
|
|
|
41,556
|
|
|
|
41,041
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|
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Customer deposits
|
|
|
181,407
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|
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|
18,504
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Net cash used in operating activities
|
|
|
(1,629,205
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)
|
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(1,302,192
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)
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INVESTING ACTIVITIES
|
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|
|
|
|
|
|
|
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Proceeds from sale of assets
|
|
|
-
|
|
|
|
16,000
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|
Purchases of property and equipment
|
|
|
-
|
|
|
|
(20,492
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)
|
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(4,492
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)
|
|
|
|
|
|
|
|
|
|
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FINANCING ACTIVITIES
|
|
|
|
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|
|
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Proceeds from sale of series A-1 preferred stock
|
|
|
467,945
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|
|
|
2,419,943
|
|
|
Proceeds from related party notes
|
|
|
50,000
|
|
|
|
-
|
|
|
Repayment of related party notes
|
|
|
-
|
|
|
|
(38,203
|
)
|
|
Proceeds from notes payable
|
|
|
525,000
|
|
|
|
-
|
|
|
Repayment of note payable
|
|
|
-
|
|
|
|
(100,000
|
)
|
|
Net cash provided by financing activities
|
|
|
1,042,945
|
|
|
|
2,281,740
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash increase (decrease) for year
|
|
|
(586,260
|
)
|
|
|
975,056
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of year
|
|
|
1,000,665
|
|
|
|
25,609
|
|
|
Cash at end of year
|
|
$
|
414,405
|
|
|
$
|
1,000,665
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
8,333
|
|
|
$
|
6,921
|
|
|
Cash paid during the year for income
taxes
|
|
$
|
-
|
|
|
$
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Conversion of series A-1 preferred
stock to common stock
|
|
$
|
3,832,933
|
|
|
$
|
-
|
|
|
Notes payable to related parties
and accrued interest converted to series A-1 preferred stock
|
|
$
|
-
|
|
|
$
|
28,022
|
|
See accompanying notes to financial statements.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 1: NATURE OF OPERATIONS
Arcimoto, Inc. (the “Company”) was formed on November
21, 2007, as WTP Incorporated, an Oregon Corporation. On December 29, 2011, the Company filed an Amendment to the Articles of Incorporation
changing its name from WTP Incorporated to Arcimoto, Inc., an Oregon Corporation. On December 30, 2011, Arcimoto, Inc. merged with
Arcimoto-II, LLC. Arcimoto-II, LLC was formed on December 20, 2007, as Electromotion Design, LLC and subsequently changed its name
to Arcimoto, LLC on September 19, 2008, and then to Arcimoto-II, LLC on December 29, 2011. Arcimoto-II, LLC was dissolved upon
execution of the merger, leaving Arcimoto, Inc. as the remaining entity. The Company was founded in order to build products that
catalyze the shift to a sustainable transportation system. The first step in this shift has been developing an affordable, daily
utility, pure electric vehicle. Over the past nine years, the Company has developed a revolutionary new vehicle platform designed
around the needs of everyday drivers. Its main product is the SRK, the first real fossil-free alternative for the vast majority
of daily trips. Compared to the average car, the SRK has dropped 3/4 of the weight and 2/3 of the footprint in order to bring the
joy of affordable, ultra-efficient, pure electric driving to the masses.
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared on
a basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal
course of business. However, the Company has experienced recurring operating losses and negative operating cash flows since inception.
To date, the Company has not generated revenues from product
sales to achieve 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 equity securities. Accordingly, there is substantial doubt
about the Company’s ability to continue as a going concern.
Although the Company's objective is to increase its revenues
from the sales of its products within the next few years sufficient to generate positive operating and cash flow levels, there
can be no assurance that the Company will be successful in this regard. The Company will also need to continue to raise capital
in order to fund its operations, which it intends to obtain through a Regulation A offering. The Company intends to use the proceeds
from the Regulation A offering to invest in its business to expand sales and marketing efforts, enhance its current product by
continuing research and development to bring the SRK to retail production, to build out a leased 50,000 SQFT production facility,
and fund startup operations until positive cash flow is achieved. The next steps on the road to retail product development are:
1) Beta vehicle design, build and test. 2) Production vehicle design, pre-production vehicles built to test retail vehicle production
process. 3) Retail vehicle production and delivery to customers. Production is expected to commence in 2018; however, there are
no assurances that this schedule will be met. The need for additional capital may be adversely impacted by uncertain market conditions
or approval by regulatory bodies. If the Regulation A offering is delayed or unsuccessful, the Company anticipates continuing to
fund its operations through the issuance of equity securities, but there can be no assurances that the Company will be successful
in this regard.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting and reporting policies of the Company conform
to accounting principles generally accepted in the United States of America (“GAAP”). The financial statements are
presented using the accrual basis of accounting. The Company adopted the calendar year as its basis of reporting.
Use of Estimates
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties
The Company has not commenced revenue generating activities.
The Company's business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along
with governmental policy decisions. A host of factors beyond the Company's control could cause fluctuations in these conditions.
Adverse developments may also include: economic recessions, trends in car manufacturing, consumer taste, availability of inventory,
and changes in government policy related to cars and motorcycles could have a material adverse effect on the Company's financial
condition and the results of its operations.
The Company currently has limited sales and marketing and/or
distribution capabilities. The Company has limited experience in developing, training or managing a sales force and will incur
substantial additional expenses if we decide to market any of our current and future products and services. Developing a marketing
and sales force is also time consuming and could delay launch of our future products and services. In addition, the Company will
compete with companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts
may be unable to compete successfully against these companies. In addition, the Company has limited capital to devote to sales
and marketing.
The Company's industry is characterized by rapid changes
in technology and customer demands. As a result, the Company's products and services may quickly become obsolete and
unmarketable. The Company's future success will depend on its ability to adapt to technological
advances, anticipate customer demands, develop new products and services and enhance our current products and services
on a timely and cost-effective basis. Further, the Company's products and services must remain competitive with those of
other companies with substantially greater resources. The Company may experience technical or other difficulties that could
delay or prevent the development, introduction or marketing of new products and services or enhanced versions of existing
products and services. Also, the Company may not be able to adapt new or enhanced products and services to emerging industry
standards, and the Company's new products and services may not be favorably received. In addition, we may not have the
capital resources to further the development of existing and/or new ones.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
Revenue Recognition
The Company will recognize revenue when the earnings process
is complete on vehicle sales. This generally occurs when products are shipped to the customer in accordance with the sales agreement
or purchase order, ownership and risk of loss pass to the customer, collectability is reasonably assured, and pricing is fixed
or determinable. The Company’s shipping terms are generally F.O.B. shipping point, where title is transferred and revenue
is recognized when the products are shipped to customers.
Grant Revenue
In January 2014, the Company was awarded a grant of $126,875
from the Oregon Best Commercialization Program which awarded a sub agreement between the State of Oregon acting by and through
the State Board of Higher Education on behalf of Oregon Institute of Technology and Arcimoto, Inc. for the purpose of the activities
relating to a BEST Commercialization Grant to fund a proposal entitled “Integrated Battery Systems.” Grant award reimbursements
were invoiced and recorded as revenue for expenses paid by the Company. Revenue from the grant was recognized in the period during
which the conditions under the grant had been met and the Company had made payment for the related expense. Grant revenue of $0
and $12,244 for 2016 and 2015, respectively, are recorded as income in the accompanying financial statements. Grant revenue makes
up 100% of revenue in each year. Management believes the loss of such revenues will not have a material effect on the Company’s
operations.
Accounts Receivable
Accounts receivable are reported net of allowance for expected
losses. It represents the amount management expects to collect from outstanding balances. Differences between the amount due and
the amount management expects to collect are charged to operations in the year in which those differences are determined, with
an offsetting entry to a valuation allowance. As of December 31, 2016 and 2015, the Company has no reserve allowance.
Customer Deposits
Customer deposits are generally held in a separate deposit account.
Revenue is not recognized on customer deposits until the vehicle is shipped to the customer.
Cash and Cash Equivalents
The Company considers deposits that can be redeemed on demand
and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of December
31, 2016 and 2015, the Company’s cash and cash equivalents were deposited in one financial institution, which at times, exceed
the federally insured limits.
Inventories
Inventories are stated at the lower of cost (using the first-in,
first-out method “FIFO”) or market. Inventories consist of purchased electric motors, electrical storage and transmission
equipment and component parts. Inventories consist entirely of raw materials and component parts as of December 31, 2016.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
Property and Equipment
Property and equipment are recorded at cost, less accumulated
depreciation. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs
are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective
period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial
statement purposes.
The estimated useful lives for significant property and equipment
categories are as follows:
|
Computer Equipment & Software
|
1 – 3 years
|
|
Furniture and Fixtures
|
2 – 7 years
|
|
Machinery and Equipment
|
5 – 10 years
|
|
Leasehold Improvements
|
Shorter of useful of lease life
|
Depreciation for the years ended December 31, 2016 and 2015
was $7,951 and $5,756, respectively. Accumulated depreciation as of December 31, 2016 and 2015 was $76,091 and $68,141, respectively.
Impairment of Long-Lived Assets
The Company adopted Accounting Standards Codification (“ASC”)
360, Accounting for Impairment or Disposal of Long-Lived Assets. ASC 360 requires that if events or changes in circumstances
indicate that the cost of long-lived assets or asset groups may be impaired, an evaluation of recoverability would be performed
by comparing the estimated future undiscounted cash flows associated with the asset to the asset's carrying value to determine
if a write-down to market value would be required. Long-lived assets or asset groups that meet the criteria in ASC 360 as being
held for sale are reflected at the lower of their carrying amount or fair market value, less costs to sell
Fair Value Measurements
The Company’s financial instruments consist primarily
of cash and notes payable. The carrying amounts of such financial instruments approximate their respective
estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated
fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings
or cash flows. The Company adopted Financial Accounting Standards Board (“FASB”) ASC 820-10, Fair Value Measurements
and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would
be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
The standard also prioritizes, within the measurement of fair
value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value
measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
The three-level hierarchy for fair value measurements is defined
as follows:
• Level 1 – inputs to the valuation methodology are
quoted prices (unadjusted) for identical assets or liabilities in active markets
• Level 2 – inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other
than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active
• Level 3 – inputs to the valuation methodology are
unobservable and significant to the fair value measurement
Categorization within the valuation hierarchy is based upon
the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the accompanying
financial statements for current assets and current liabilities approximate the fair value because of the immediate or short term
maturities of the financial instruments. As of December 31, 2016 and 2015, the Company did not have any level 2 or level 3 instruments.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance
with ASC 718, Compensation - Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite
service period, which is generally the option vesting period. The Company uses the Black-Scholes option pricing model to determine
the fair value of stock options and common warrants. Stock-based awards issued to date are comprised of employee stock options
and common warrants.
The Company measures compensation expense for its non-employee
stock-based compensation under FASB ASC 505-50, Equity-Based Payments to Non-Employees. The fair value of the option issued
or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received.
The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by
the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument
is charged directly to stock-based compensation expense and credited to additional paid-in capital.
Advertising Costs
Advertising costs are recorded as an expense in the period in
which we incur the costs or the first time the advertising takes place. Advertising costs expensed were $131,709 and $23,244 for
the years ended December 31, 2016 and 2015, respectively.
Research and Development
Expenses relating to research and development are expensed as
incurred. For the years ended December 31, 2016 and 2015, vehicle and battery research and development consisted of $974,806 and
$845,419, respectively.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
Income Taxes
The Company accounts for income taxes under an asset and liability
approach for financial accounting and reporting for income taxes. Accordingly, the Company recognizes deferred tax assets and liabilities
for the expected impact of differences between the financial statements and the tax basis of assets and liabilities.
The Company records a valuation allowance to reduce its deferred
tax assets to the amount that is more likely than not to be realized. In the event the Company was to determine that it would be
able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets
would be credited to operations in the period such determination was made. Likewise, should the Company determine that it would
not be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be
charged to operations in the period such determination was made. The Company has incurred losses for tax purposes since inception
and has significant tax losses and tax credit carry forwards. These amounts are subject to valuation allowances as it is not likely
that they will be realized in the next few years.
Net Earnings or Loss per Share
The Company’s computation of earnings 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., Series A-1 preferred stock, common stock warrants and common stock
options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common
shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from
the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common
share is the same for all periods presented because all series A-1 preferred stock, common stock warrants and common stock options
outstanding were anti-dilutive.
At December 31, 2016 and 2015, the Company excluded the outstanding
securities summarized below, which entitle 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.
|
|
|
2016
|
|
|
2015
|
|
|
Series A-1 preferred stock (as convertible to common stock)
|
|
|
--
|
|
|
|
2,191,982
|
|
|
Warrants to purchase common stock
|
|
|
980,004
|
|
|
|
980,004
|
|
|
Stock options to purchase common stock
|
|
|
267,700
|
|
|
|
275,200
|
|
|
Total
|
|
|
1,247,704
|
|
|
|
3,447,186
|
|
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
Offering Costs
The Company complies with the requirements of FASB ASC 340 with
regards to offering costs. Prior to the completion of an offering, offering costs will be capitalized as deferred offering costs
on the balance sheet. The deferred offering costs will be charged to stockholders’ equity (deficit) upon the completion of
an offering or to expense if the offering is not completed. $40,000 and $0 offering costs were capitalized as of December 31, 2016
and 2015, respectively. The Company anticipates significant offering costs in connection with the proposed Regulation A offering
discussed in Note 2.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No.
2014-09 (ASU 2014-09), Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction and industry-specific
revenue recognition guidance under current GAAP and replace it with a principle based approach for determining revenue recognition.
ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in
the contract. ASU 2014-09 also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and
cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from
costs incurred to obtain or fulfill a contract. Based on the FASB’s Exposure Draft Update issued on April 29, 2015, and approved
in July 2015, Revenue from Contracts With Customers (Topic 606): Deferral of the Effective Date, ASU 2014-09 is now effective for
reporting periods beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning
after December 15, 2016, including interim reporting periods within that reporting period. Entities will be able to transition
to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating
ASU 2014-9, and has not yet determined its impact to the Company’s financial statements, nor decided the transition approach
it will take.
In November 2015, the FASB issued Accounting Standards Update
No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17
requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.
ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim
periods within those annual periods. Earlier application is permitted as of the beginning of an interim or annual reporting period.
The adoption of ASU 2015-17 is not expected to have any impact on Company’s financial statement presentation or disclosures.
In February 2016, the Financial Accounting Standards Board issued
Accounting Standards Update No. 2016-02 regarding leases. The new standard requires lessee recognition on the balance sheet of
a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. It further requires
recognition in the income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease
term on a generally straight-line basis. Finally, it requires classification of all cash payments within operating activities in
the statement of cash flows. It is effective for fiscal years commencing after December 15, 2018 and early adoption is permitted.
Management has not yet evaluated the impact of the adoption of ASU 2016-02 on the Company’s financial statement presentation
or disclosures.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
In November
2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, to address the diversity
that exists on how entities classify and present changes in restricted cash or restricted cash equivalents on the statement of
cash flows. Other than limited guidance for not-for-profit entities, current GAAP does not include specific guidance on the cash
flow classification and presentation of changes in restricted cash or restricted cash equivalents. The amendments in this update
now provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. This
ASU is effective for public entities for annual periods beginning after December 15, 2017, including interim periods within that
reporting period, with early adoption permitted. The amendments should be applied using a retrospective transition method to each
period presented. We do not think that the adoption of this ASU will have a significant impact on our financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of
Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to provide guidance on eight specific
cash flow issues where current GAAP is unclear or does not have specific guidance. The cash flow issues covered by this ASU are:
1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon
interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration
payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement
of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity
method investees; 7) beneficial interests in securitization transactions; and 8) separately identifiable cash flows and application
of the predominance principle. The effective date and transition requirements of this ASU for public entities are effective for
annual periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted.
The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply
the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the
earliest date practicable. We are currently evaluating the impact of the adoption of this ASU on our financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation-Stock
Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, as part of the Board’s Simplification
Initiative. The areas for simplification in this Update involves several aspects of share-based payment transactions, including
the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash
flows. Variables such as timing of award settlements or expirations, changes in stock price over time, ultimate payout levels for
awards with performance contingencies, shares cancelled before vesting, and the tax rules in effect at the time of settlement will
impact both the timing and the amount of the tax deductions. We are currently evaluating the impact of the adoption of this ASU
on our financial statements.
Management does not believe that any other recently issued,
but not yet effective, authoritative guidance, if currently adopted, would have a material impact on the Company’s financial
statement presentation or disclosures.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 4: NOTES PAYABLE
Notes payable as of December 31, 2016 and 2015 are as follows:
|
|
|
Principal
|
|
|
Accrued Interest
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
Business Development Loan
|
|
$
|
250,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Convertible Notes Payable
|
|
|
275,000
|
|
|
|
-
|
|
|
|
3,322
|
|
|
|
-
|
|
|
Convertible Notes Payable to Related Parties
|
|
|
50,000
|
|
|
|
-
|
|
|
|
384
|
|
|
|
-
|
|
|
|
|
$
|
575,000
|
|
|
$
|
-
|
|
|
$
|
3,706
|
|
|
$
|
-
|
|
On December 4, 2015, the Company entered into a $250,000 loan
agreement with the City of Eugene Business Development Fund; however, the funds for the loan were not received until April 1, 2016,
and accordingly no debt was owed as of December 31, 2015. This loan is secured by substantially all assets of the Company and has
an interest rate of 5% per annum. Interest only payments are due monthly from the date of disbursement. The entire unpaid principal
balance of the loan, plus accrued interest, shall be due and payable upon the earlier of the issuance of a Regulation A Public
Offering (see Note 2), or July 1, 2017.
On October 1, 2016, the Company issued a convertible note in
the amount of $250,000. The note and all accrued interest is due on March 31, 2018. This note is secured by substantially all assets
of the Company and had a stated interest rate of 6% per annum. In 2016, interest expense of $3,306 was accrued. The note is convertible
on demand at the greater of $5.00 per share or 90% of the active selling price of the Series A-1 Preferred Stock at the time of
conversion.
On November 16, 2016, the Company issued a convertible note
to a related party in the amount of $50,000. The note and all accrued interest is due on March 31, 2018. This note is secured by
substantially all assets of the Company and had a stated interest rate of 6% per annum. In 2016, interest expense of $384 was accrued.
The note is convertible on demand at the greater of $5.00 per share or 90% of the active selling price of the Series A-1 Preferred
Stock at the time of conversion.
On December 27, 2016, the Company issued a convertible note
in the amount of $25,000. The note and all accrued interest is due on March 31, 2018. This note is secured by substantially all
assets of the Company and had a stated interest rate of 6% per annum. In 2016, interest expense of $16 was accrued. The note is
convertible on demand at the greater of $5.00 per share or 90% of the active selling price of the Series A-1 Preferred Stock at
the time of conversion.
None of the above convertible notes contained a beneficial conversion
feature due to the conversion price of the notes being at or above the fair value of the stock at issuance.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 5: STOCKHOLDERS’ EQUITY (DEFICIT)
Amendment
On July 21, 2017,
the Board and a majority of common stockholders voted to enact a two-for-one common stock split and increased the authorized common
shares to 20,000,000. On July 25, 2017, a majority of Preferred stockholders voted to convert all Preferred shares to common.
The July 21, 2017, two-for-one common stock split resulted in a conversion rate of two shares of common stock for each share of
Preferred stock. In accordance with SEC reporting guidelines, the retrospective application of the stock split has been applied
to historical financial information, and the Preferred to common stock conversion was reflected in the accompanying financial
statements as if it occurred as of December 31, 2016.
Preferred Stock
On December 30, 2013, the Company amended its Certificate
of Incorporation to increase its authorized preferred stock from 500,000 to 5,000,000 shares, no par value, of which 1,500,000
shares were designated as Series A-1 Preferred Stock. Zero and 1,095,991 shares of preferred stock were issued and outstanding
as of December 31, 2016 and 2015, respectively. The 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 preferred stock. The preferred stock is also subject
to mandatory conversion provisions upon an initial public offering raising $15 million or more and is not redeemable. To prevent
dilution, the conversion price of the preferred stock is to be adjusted for any issuance of securities, excluding exempt securities,
which change the number of shares of common stock outstanding. The Series A-1 Preferred Stockholders are entitled to equal voting
rights to common stockholders on an as-converted basis and receive preference to the common stockholders upon liquidation. During
the years ended December 31, 2016 and 2015, 93,800 and 658,726 shares of Series A-1 Preferred Stock were sold for cash proceeds
of $467,945 and $2,419,943, respectively. Of these, 20,000 and 16,671 shares were sold to related parties for total proceeds of
$100,000 and $54,304, respectively. In addition, 6,800 shares of Series A Preferred Stock were issued to a related party during
the year ended December 31, 2015, for the conversion of notes payable and accrued interest.
Common Stock
The Company was authorized to issue 10,000,000 shares of
common stock, no par value, as of December 31, 2016 and 2015. On July 21, 2017, the Board and a majority of common stockholders
voted to enact a two-for-one common stock split and increase the authorized common shares to 20,000,000. Common stockholders are
entitled to one vote for each share on all matters to be voted on by the stockholders, do not have cumulative voting rights, have
no preemptive rights to purchase common stock, no conversion or redemption rights or sinking fund provisions with respect to the
common stock, and are entitled to share ratably in dividends. In the event of liquidation, common stockholders are entitled to
share pro rata all assets remaining after payment in full of all liabilities and preferences.
The Company has reserved a total of 2,000,000 shares of
its common stock pursuant to the Equity Incentive Plans (see Note 6). The Company has 1,247,704 and 1,255,204 stock options and
warrants outstanding post-split as of December 31, 2016 and 2015, respectively.
Warrants
The Company has 980,004 warrants to purchase shares of common
stock outstanding in conjunction with the Amended and Restated 2012 Employee Stock Benefit Plan. The outstanding warrants have
a weighted average exercise price of $0.58 and a weighted average remaining contractual life as of December 31, 2016, of 7.36
years. The number of shares or exercise price will be adjusted in the event of any stock dividend, stock splits or recapitalization
of the Company. The fully vested common stock warrants were valued and expensed by the Company at the grant date using the Black-Scholes
model. The number of warrants and exercise price stated here reflect adjustment for the July 21, 2017, two-for-one common stock
split.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 6: SHARE-BASED PAYMENTS
2015 Stock Incentive Plan
The 2015 Stock Incentive Plan (the "2015 Plan")
of the Company was approved by the written consent of the holders of a majority of the Company's outstanding common stock. The
Plan provides the Company the ability to grant to any employee, director, consultant or advisor who provides services to the Company
the opportunity to acquire shares of Common Stock of the Company through the grant of options that are incentive stock options
or nonqualified stock options (NQSOs) and/or the grant of restricted stock, provided that only employees are entitled to receive
incentive stock options in accordance with IRS guidelines. The Company reserved 1,000,000 shares of common stock for delivery
under the Plan as of May 8, 2015. Employee stock options expire ten years from the grant date. Awards that are forfeited generally
become available for grant under the plan. Pursuant to the Stock Incentive Plan the Compensation Committee of the Company's Board
of Directors authorized the grant of 225,000 employee incentive stock options on October 2, 2015. Of these, 7,500 employee stock
options expired or were forfeited during 2016.
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. 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 used 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. See below for the weighted average variables used in assessing the fair
value during the year ended December 31, 2015:
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
Annual dividend yield
|
|
|
-
|
|
|
Expected life (years)
|
|
|
6.73
|
|
|
Risk-free interest rate
|
|
|
1.56
|
%
|
|
Expected volatility
|
|
|
30.61
|
%
|
The expected life of employee stock options was estimated using
the “simplified method,” as the Company has no 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 NQSOs is the contractual maturity since they are vested when
issued. For stock price volatility, the Company uses historical private placements 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.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
The estimation of the number of stock awards that will ultimately
vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates,
such amounts are recognized as an adjustment in the period in which estimates are revised.
The total grant date fair value of employee incentive stock
options issued during the years ended December 31, 2016 and 2015 was $0 and $150,320, respectively. Employee stock-based compensation
expense related to stock options included in general and administrative expenses for the years ended December 31, 2016 and 2015
was $48,375 and $12,344, respectively.
During the year ended December 31, 2016, 7,500 stock options
issued to employees were forfeited as a result of employee terminations, and 83,926 became vested.
On October 2, 2015, the board of directors of the Company
granted non-qualified stock options (“NQSOs”) for a total of 41,000 shares, with an exercise price of $2.061 per share,
to certain independent contractors of Arcimoto, Inc. All of the options were vested when issued. Effective October 22, 2015, the
board of directors granted NQSOs for a total of 9,200 shares, with an exercise price of $2.061 per share, to certain advisors
of Arcimoto, Inc. All of the options were vested when issued.
Grants to non-employees are expensed at the earlier of (i) the
date at which a commitment for performance by the counterparty to earn the equity instrument is reached and (ii) the date at which
the counterparty’s performance is complete. For the NQSOs issued in 2015, performance was completed on the date of issue.
The fair value of non-employee awards were $0 and $44,833, respectively, for the years ended December 31, 2016 and 2015, which
is included in general and administrative expenses in the accompanying statements of operations.
Total compensation cost related to non-vested awards not yet
recognized as of December 31, 2016 was $84,590 and will be recognized on a straight line basis through the end of the vesting period,
October, 2018. Future stock option compensation expense related to these options to be recognized during the years ending December
31, 2017, and 2018 is $48,243 and $36,347, respectively. The amount of future stock option compensation expense could be affected
by any future option grants or by any option holders leaving the Company before their grants are fully vested.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
A summary of stock option activity for the years ended December
31, 2016 and 2015 is presented below:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Life
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
(in
Years)
|
|
|
Options outstanding at December 31, 2014
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
275,200
|
|
|
|
2.061
|
|
|
|
9.76
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Options outstanding at December 31, 2015
|
|
|
275,200
|
|
|
$
|
2.061
|
|
|
|
9.76
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited or expired
|
|
|
(7,500
|
)
|
|
|
2.061
|
|
|
|
-
|
|
|
Options outstanding at December 31, 2016
|
|
|
267,700
|
|
|
$
|
2.061
|
|
|
|
8.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31, 2016
|
|
|
134,126
|
|
|
$
|
2.061
|
|
|
|
8.76
|
|
As of December 31, 2016, 724,800 options are still issuable
under the 2015 Plan.
2012 Employee Stock Benefit Plan
The Amended and Restated 2012 Employee Stock Benefit Plan
(the "2012 Plan") of the Company was approved by the written consent of the holders of a majority of the Company's outstanding
common stock. The Plan provides the Company the ability to grant to any officer, director, or employee of the Company, or any
Consultant, advisor or independent contractor who provides services to the Company, the opportunity to acquire shares of Common
Stock of the Company through the grant of warrants and/or the grant of common stock. The Company reserved 1,000,000 shares of
common stock for delivery under the Plan as of March 29, 2013. Warrants issued and outstanding as of December 31, 2016 and 2015
are 980,004. Warrants expire ten to fifteen years from the grant date and were vested when issued.
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.
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 warrants,
the expected life of the warrant, and expected stock price volatility. The Company used the Black-Scholes option pricing model
to value its stock warrant 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.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
The expected life of a stock warrant is the contractual maturity
since they were vested when issued. For stock price volatility, the Company uses historical private placements as a basis for its
expected volatility to calculate the fair value of warrant grants. The risk-free interest rate is based on U.S. Treasury notes
with a term approximating the expected life of the warrant at the grant-date. All employee compensation for the warrant plan was
recognized in 2012 and 2013.
A summary of warrants activity for the years ended December
31, 2016 and 2015 is presented below:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Life
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
(in
Years)
|
|
|
Warrants outstanding at December 31, 2014
|
|
|
980,004
|
|
|
$
|
0.576
|
|
|
|
9.36
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Warrants outstanding at December 31, 2015
|
|
|
980,004
|
|
|
$
|
0.576
|
|
|
|
8.36
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited or expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Warrants outstanding at December 31, 2016
|
|
|
980,004
|
|
|
$
|
0.576
|
|
|
|
7.36
|
|
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 7: INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2016 and 2015 are summarized
below:
In assessing the potential realization of these deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods
in which those temporary differences become deductible. As of December 31, 2016 and 2015, management was unable to determine if
it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate
valuation allowance against deferred tax assets at such dates. The valuation allowance for deferred tax assets increased approximately
$836,000 and $654,000 during the years ended December 31, 2016 and 2015, respectively.
No federal tax provision has been provided for the years ended
December 31, 2016 and 2015 due to the losses incurred during such periods. The Company’s effective tax rate is different
from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation
allowance recorded for such losses.
|
|
|
2016
|
|
|
2015
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
|
$
|
42,854
|
|
|
$
|
23,190
|
|
|
Net operating loss carry forward
|
|
|
2,112,856
|
|
|
|
1,378,425
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(15,387
|
)
|
|
|
(14,004
|
)
|
|
Federal R&D credit
|
|
|
178,158
|
|
|
|
124,631
|
|
|
Oregon R&D credit
|
|
|
83,012
|
|
|
|
53,286
|
|
|
Total deferred tax asset
|
|
|
2,401,493
|
|
|
|
1,565,528
|
|
|
Valuation allowance
|
|
|
(2,401,493
|
)
|
|
|
(1,565,528
|
)
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
In assessing the potential realization of these deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods
in which those temporary differences become deductible. As of December 31, 2016 and 2015, management was unable to determine if
it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate
valuation allowance against deferred tax assets at such dates. The valuation allowance for deferred tax assets increased approximately
$836,000 and $654,000 during the years ended December 31, 2016 and 2015, respectively.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
No federal tax provision has been provided for the years ended
December 31, 2016 and 2015 due to the losses incurred during such periods. The Company’s effective tax rate is different
from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation
allowance recorded for such losses.
|
|
|
2016
|
|
|
2015
|
|
|
Statutory U.S. Federal tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
State and local income taxes – net of Federal benefit
|
|
|
6.6
|
%
|
|
|
6.6
|
%
|
|
Nondeductible expenses and other
|
|
|
3.0
|
%
|
|
|
7.6
|
%
|
|
Valuation Allowance
|
|
|
-43.6
|
%
|
|
|
-48.2
|
%
|
|
Effective rate tax
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
As of December 31, 2016, the Company had net operating loss
carry forwards of $5,204,079 which will expire at various dates from 2029 through 2036. The Federal R&D tax credits will expire
at various dates from 2032 through 2036, and the Oregon R&D tax credits will expire at various dates from 2017 through 2021.
The Company has evaluated its income tax positions and has determined
that it does not have any uncertain tax positions. The Company policy is to record interest and penalties on uncertain tax positions
as income tax expense. The Company may in the future become subject to federal, state and local income taxation though it has not
been since its inception. The Company is not presently subject to any income tax audit in any taxing jurisdiction.
The Company has identified the United States Federal and Oregon
State tax returns as its “major” tax jurisdiction. The United States Federal and Oregon State return years 2013 through
2016 are still subject to tax examination by the United States Internal Revenue Service; however, we do not currently have any
ongoing tax examinations.
NOTE 8: CUSTOMER DEPOSITS
The Company has received customer deposits ranging from $100
to $10,100 per order for retail production vehicles and $42,000 per order for signature series vehicles for purposes of securing
their vehicle production slot. As of December 31, 2016 and 2015, the Company’s balance of refundable deposits received was
$386,035 and $204,628, respectively, which are refundable upon demand. Refundable deposits are included in current liabilities
in the accompanying balance sheets. Production of retail vehicles is expected to begin in the first half of 2018; production of
signature series vehicles is expected to begin in June 2017. 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. If the customer elects
to proceed with their order, their deposit is used to purchase the inventory needed to manufacture
the vehicle. Customer deposits from related parties total $43,700 through December 31, 2016.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
NOTE 9: COMMITMENTS AND CONTINGENCIES
Operating Leases
The land lord for the Company’s office lease, Center Camp,
LLC, has a related party, Mark Frohnmayer (officer and director) as the sole member of Center Camp, LLC. The Triple Net Lease is
for 5,094 usable square feet of 544 Blair Boulevard, Eugene, Oregon. The lease began on May 1, 2013 and will terminate on April
30, 2018. The lease may be terminated by written notification (90) days in advance of intent to vacate the Premises, provided that
the Tenant pays a termination charge equal to 6 months’ rent. Termination must occur at the end of the calendar month. The
Company has two, five year options to renew the lease. Base rental rate is $3,500 per month during years 1-2, $4,400 per month
during years 3-4, and $5,450 per month during year 5. See the following table for future minimum rent payments by year.
Years ending December 31:
|
2017
|
|
$
|
61,200
|
|
|
2018
|
|
$
|
21,800
|
|
On July 13, 2015, Arcimoto, Inc. entered into a lease on a 600
square feet of commercial retail space located at 543 Blair Boulevard, Eugene, Oregon. The lease can be terminated at any time
with (30) days prior written notice of termination. The monthly rent is $600 per month.
On August 24, 2016, Arcimoto, Inc. entered into a sublease on
a 600 square feet of commercial industrial manufacturing space located at 2084 Roosevelt Blvd, Suite B, Eugene, Oregon. The sublessor,
Roderick Bautista, is a related party employed by Arcimoto, Inc. as an R&D Fabricator. The space will be used to manufacture
the roll cages for the Signature Series vehicles. The lease terminated on March 31, 2017. The monthly rent is $300 per month.
Total rent expense for the years ended December 31, 2016 and
2015 was $61,740 and $54,020, respectively.
Litigation
The Company is involved in claims and litigation from time to
time in the normal course of business. At December 31, 2016, the Management of the Company believes there are no pending matters
that are expected to have a material adverse effect on the business of the Company, their financial condition, results of operations
or cash flows.
NOTE 10: SUBSEQUENT EVENTS
Subsequent to December 31, 2016, subscription agreements
for 245,100 shares of A-1 Preferred Stock have been issued at $5.00 per share, 10,000 of which were issued to a related party.
ARCIMOTO, INC.
NOTES TO FINANCIAL STATEMENTS
For the years ended December
31, 2016 and 2015
Subsequent to December 31, 2016, the Company issued convertible
notes in the amount of $200,000. The notes and all accrued interest are due on March 31, 2018. The notes are secured by substantially
all assets of the Company and had a stated interest rate of 6% per annum. The notes are convertible on demand at the greater of
5.00 per share or 90% of the active selling price of the Series A-1 Preferred Stock at the time of conversion. None of the convertible
notes contained a beneficial conversion feature due to the conversion price of the notes being at or above the fair value of the
stock at issuance. $100,000 of the notes were issued to a related party, Mark Frohnmayer. One note not issued to a
related party on March 17, 2017, in the amount of $50,000 was repaid along with $234 in accrued interest on April 14, 2017.
On March 1, 2017, an additional 455,000 incentive stock
options were issued to employees at an exercise price of $2.50 per share and 20,000 incentive stock options were issued to an
employee at an exercise price of $2.75 per share, all options were issued with a ten-year life.
On May 1, 2017, 8,000 warrants with an exercise price of
$2.50 per share and a five-year life were issued to a vendor in payment of $15,000 of invoices.
Management has evaluated subsequent events through May 12,
2017, the original date the financial statements were available to be issued. Based on this evaluation, no additional material
events were identified which require adjustment or disclosure in these financial statements.
The Board of Directors and Common Shareholders voted for
a two-for-one Common Stock split on July 21, 2017. The Majority of Preferred Shareholders voted to convert to Common Stock on
July 25, 2017. These financial statements and Notes 3, 5, and 6 have been restated to reflect these actions.
PART III
INDEX TO EXHIBITS
1. Issuer agreement with W.R. Hambrecht + Co., LLC
2.1 Second Amended and Restated Certificate of Incorporation
2.2 Second Amended and Restated Bylaws
4. Form of Subscription Agreement
6.1 Second Amended and Restated 2012 Employee Stock Benefit
Plan
6.2 Amended and Restated 2015 Stock Incentive Plan
8. Escrow Agreement with Prime Trust, LLC
11. Consent of Auditing Accountant, dbbmckennon
12. Attorney opinion on legality of the offering
13.1 Arcimoto Press Release
13.2 Arcimoto One-Page Summary
13.3 W.R. Hambrect + Co., LLC Online Investment Page
13.4 Arcimoto Online Investment Page
SIGNATURES
Pursuant to the requirements of Regulation
A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A
and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Eugene, State of Oregon on August 7, 2017.
Arcimoto, Inc.
/s/
By Mark Frohnmayer, President, Chief Executive
Officer, Director and Chair of the Board of Arcimoto, Inc.,
This Offering Statement has been signed by the following persons
in the capacities and on the dates indicated.
/s/
By Mark Frohnmayer, President, Chief Executive
Officer, Director and Chair of the Board of Arcimoto, Inc.
Date: August 7, 2017
/s/
Douglas Campoli, Chief Financial Officer, Chief Accounting Officer
Date: August 7, 2017
/s/
Terry Becker, Director
Date: August 7, 2017
/s/
Jefferson Curl, Director
Date: August 7, 2017
Exhibit 1
ARCIMOTO, INC.
4,600,000 Shares of Common Stock
no par value per share
UNDERWRITING AGREEMENT
July 31, 2017
W.R. Hambrecht + Co., LLC
909 Montgomery Street, 3rd Floor
San Francisco, California 94133
Dear Ladies and Gentlemen:
Arcimoto, Inc., an Oregon corporation (the
“Company”), proposes, subject to the terms and conditions contained in this Underwriting Agreement (this “Agreement”),
to issue and sell 4,600,000 shares of its common stock, no par value per share (the “Common Stock”), to investors
(collectively, the “Investors”) in an initial public offering pursuant to Regulation A through you as the underwriter
(the “Underwriter”), acting on a best efforts basis only, in connection with such sales. The shares of Common
Stock to be sold in this offering are referred to herein as the “Shares.” The Shares are more fully described
in the Offering Statement (as hereinafter defined).
The Company hereby confirms its agreements
with the Underwriter concerning the purchase and sale of the Shares, as follows:
|
|
1.
|
Agreement to Act on a Best Efforts Basis. On the basis of the representations, warranties and agreements of the Company
herein contained and subject to all the terms and conditions of this Agreement, the Underwriter agrees to its best efforts in connection
with the issuance and sale by the Company of the Shares to the Investors. Under no circumstances will the Underwriter be obligated
to underwrite or purchase any of the Shares for its own accounts or otherwise provide any financing. The Company will pay to the
Underwriter a fee equal to six percent (6%) (the “Fee”) of the gross offering proceeds received by the Company
from the sale of the Shares, excluding proceeds raised from investors via alternative funding platforms. Further, the Company will
pay to the Underwriter five year warrants to purchase such number of shares of common stock representing five percent (5%)
of the total number of shares sold in the Amended Final Offering Circular, excluding shares purchased by investors via alternative
funding platforms,, with an exercise price at a 15% premium to the price set forth in the Amended Final Offering Circular. For
shares purchased by investors sourced via alternative funding platforms, the Company will pay to the Underwriter a fee equal to
three percent (3%) of the gross proceeds. For the avoidance of doubt, “alternative funding platforms” shall include
investors sourced via the direct “Invest now” functionality on the Company’s web site and on the Fundable.com
web site.
|
|
|
|
The Underwriter shall have the right to enter into selected dealer agreements with other
broker-dealers participating in the Offering (each dealer being referred to herein as a “Dealer” and said dealers
being collectively referred to herein as the “Dealers”). The Fee shall be re-allowable, in whole or in
part, to the Dealers. The Company will not be liable or responsible to any Dealer for direct payment of compensation to any
Dealer, it being the sole and exclusive responsibility of the Underwriter for payment of compensation to Dealers with
whom the Underwriter entered into an agreement.
|
|
|
(a)
|
On or after the date of this Agreement, the Company, the Underwriter and Prime Trust, LLC (the “Agent”)
will enter into an escrow agreement substantially in the form included as an exhibit to the Offering Statement (the “Escrow
Agreement”), pursuant to which a separate bank account, as agent or trustee for the persons who have the beneficial interests
therein, will be established, as an expense of the Underwriter, for the benefit of the Investors (the “Separate Account”).
|
|
|
(b)
|
Prior to the closing date of the offering, purchases of Shares
may be through broker transactions where each Investor will provide instructions to its
Broker to purchase shares in accordance with FINRA regulations and (iii) funds received
from any Investor will be promptly transmitted to the Separate Account in compliance
with Rule 15c2-4 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). The Agent will notify the Company and the Underwriter in writing whether
the balance of the Separate Account contains collected funds in the amount equal to the
proceeds for the sale of 160,000 Shares offered hereby (the “Requisite Funds”).
|
|
|
(1)
|
If the Agent shall have received at least the Requisite Funds
as may be agreed upon by the Company and the Underwriter (the “Initial Closing Date”), the Agent will release
the balance of the Separate Account for collection by the Company and the Underwriter as provided in the Escrow Agreement and
the Company shall deliver the Shares purchased on the Closing Date to the Investors, which delivery may be made through the facilities
of the Depository Trust Company (“DTC”) or via book entry with the Company’s securities registrar and
transfer agent, Computershare (the “Transfer Agent”). The closing (the “Closing”) shall
take place at the office of the Underwriter or such other location as the Underwriter and the Company shall mutually agree. All
actions taken at the Closing shall be deemed to have occurred simultaneously on the date of the Closing.
|
|
|
(2)
|
If the Requisite Funds have not been received immediately prior to the Closing Date, the offering will not proceed and the
Agent will promptly return the funds to the investors without interest.
|
|
|
(3)
|
If the Agent shall have received at least the Requisite Funds on or before the Final Closing Date, then on the Final Closing
Date, the Company will issue to the Underwriter (and/or its designee) warrants to purchase that number of shares of Common Stock
equal to five percent (5%) of the shares issued and sold by the Underwriter on all Closing Dates (adjusted upward to the nearest
whole share) (the “Underwriter’s Warrants”). The Underwriter’s Warrants shall be in the form of Exhibit
D attached hereto. The Underwriter’s Warrants shall have an exercise price per share equal to one hundred fifteen
percent (115%) of the price per Share as shown on the cover page of the Amended Final Offering Circular (as defined below). The
Underwriter’s Warrants will be exercisable for a term of five years beginning on the Qualification Date (as defined below).
The Underwriter understands and agrees that there are significant restrictions pursuant to Financial Industry Regulatory Authority
(“FINRA”) Rule 5110 against transferring the Underwriter’s Warrants and the underlying shares of Common
Stock during the one hundred eighty (180) days after the Qualification Date and by its acceptance thereof shall agree that it will
not sell, transfer, assign, pledge or hypothecate the Underwriter’s Warrants, or any portion thereof, or be the subject of
any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities
for a period of one hundred eighty (180) days following the Qualification Date to anyone other than (i) an underwriter or selected
dealer in connection with the offering contemplated hereby or (ii) a bona fide officer or partner of the Underwriter or of any
underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
|
|
|
3.
|
Representations and Warranties of the Company. The Company represents and warrants and covenants to the Underwriter
that:
|
|
|
(a)
|
The Company has filed with the Securities and Exchange Commission (the “Commission”) an offering statement
on Form 1-A (File No. 024-10557) (collectively, with the various parts of such offering statement, each as amended as of the Qualification
Date for such part, including any Offering Circular and all exhibits to such offering statement as may have been amended, the “Offering
Statement”) relating to the Shares pursuant to Regulation A as promulgated under the Securities Act of 1933, as amended
(the “Act”), and the other applicable rules, orders and regulations (collectively referred to as the “Rules
and Regulations”) of the Commission promulgated under the Act. As used in this Agreement:
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(1)
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“Applicable Time” means 5:00 p.m. (Eastern time) on the date of this Agreement;
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(2)
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“Amended Final Offering Circular” means the Final Offering Circular relating to the public offering of the
Shares as filed with the Commission pursuant to Regulation A of the Rules and Regulations on May 31, 2016 and as amended on ______,
2017;
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(3)
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“Preliminary Offering Circular” means any preliminary offering circular relating to the Shares included
in the Offering Statement pursuant to Regulation A of the Rules and Regulations;
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(4)
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“Pricing Disclosure Materials” means the most recent Preliminary Offering Circular and the materials identified
in Schedule 1 hereto;
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(5)
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“Qualification Date” means the date as of which the Offering Statement was or will be qualified with the
Commission pursuant to Regulation A, the Act and the Rules and Regulations; and
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(6)
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“Testing-the-Waters Communication” means any video or written communication with potential investors undertaken
in reliance on Rule 255 of the Rules and Regulations.
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(b)
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The Offering Statement, has been filed with the Commission in accordance with the Act and Regulation A of the Rules and Regulations;
no stop order of the Commission preventing or suspending the qualification or use of the Offering Statement, or any amendment thereto,
has been issued, and no proceedings for such purpose have been instituted or, to the Company’s, knowledge, are contemplated
by the Commission.
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(c)
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The Offering Statement, at the time it became qualified including any subsequent amendments thereto, as of the date hereof,
and as the Closing Date, conformed and will conform in all material respects to the requirements of Regulation A, the Act and the
Rules and Regulations.
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(d)
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The Offering Statement, at the time it became qualified including any subsequent amendments thereto, as of the date hereof,
and as of each Closing Date, did not and will not, contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading.
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(e)
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The Preliminary Offering Circular did not, as of its date, contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that the Company makes no representation or warranty
with respect to the statements provided by the Underwriter and contained in the Preliminary Offering Circular as set forth in Section
8 (a).
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(f)
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The Amended Final Offering Circular will not, as of its date and on the Closing Date, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however, that the Company makes
no representation or warranty with respect to the statements provided by the Underwriter and contained in the Preliminary Offering
Circular as set forth in Section 8 (a).
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(g)
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The Pricing Disclosure Materials and each Testing-the-Waters Communication, when considered together, did not, as of the Applicable
Time, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not misleading, provided, however,
that the Company makes no representation or warranty with respect to the statements provided by the Underwriter and contained in
the Preliminary Offering Circular as set forth in Section 8 (a).
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(h)
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As of the date hereof and as of the Closing Date, the Company is duly organized and validly existing as a corporation in good
standing under the laws of the State of Oregon. The Company has full power and authority to conduct all the activities conducted
by it, to own and lease all the assets owned and leased by it and to conduct its business as presently conducted and as described
in the Offering Statement, the Pricing Disclosure Materials and the Amended Final Offering Circular. The Company is duly licensed
or qualified to do business and in good standing as a foreign organization in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such licensing or qualification necessary, except where
the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on or affecting the business, prospects, properties, management, financial
position, stockholders’ equity, or results of operations of the Company and its Subsidiaries taken as a whole (a “Material
Adverse Effect”). Complete and correct copies of the articles of incorporation and of the bylaws of the Company and all
amendments thereto have been made available to the Underwriter, and no changes therein will be made subsequent to the date hereof
and prior to any Closing Date.
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(i)
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The Company has no subsidiaries, nor does it own a controlling interest in any entity other than those entities set forth on Schedule
3 to this Agreement (each a “Subsidiary” and collectively the “Subsidiaries”). Each
Subsidiary has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of formation.
Each Subsidiary is duly qualified and in good standing as a foreign company in each jurisdiction in which the character or location
of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which would not be reasonably expected to have a Material Adverse Effect.
All of the shares of issued capital stock of each corporate subsidiary, and all of the share capital, membership interests and/or
equity interests of each subsidiary that is not a corporation, have been duly authorized and validly issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, encumbrance, claim, security interest,
restriction on transfer, shareholders’ agreement, proxy, voting trust or other defect of title whatsoever.
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(j)
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The Company is organized in, and its principal place of business is in, the United States.
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(k)
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The Company is not subject to the ongoing reporting requirements of Section 13 or 15(d) of the Exchange Act and has not been
subject to an order by the Commission denying, suspending, or revoking the registration of any class of securities pursuant to
Section 12(j) of the Exchange Act that was entered within five years preceding the date the Offering Statement was originally filed
with the Commission. The Company is not, and has not been at any time during the two-year period preceding the date the Offering
Statement was originally filed with the Commission, required to file with the Commission the ongoing reports required by the Rules
and Regulations under Regulation A.
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(l)
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The Company is not, nor upon completion of the transactions contemplated herein will it be, an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).
The Company is not a development stage company or a “business development company” as defined in Section 2(a)(48) of
the Investment Company Act. The Company is not a blank check company and is not an issuer of fractional undivided interests in
oil or gas rights or similar interests in other mineral rights. The Company is not an issuer of asset-backed securities as defined
in Item 1101(c) of Regulation AB.
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(m)
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Neither the Company, nor any predecessor of the Company; nor any other issuer affiliated with the Company; nor any director
or executive officer of the Company or other officer of the Company participating in the offering, nor any beneficial owner of
20% or more of the Company's outstanding voting equity securities, nor any promoter connected with the Company, is subject to the
disqualification provisions of Rule 262 of the Rules and Regulations.
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(n)
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The Company is not a “foreign private issuer,” as such term is defined in Rule 405 under the Act.
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(o)
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The Company has full legal right, power and authority to enter into this Agreement and the Escrow Agreement and perform the
transactions contemplated hereby and thereby. This Agreement and the Escrow Agreement have each been authorized and validly executed
and delivered by the Company and are each a legal, valid and binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’
rights generally and equitable principles of general applicability.
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(p)
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The issuance and sale of the Shares have been duly authorized by the Company, and, when issued and paid for in accordance with
this Agreement, will be duly and validly issued, fully paid and nonassessable and will not be subject to preemptive or similar
rights. The holders of the Shares will not be subject to personal liability by reason of being such holders. The Shares, when issued,
will conform to the description thereof set forth in the Amended Final Offering Circular in all material respects.
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(q)
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The Company has not authorized anyone other than the management of the Company and the Underwriter to engage in Testing-the-Waters
Communications. The Company reconfirms that the Underwriter have been authorized to act on its behalf in undertaking Testing-the-Waters
Communications. The Company has not distributed any Testing-the-Waters Communications other than those listed on Schedule
2 hereto.
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(r)
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The financial statements and the related notes included in the Offering Statement, the Pricing Disclosure Materials and the
Amended Final Offering Circular present fairly, in all material respects, the financial condition of the Company and its Subsidiaries
as of the dates thereof and the results of operations and cash flows at the dates and for the periods covered thereby in conformity
with United States generally accepted accounting principles (“GAAP”), except as may be stated in the related
notes thereto. No other financial statements or schedules of the Company, any Subsidiary or any other entity are required by the
Act or the Rules and Regulations to be included in the Offering Statement or the Amended Final Offering Circular. There are no
off-balance sheet arrangements (as defined in Regulation S-K Item 303(a)(4)(ii)) that may have a material current or future effect
on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures
or capital resources.
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(s)
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DBB McKennon (the “Accountants”), who have reported on the financial statements and schedules described
in Section 3(s), are registered independent public accountants with respect to the Company as required by the Act and the Rules
and Regulations and by the rules of the Public Company Accounting Oversight Board. The financial statements of the Company and
the related notes and schedules included in the Offering Statement, the Pricing Disclosure Materials and the Amended Final Offering
Circular comply as to form in all material respects with the requirements of the Act and the Rules and Regulations and present
fairly the information shown therein.
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(t)
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Since the date of the most recent financial statements of the Company included or incorporated by reference in the Offering
Statement and the most recent Preliminary Offering Circular and prior to the Closing, other than as described in the Amended Final
Offering Circular (A) there has not been and will not have been any change in the capital stock of the Company or long-term debt
of the Company or any Subsidiary or any dividend or distribution of any kind declared, set aside for payment, paid or made by the
Company on any class of capital stock or equity interests, or any material adverse change, or any development that would reasonably
be expected to result in a material adverse change, in or affecting the business, prospects, properties, management, financial
position, stockholders’ equity, or results of operations of the Company and its Subsidiaries taken as a whole (a “Material
Adverse Change”) and (B) neither the Company nor any Subsidiary has sustained or will sustain any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance
or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case
as otherwise disclosed in the Offering Statement, the Pricing Disclosure Materials and the Amended Final Offering Circular.
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(u)
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Since the date as of which information is given in the most recent Preliminary Offering Circular, neither the Company nor any
Subsidiary has entered or will before the Closing enter into any transaction or agreement, not in the ordinary course of business,
that is material to the Company and its Subsidiaries taken as a whole or incurred or will incur any liability or obligation, direct
or contingent, not in the ordinary course of business, that is material to the Company and its Subsidiaries taken as a whole, and
neither the Company nor any Subsidiary has any plans to do any of the foregoing.
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(v)
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The Company and each Subsidiary has good and valid title in fee simple to all items of real property and good and valid title
to all personal property described in the Offering Statement or the Amended Final Offering Circular as being owned by them, in
each case free and clear of all liens, encumbrances and claims except those that (1) do not materially interfere with the use made
and proposed to be made of such property by the Company and its Subsidiaries or (2) would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. Any real property described in the Offering Statement or the Amended Final
Offering Circular as being leased by the Company or any Subsidiary that is material to the business of the Company and its Subsidiaries
taken as a whole is held by them under valid, existing and enforceable leases, except those that (A) do not materially interfere
with the use made or proposed to be made of such property by the Company and its Subsidiaries or (B) would not be reasonably expected,
individually or in the aggregate, to have a Material Adverse Effect.
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(w)
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There are no legal, governmental or regulatory actions, suits or proceedings pending, either domestic or foreign, to which
the Company is a party or to which any property of the Company is the subject, nor are there, to the Company’s knowledge,
any threatened legal, governmental or regulatory investigations, either domestic or foreign, involving the Company or any property
of the Company that, individually or in the aggregate, if determined adversely to the Company, would reasonably be expected to
have a Material Adverse Effect or materially and adversely affect the ability of the Company to perform its obligations under this
Agreement; to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated by any governmental
or regulatory authority or threatened by others.
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(x)
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The Company and each Subsidiary has, and at each Closing Date will have, (1) all governmental licenses, permits, consents,
orders, approvals and other authorizations necessary to carry on its business as presently conducted except where the failure to
have such governmental licenses, permits, consents, orders, approvals and other authorizations would not be reasonably expected
to have a Material Adverse Effect, and (2) performed all its obligations required to be performed, and is not, and at each Closing
Date will not be, in default, under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture,
note agreement, lease, contract or other agreement or instrument (collectively, a “contract or other agreement”)
to which it is a party or by which its property is bound or affected and, to the Company’s knowledge, no other party under
any material contract or other agreement to which it is a party is in default in any respect thereunder. The Company and its Subsidiaries
are not in violation of any provision of its organizational or governing documents.
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(y)
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The Company has obtained all authorization, approval, consent, license, order, registration, exemption, qualification or decree
of, any court or governmental authority or agency or any sub-division thereof that is required for the performance by the Company
of its obligations hereunder, in connection with the offering, issuance or sale of the Shares and the Underwriter’s Securities
under this Agreement or the consummation of the transactions contemplated by this Agreement as may be required under federal, state,
local and foreign laws, the Act or the rules and regulations of the Commission thereunder, state securities or Blue Sky laws, the
rules and regulations of FINRA.
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(z)
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There is no actual or, to the knowledge of the Company, threatened, enforcement action or investigation by any governmental
authority that has jurisdiction over the Company, and to its knowledge, the Company has received no notice of any pending or threatened
claim or investigation against the Company that would provide a legal basis for any enforcement action, and the Company has no
reason to believe that any governmental authority is considering such action.
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(aa)
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Neither the execution of this Agreement, nor the issuance, offering or sale of the Shares, nor the consummation of any of the
transactions contemplated herein, nor the compliance by the Company with the terms and provisions hereof or thereof will conflict
with, or will result in a breach of, any of the terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any Subsidiary pursuant to the terms of any contract or other agreement to which the Company or any Subsidiary
may be bound or to which any of the property or assets of the Company or any Subsidiary is subject, except such conflicts, breaches
or defaults as may have been waived or would not, in the aggregate, be reasonably expected to have a Material Adverse Effect; nor
will such action result in any violation, except such violations that would not be reasonably expected to have a Material Adverse
Effect, of (1) the provisions of the organizational or governing documents of the Company or any Subsidiary, or (2) any statute
or any order, rule or regulation applicable to the Company or any Subsidiary or of any court or of any federal, state or other
regulatory authority or other government body having jurisdiction over the Company or any Subsidiary.
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(bb)
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There is no document or contract of a character required to be described in the Offering Statement or the Amended Final Offering
Circular or to be filed as an exhibit to the Offering Statement which is not described or filed as required. All such contracts
to which the Company or any Subsidiary is a party have been authorized, executed and delivered by the Company or any Subsidiary,
and constitute valid and binding agreements of the Company or any Subsidiary, and are enforceable against the Company in accordance
with the terms thereof, subject to the effect of applicable bankruptcy, insolvency or similar laws affecting creditors’ rights
generally and equitable principles of general applicability. None of these contracts have been suspended or terminated for convenience
or default by the Company or any of the other parties thereto, and the Company has not received notice of any such pending or threatened
suspension or termination.
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(cc)
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The Company and its directors, officers or controlling persons have not taken, directly or indirectly, any action intended,
or which might reasonably be expected, to cause or result, under the Act or otherwise, in, or which has constituted, stabilization
or manipulation of the price of any security of the Company to facilitate the sale or resale of the Company’s Common Stock.
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(dd)
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Other than as previously disclosed to the Underwriter in writing, the Company, or any person acting on behalf of the Company,
has not and, except in consultation with the Underwriter, will not publish, advertise or otherwise make any announcements concerning
the distribution of the Shares, and has not and will not conduct road shows, seminars or similar activities relating to the distribution
of the Shares nor has it taken or will it take any other action for the purpose of, or that could reasonably be expected to have
the effect of, preparing the market, or creating demand, for the Shares.
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(ee)
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No holder of securities of the Company has rights to the registration of any securities of the Company as a result of the filing
of the Offering Statement or the transactions contemplated by this Agreement, except for such rights as have been waived or as
are described in the Offering Statement.
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(ff)
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No labor dispute with the employees of the Company or any Subsidiary exists or, to the knowledge of the Company, is threatened,
and the Company is not aware of any existing or threatened labor disturbance by the employees of any of its or any Subsidiary’s
principal suppliers, manufacturers, customers or contractors.
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(gg)
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The Company and each of its subsidiaries: (i) are and have been in material compliance with all laws, to the extent applicable,
and the regulations promulgated pursuant to such laws, and comparable state laws, and all other local, state, federal, national,
supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company
and its subsidiaries except for such non-compliance as would not be reasonably expected, individually or in the aggregate, to have
a Material Adverse Effect; (ii) have not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from any Regulatory Agency or third party alleging that any product operation or activity
is in material violation of any laws and has no knowledge that any such Regulatory Agency or third party is considering any such
claim, litigation, arbitration, action, suit, investigation or proceeding; and (iii) are not a party to any corporate integrity
agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, or similar agreements, or has
any reporting obligations pursuant to any such agreement, plan or correction or other remedial measure entered into with any Governmental
Authority.
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(hh)
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The business and operations of the Company, and each of its Subsidiaries, have been and are being conducted in compliance with
all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating
to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those
relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances,
materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department, commission, board,
bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or any foreign jurisdiction
(“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards,
judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually
or in the aggregate, to have a Material Adverse Effect; and neither the Company nor any of its Subsidiaries has received any notice
from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including,
without limitation, liability for costs of investigating or remediating sites containing hazardous substances and/or damages to
natural resources).
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(ii)
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There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous
Materials (as defined below) by or caused by the Company or any of its Subsidiaries (or, to the knowledge of the Company, any other
entity (including any predecessor) for whose acts or omissions the Company or any of its Subsidiaries is or could reasonably be
expected to be liable at, on, under or from any property or facility now or previously owned, operated or leased by the Company
or any of its Subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or
in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law,
except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Effect. “Hazardous
Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent
thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural
gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated
or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or
migrating in, into or through the environment, or in, into from or through any building or structure.
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(jj)
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The Company and its Subsidiaries own, possess, license or have other adequate rights to use, on reasonable terms, all material
patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other intellectual property necessary for the conduct of the Company’s
and each of its Subsidiary’s business as now conducted (collectively, the “Intellectual Property”), except
to the extent such failure to own, possess or have other rights to use such Intellectual Property would not result in a Material
Adverse Effect. Except as set forth in the Amended Final Offering Circular: (a) no party has been granted an exclusive license
to use any portion of such Intellectual Property owned by the Company or its Subsidiaries; (b) to the knowledge of the Company,
there is no infringement by third parties of any such Intellectual Property owned by or exclusively licensed to the Company or
its Subsidiaries; (c) the Company is not aware of any defects in the preparation and filing of any of patent applications, as listed
in Exhibit C, within the Intellectual Property; (d) to the knowledge of the Company, the patent applications, as listed
in Exhibit C, within the Intellectual Property are being prosecuted so as to avoid the abandonment thereof; (e) to the knowledge
of the Company, the patents, as listed in Exhibit C, within the Intellectual Property are being maintained and the required maintenance
fees (if any) are being paid; (f) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding
or claim by others challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property,
and the Company and its Subsidiaries are unaware of any facts which would form a reasonable basis for any such claim; (g) there
is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity
or scope or enforceability of any such Intellectual Property, and the Company and its Subsidiaries are unaware of any facts which
would form a reasonable basis for any such claim; and (h) there is no pending, or to the knowledge of the Company, threatened action,
suit, proceeding or claim by others that the Company’s or any of its Subsidiaries’ business as now conducted infringes
or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company and
its Subsidiaries are unaware of any other fact which would form a reasonable basis for any such claim. To the knowledge of the
Company, no opposition filings or invalidation filings have been submitted which have not been finally resolved in connection with
any of the Company’s patents and patent applications in any jurisdiction where the Company has applied for, or received,
a patent.
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(kk)
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Except as would not have, individually or in the aggregate, a Material Adverse Effect, the Company and each Subsidiary (1)
has timely filed all federal, state, provincial, local and foreign tax returns that are required to be filed by such entity through
the date hereof, which returns are true and correct, or has received timely extensions for the filing thereof, and (2) has paid
all taxes, assessments, penalties, interest, fees and other charges due or claimed to be due from the Company, other than (A) any
such amounts being contested in good faith and by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP or (B) any such amounts currently payable without penalty or interest. There are no tax audits or investigations
pending, which if adversely determined could have a Material Adverse Effect; nor to the knowledge of the Company are there any
proposed additional tax assessments against the Company or any Subsidiary which could have, individually or in the aggregate, a
Material Adverse Effect. No transaction, stamp, capital or other issuance, registration, transaction, transfer or withholding tax
or duty is payable by or on behalf of the Underwriter to any foreign government outside the United States or any political subdivision
thereof or any authority or agency thereof or therein having the power to tax in connection with (i) the issuance, sale and delivery
of the Shares by the Company; (ii) the purchase from the Company, and the initial sale and delivery of the Shares to purchasers
thereof; or (iii) the execution and delivery of this Agreement or any other document to be furnished hereunder.
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(ll)
|
On each Closing Date, all stock transfer or other taxes (other than income taxes) which are required to be paid in connection
with the sale and transfer of the Shares to be issued and sold on such Closing Date will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have been fully complied with.
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(mm)
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The Company and its Subsidiaries are insured with insurers with appropriately rated claims paying abilities against such losses
and risks and in such amounts as are prudent and customary for the businesses in which they are engaged; all policies of insurance
and fidelity or surety bonds insuring the Company, each Subsidiary or their respective businesses, assets, employees, officers
and directors are in full force and effect; and there are no claims by the Company or its Subsidiary under any such policy or instrument
as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor
any Subsidiary has been refused any insurance coverage sought or applied for; and neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its business at a cost that is not materially greater than
the current cost. The Company has obtained director’s and officer’s insurance in such amounts as is customary for a
similarly situated company engaging in an initial public offering of securities.
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(nn)
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Neither the Company nor its Subsidiaries, nor any director, officer, agent or employee of either the Company or any Subsidiary
has directly or indirectly, (1) made any unlawful contribution to any federal, state, local and foreign candidate for public office,
or failed to disclose fully any contribution in violation of law, (2) made any payment to any federal, state, local and foreign
governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof, (3) violated or is in violation of any provisions of
the U.S. Foreign Corrupt Practices Act of 1977, or (4) made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
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(oo)
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The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects
with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar
rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”) and no material action, suit or proceeding by or before any court or governmental agency, authority
or body or any arbitrator involving the Company or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company, threatened.
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|
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(pp)
|
Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, agent or employee
of the Company or any of its Subsidiaries is currently subject to any U.S. sanctions (the “Sanctions Regulations”)
administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company
will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds
to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently
subject to any U.S. sanctions administered by OFAC or listed on the OFAC Specially Designated Nationals and Blocked Persons List.
Neither the Company nor, to the knowledge of the Company, any director, officer, agent or employee of the Company, is named on
any denied party or entity list administered by the Bureau of Industry and Security of the U.S. Department of Commerce pursuant
to the Export Administration Regulations (“EAR”); and the Company will not, directly or indirectly, use the
proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to
any Sanctions Regulations or to support activities in or with countries sanctioned by said authorities, or for engaging in transactions
that violate the EAR.
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(qq)
|
The Company has not distributed and, prior to the later to occur of the last Closing Date and completion of the distribution
of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than each
Preliminary Offering Circular, the Pricing Disclosure Materials and the Amended Final Offering Circular, or such other materials
as to which the Underwriter shall have consented in writing.
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|
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(rr)
|
Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and all stock purchase, stock option, stock-based severance, employment, change-in-control, medical,
disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements,
programs, policies or other arrangements, whether or not subject to ERISA, that is maintained, administered or contributed to by
the Company or any of its affiliates for employees or former employees, directors or independent contractors of the Company or
its Subsidiaries, or under which the Company or any of its Subsidiaries has had or has any present or future obligation or liability,
has been maintained in material compliance with its terms and the requirements of any applicable federal, state, local and foreign
laws, statutes, orders, rules and regulations, including but not limited to ERISA and the Code; no prohibited transaction, within
the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred which would result in a material liability to the
Company with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; no event
has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists
that would subject the Company to any material tax, fine, lien, penalty, or liability imposed by ERISA, the Code or other applicable
law; and for each such plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no “accumulated
funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value
of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all
benefits accrued under such plan determined using reasonable actuarial assumptions.
|
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(ss)
|
No relationship, direct or indirect, exists between or among the Company or any Subsidiary, on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any Subsidiary, on the other, which would be required to be disclosed
in the Offering Statement, the Preliminary Offering Circular and the Amended Final Offering Circular and is not so disclosed.
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(tt)
|
The Company has not sold or issued any securities that would be integrated with the offering of the Shares contemplated by
this Agreement pursuant to the Act, the Rules and Regulations or the interpretations thereof by the Commission or that would fail
to come within the safe harbor for integration under Regulation A.
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(uu)
|
Except as set forth in this Agreement, there are no contracts, agreements or understandings between the Company and any person
that would give rise to a valid claim against the Company or the Underwriter for a brokerage commission, finder’s fee or
other like payment in connection with the offering of the Shares.
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(vv)
|
To the knowledge of the Company, there are no affiliations with FINRA among the Company’s directors, officers or any
five percent or greater stockholder of the Company or any beneficial owner of the Company’s unregistered equity securities
that were acquired during the 180-day period immediately preceding the initial filing date of the Offering Statement.
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(ww)
|
There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business)
or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the Company or any of
their respective family members. The Company has not directly or indirectly, including through its Subsidiaries, extended or maintained
credit, arranged for the extension of credit, or renewed any extension of credit, in the form of a personal loan to or for any
director or executive officer of the Company or any of their respective related interests, other than any extensions of credit
that ceased to be outstanding prior to the initial filing of the Offering Statement. No transaction has occurred between or among
the Company and any of its officers or directors, stockholders, customers, suppliers or any affiliate or affiliates of the foregoing
that is required to be described or filed as an exhibit to in the Offering Statement, the Preliminary Offering Circular, the Pricing
Disclosure Materials or the Amended Final Offering Circular and is not so described.
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(xx)
|
The Company has the power to submit, and pursuant to Section 13 of this Agreement, has legally, validly, effectively and irrevocably
submitted, to the personal jurisdiction of each United States federal court and California state court located in Orange County,
California, U.S.A. (each, a “California Court”), and the Company has the power to designate, appoint and authorize,
and pursuant to Section 13 of this Agreement, has legally, validly, effectively and irrevocably designated, appointed and authorized
an agent for service of process in any action arising out of or relating to this Agreement or the Shares in any California Court,
and service of process effected on such authorized agent will be effective to confer valid personal jurisdiction over the Company
as provided in Section 13 hereof.
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|
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(yy)
|
The Underwriter’s Warrants have been duly authorized for issuance. The Company has reserved a sufficient number of shares
of its Common Stock for issuance upon exercise of the Underwriter’s Warrants and, when issued and paid for in accordance
with the terms of the Underwriter’s Warrants, such shares of Common Stock will be validly issued, fully paid and non-assessable
(such shares of Common Stock, together with the Underwriter’s Warrants, the “Underwriter’s Securities”).
The issuance of the Common Stock pursuant to the Underwriter’s Warrants will not be subject to any preemptive rights, rights
of first refusal or other similar rights to subscribe for or purchase securities of the Company or any of its subsidiaries.
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|
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4.
|
Agreements of the Company.
|
|
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(a)
|
The Offering Statement has become qualified, and the Company will file the Amended Final Offering Circular, subject to the
prior approval of the Underwriter, pursuant to Rule 253 and Regulation A, within the prescribed time period and will provide a
copy of such filing to the Underwriter promptly following such filing.
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(b)
|
The Company will not, during such period as the Amended Final Offering Circular would be required by law to be delivered in
connection with sales of the Shares by an underwriter or dealer in connection with the offering contemplated by this Agreement
(whether physically or through compliance with Rules 251 and 254 under the Act or any similar rule(s)), file any amendment or supplement
to the Offering Statement or the Amended Final Offering Circular unless a copy thereof shall first have been submitted to the Underwriter
within a reasonable period of time prior to the filing thereof and the Underwriter shall not have reasonably objected thereto in
good faith.
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(c)
|
The Company will notify the Underwriter promptly, and will, if requested, confirm such notification in writing: (1) when any
amendment to the Offering Statement is filed; (2) of any request by the Commission for any amendments to the Offering Statement
or any amendment or supplements to the Amended Final Offering Circular or for additional information; (3) of the issuance by the
Commission of any stop order preventing or suspending the qualification of the Offering Statement or the Amended Final Offering
Circular, or the initiation of any proceedings for that purpose or the threat thereof; (4) of becoming aware of the occurrence
of any event that in the judgment of the Company makes any statement made in the Offering Statement, the Preliminary Offering Circular,
the Pricing Disclosure Materials or the Amended Final Offering Circular untrue in any material respect or that requires the making
of any changes in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Amended Final
Offering Circular in order to make the statements therein, in light of the circumstances in which they are made, not misleading;
and (5) of receipt by the Company of any notification with respect to any suspension of the qualification or exemption from registration
of the Shares for offer and sale in any jurisdiction. If at any time the Commission shall issue any order suspending the qualification
of the Offering Statement in connection with the offering contemplated hereby or in connection with sales of Common Stock pursuant
to market making activities by the Underwriter, the Company will make every reasonable effort to obtain the withdrawal of any such
order at the earliest possible moment. If the Company has omitted any information from the Offering Statement, it will use its
best efforts to comply with the provisions of and make all requisite filings with the Commission pursuant to Regulation A, the
Act and the Rules and Regulations and to notify the Underwriter promptly of all such filings.
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|
|
(d)
|
If, at any time when the Amended Final Offering Circular relating to the Shares is required to be delivered under the Act,
the Company becomes aware of the occurrence of any event as a result of which the Amended Final Offering Circular, as then amended
or supplemented, would, in the reasonable judgment of counsel to the Company or counsel to the Underwriter , include any untrue
statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or the Offering Statement, as then amended or supplemented, would,
in the reasonable judgment of counsel to the Company or counsel to the Underwriter , include any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein not misleading, or if for any other reason it is
necessary, in the reasonable judgment of counsel to the Company or counsel to the Underwriter , at any time to amend or supplement
the Amended Final Offering Circular or the Offering Statement to comply with the Act or the Rules and Regulations, the Company
will promptly notify the Underwriter and will promptly prepare and file with the Commission, at the Company’s expense, an
amendment to the Offering Statement and/or an amendment or supplement to the Amended Final Offering Circular that corrects such
statement and/or omission or effects such compliance and will deliver to the Underwriter , without charge, such number of copies
thereof as the Underwriter may reasonably request. The Company consents to the use of the Amended Final Offering Circular or any
amendment or supplement thereto by the Underwriter, and the Underwriter agrees to provide to each Investor, prior to the Closing
and a copy of the Amended Final Offering Circular and any amendments or supplements thereto.
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|
|
(e)
|
The Company will furnish to the Underwriter and their counsel, without charge (a) one conformed copy of the Offering Statement
as originally filed with the Commission and each amendment thereto, including financial statements and schedules, and all exhibits
thereto, and (b) so long as an offering circular relating to the Shares is required to be delivered under the Act or the Rules
and Regulations, as many copies of each Preliminary Offering Circular or the Amended Final Offering Circular or any amendment or
supplement thereto as the Underwriter may reasonably request.
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|
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(f)
|
If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event
or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement
of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at that subsequent time, not misleading, the Company has or will promptly notify the Underwriter
in writing and has or will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate
or correct such untrue statement or omission.
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|
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(g)
|
The Company will comply with any undertakings contained in the Offering Statement.
|
|
|
(h)
|
Prior to the sale of the Shares to the Investors, the Company will cooperate with the Underwriter and its counsel in connection
with the registration or qualification, or exemption therefrom, of the Shares for offer and sale under the state securities or
Blue Sky laws of such jurisdictions as the Underwriter may reasonably request; provided, that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject
it to general service of process in any jurisdiction where it is not now so subject.
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|
|
(i)
|
The Company will apply the net proceeds from the offering and sale of the Shares in the manner set forth in the Amended Final
Offering Circular under the caption “Use of Proceeds.”
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|
|
(j)
|
The Company will use its reasonable best efforts to ensure that the Shares are quoted for trading on the NASDAQ upon approval
of the Underwriter’s Form 211 filed with FINRA relative to the Underwriter’s quotation of the Shares.
|
|
|
(k)
|
The Company will not at any time, directly or indirectly, take any action intended, or which might reasonably be expected,
to cause or result in, or which will constitute, stabilization of the price of the Shares to facilitate the sale or resale of any
of the Shares.
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|
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(l)
|
The Company will not, directly or indirectly, without the prior written consent of the Underwriter , offer to sell, sell, contract
to sell, grant any option or warrant to purchase, make any short sale, or otherwise dispose of (or announce any offer, sale, grant
of any option or warrant to purchase or other disposition), any shares of capital stock of the Company or securities convertible
into, or exchangeable or exercisable for, shares of capital stock of the Company, (the “Lock-Up Securities”)
for a period of 180 days after the date of this Agreement (the “Lock-Up Period”), except with respect to (i)
the Shares to be sold hereunder, (ii) the issuance of shares of Common Stock upon the exercise of stock options and warrants outstanding
as of the date hereof and the issuance of Common Stock or stock options under any employee benefit or stock incentive plan of the
Company existing on the date hereof, and described in the Amended Final Offering Circular, (iii) the issuance of Common Stock or
stock options under any non-employee director stock plan or dividend reinvestment plan described in the Amended Final Offering
Circular, or (iv) the issuance of any shares of Common Stock by the Company in connection with a licensing agreement, joint venture,
acquisition or business combination or other collaboration or strategic transaction, provided, however that
recipients of such shares of Common Stock agree to be bound by the terms of the lock-up letter described in Section 7(i) hereof
and the sum of the aggregate number of shares of Common Stock so issued shall not exceed 10% of the total outstanding shares of
Common Stock outstanding immediately following the consummation of this offering of Shares. If the Underwriter agrees to waive
or release any Lock-Up Securities from the Lock-Up Period, the Company will announce the impending release or waiver by press release
through a major news service at least two business days before the effective date of such release or waiver.
|
|
|
5.
|
Representations and Warranties of the Underwriter; Agreements of the Underwriter. The Underwriter represents and warrants
and covenants to the Company that:
|
|
|
(a)
|
The Underwriter agrees that it shall not include any “issuer information” (as defined in Rule 433 under
the Act) in any Written Testing-the-Waters Communication used or referred to by such Underwriter without the prior consent of the
Company (any such issuer information with respect to whose use the Company has given its consent, “Permitted Issuer Information”),
provided that “issuer information” (as defined in Rule 433 under the Act) within the meaning of this Section
5 shall not be deemed to include information prepared by the Underwriter on the basis of, or derived from, “issuer information”.
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|
|
(b)
|
The Underwriter is a member of FINRA and each of them and their respective employees and representatives have all required
licenses and registrations to act under this Agreement, and each shall remain a member or duly licensed, as the case may be, during
the Offering.
|
|
|
(c)
|
Except for participating Dealer agreements, no agreement will be made by the Underwriter with any person permitting the resale,
repurchase or distribution of any Shares purchased by such person.
|
|
|
(d)
|
Except as otherwise consented to by the Company, the Underwriter has not and will not use or distribute any written offering
materials other than the Preliminary Offering Circular, Pricing Disclosure Materials and the Amended Final Offering Circular. The
Underwriter has not and will not use any “broker-dealer use only” materials with members of the public, or has not
and will not make any unauthorized verbal representations or verbal representations which contradict or are inconsistent with the
statements made in the Offering Statement in connection with offers or sales of the Shares.
|
|
|
(a)
|
Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company
will pay, or reimburse if paid by the Underwriter , all costs and expenses incident to the performance of the obligations of the
Company under this Agreement, including but not limited to costs and expenses of or relating to (i) the preparation, printing and
filing of the Offering Statement (including each and every amendment thereto) and exhibits thereto, each Preliminary Offering Circular,
the Pricing Disclosure Materials, the Amended Final Offering Circular and any amendments or supplements thereto, including all
fees, disbursements and other charges of counsel and accountants to the Company, (ii) the preparation and delivery of certificates
representing the Shares (if any), (iii) furnishing (including costs of shipping and mailing) such copies of the Offering Statement
(including each and every amendment thereto), each Preliminary Offering Circular, the Pricing Disclosure Materials, the Amended
Final Offering Circular, and all amendments and supplements thereto, as may be requested for use in connection with the direct
placement of the Shares and market making activities of the Underwriter, (iv) all fees and expenses in connection with listing
the Shares on the NASDAQ including any supplemental listing application, (v) any filings required to be made by the Underwriter
with FINRA, and the fees, disbursements and other charges of counsel for the Underwriter in connection therewith, and in connection
with any required review by FINRA, (vi) the registration or qualification of the Shares and the Underwriter’s Securities
(as defined in Section 3(zz)) for offer and sale under the securities or Blue Sky laws of such jurisdictions designated pursuant
to Section 4(h), including the fees, disbursements and other charges of counsel to the Underwriter in connection therewith and
the preparation and printing of preliminary, supplemental and final Blue Sky memoranda, (vii) fees, disbursements and other charges
of counsel to the Company, (viii) all transfer taxes, if any, with respect to the sale and delivery of the Shares by the Company
to the Investors, and (ix) fees and disbursements of the Accountants incurred in delivering the letter(s) described in Section
7(f) of this Agreement. Notwithstanding the foregoing, the Company shall have no obligation to pay or reimburse amounts incurred
under (v) and (vi) above in excess of $30,000.
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|
|
(b)
|
If this Agreement is terminated by the Underwriter in accordance with the provisions of Section 7, Section 9(a)(iii), (iv)
or (vi), the Company shall reimburse the Underwriter for all of its documented out-of-pocket expenses, up to a maximum reimbursement
of $50,000 (“Reimbursable Expenses”).
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|
|
7.
|
Conditions of the Obligations of the Underwriter. The obligations of the Underwriter hereunder are subject to the following
conditions:
|
|
|
(a)
|
(i) No stop order suspending the qualification of the Offering Statement shall have been issued, and no proceedings for that
purpose shall be pending or threatened by any securities or other governmental authority (including, without limitation, the Commission),
(ii) no order suspending the effectiveness of the Offering Statement or the qualification or exemption of the Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and no proceeding for such purpose shall be pending before,
or threatened or contemplated by, any securities or other governmental authority (including, without limitation, the Commission),
(iii) any request for additional information on the part of the staff of any securities or other governmental authority (including,
without limitation, the Commission) shall have been complied with to the satisfaction of the staff of the Commission or such authorities
and (iv) after the date hereof no amendment or supplement to the Offering Statement or the Amended Final Offering Circular shall
have been filed unless a copy thereof was first submitted to the Underwriter and the Underwriter did not object thereto in good
faith, and the Underwriter shall have received certificates of the Company, dated as of each Closing Date and signed by the President
and Chief Executive Officer of the Company, and the Chief Financial Officer of the Company, to the effect of clauses (i), (ii)
and (iii).
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|
|
(b)
|
Since the respective dates as of which information is given in the Offering Statement, the Pricing Disclosure Materials and
the Amended Final Offering Circular, (a) there shall not have been a Material Adverse Change, whether or not arising from transactions
in the ordinary course of business, in each case other than as set forth in or contemplated by the Offering Statement, the Pricing
Disclosure Materials and the Amended Final Offering Circular and (b) the Company shall not have sustained any material loss or
interference with its business or properties from fire, explosion, flood or other casualty, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other governmental action, order or decree, which is not set forth in
the Offering Statement, the Pricing Disclosure Materials and the Amended Final Offering Circular, if in the reasonable judgment
of the Underwriter any such development makes it impracticable or inadvisable to consummate the sale and delivery of the Shares
to Investors and the delivery of the Underwriter’s Securities as contemplated hereby.
|
|
|
(c)
|
Since the respective dates as of which information is given in the Offering Statement, the Pricing Disclosure Materials and
the Amended Final Offering Circular, there shall have been no litigation or other proceeding instituted against the Company or
any of its officers or directors in their capacities as such, before or by any federal, state or local or foreign court, commission,
regulatory body, administrative agency or other governmental body, domestic or foreign, which litigation or proceeding, in the
reasonable judgment of the Underwriter , would reasonably be expected to have a Material Adverse Effect.
|
|
|
(d)
|
Each of the representations and warranties of the Company contained herein shall be true and correct as of each Closing Date
in all respects for those representations and warranties qualified by materiality and in all material respects for those representations
and warranties that are not qualified by materiality, as if made on such date, and all covenants and agreements herein contained
to be performed on the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company
at or prior to such Closing Date shall have been duly performed, fulfilled or complied with in all material respects.
|
|
|
(e)
|
At the Closing, the Accountants shall have furnished to the Underwriter a letter, dated the date of its delivery (the “Comfort
Letter”), addressed to the Underwriter and in form and substance reasonably satisfactory to the Underwriter containing
statements and information of the type ordinarily included in accountants’ “comfort letters” to Underwriter with
respect to the financial statements and certain financial information contained in the Offering Statement, the Pricing Disclosure
Materials and the Amended Final Offering Circular.
|
|
|
(f)
|
At the Closing, there shall be furnished to the Underwriter a certificate, dated the date of its delivery, signed by each of
the Chief Executive Officer and the Chief Financial Officer of the Company, in form and substance satisfactory to the Underwriter
to the effect that each signer has carefully examined the Offering Statement, the Amended Final Offering Circular and the Pricing
Disclosure Materials, and that to each of such person’s knowledge:
|
|
|
(1)
|
As of the date of each such certificate, (x) the Offering Statement does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading
and (y) neither the Amended Final Offering Circular nor the Pricing Disclosure Materials contains any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (2) no event has occurred as a result of which it is necessary
to amend or supplement the Amended Final Offering Circular in order to make the statements therein not untrue or misleading in
any material respect.
|
|
|
(2)
|
Each of the representations and warranties of the Company contained in this Agreement were, when originally made, and are,
at the time such certificate is delivered, true and correct in all respects for those representations and warranties qualified
by materiality and in all material respects for those representations and warranties that are not qualified by materiality.
|
|
|
(3)
|
Each of the covenants required herein to be performed by the Company on or prior to the date of such certificate has been duly,
timely and fully performed and each condition herein required to be complied with by the Company on or prior to the delivery of
such certificate has been duly, timely and fully complied with.
|
|
|
(4)
|
No stop order suspending the qualification of the Offering Statement or of any part thereof has been issued and no proceedings
for that purpose have been instituted or are contemplated by the Commission.
|
|
|
(5)
|
Subsequent to the date of the most recent financial statements in the Offering Statement and in the Amended Final Offering
Circular, there has been no Material Adverse Change.
|
|
|
(g)
|
The Company shall have furnished or caused to be furnished to the Underwriter such certificates, in addition to those specifically
mentioned herein, as the Underwriter may have reasonably requested as to the accuracy and completeness on any Closing Date of any
statement in the Offering Statement, the Preliminary Offering Circular, the Pricing Disclosure Materials or the Amended Final Offering
Circular, as to the accuracy on such Closing Date of the representations and warranties of the Company as to the performance by
the Company of its obligations hereunder, or as to the fulfillment of the conditions concurrent and precedent to the obligations
hereunder of the Underwriter.
|
|
|
(h)
|
The Underwriter shall have received the lock-up letters referred to in Section 4(n) hereof substantially in the form of Exhibit
A from each director, officer and stockholder of the Company named in Schedule 3 hereto.
|
|
|
(i)
|
The Company shall have furnished or caused to be furnished to the Underwriter on each Closing Date satisfactory evidence of
the good standing of the Company and the Subsidiaries in their respective jurisdiction of organization and their good standing
as foreign entities in such other jurisdictions as the Underwriter may reasonably request, in each case in writing or any standard
form of telecommunication from the appropriate governmental authorities of such jurisdictions.
|
|
|
(j)
|
FINRA shall not have raised any objection with respect to the fairness or reasonableness of the plan of distribution, or other
arrangements of the transactions, contemplated hereby.
|
|
|
(k)
|
On or after the Applicable Time there shall not have occurred any of the following: (a) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange, Inc., NYSE MKT or NASDAQ; (b) a general moratorium on commercial
banking activities declared by either Federal or New York authorities or a material disruption in commercial banking or securities
settlement or clearance services in the United States; (c) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war or (d) the occurrence of any other calamity or crisis or
any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified
in clause (c) or (d) in the judgment of the Underwriter makes it impracticable or inadvisable to proceed with the offering or the
delivery of the Shares being delivered on any Closing Date on the terms and in the manner contemplated in the Amended Final Offering
Circular.
|
|
|
(a)
|
The Company shall indemnify and hold harmless the Underwriter and each of the Dealers, and each of their directors, officers,
employees and agents and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act (each an “Indemnified Party”), from and against any and all losses, claims, liabilities,
expenses and damages, joint or several (including any and all investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted (whether or not such Indemnified
Party is a party thereto)), to which it, or any of them, may become subject under the Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are
based on (a) any untrue statement or alleged untrue statement made by the Company in Section 3 of this Agreement, (b) any
untrue statement or alleged untrue statement of any material fact contained in (1) any Preliminary Offering Circular, the Offering
Statement or the Amended Final Offering Circular or any amendment or supplement thereto, (2) the Pricing Disclosure Materials,
(3) any Written Testing-the-Waters Communication or (4) any application or other document, or any amendment or supplement thereto,
executed by the Company based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order
to qualify the Shares under the securities or Blue Sky laws thereof or filed with the Commission or any securities association
or securities exchange (each, an “Application”), or (c) the omission or alleged omission to state in any
Preliminary Offering Circular, the Offering Statement, the Amended Final Offering Circular, the Pricing Disclosure Materials, or
any Written Testing-the-Waters Communication, or any amendment or supplement thereto, or in any Permitted Issuer Information or
any Application a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; provided, however, that the Company will not be liable to the extent
that such loss, claim, liability, expense or damage arises from the sale of the Shares in the offering to any person and is based
solely on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with written
information furnished to the Company by any Indemnified Party through the Underwriter expressly for inclusion in the Offering Statement,
any Preliminary Offering Circular, the Amended Final Offering Circular, or Written Testing-the-Waters Communication, or in any
amendment or supplement thereto or in any Application, it being understood and agreed that the only such information furnished
by any Indemnified Party consists of the information described as such in subsection (b) below. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
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(b)
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Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) that (a) arise out of or are based upon any untrue statement made by such Underwriter in Section 5 of this Agreement,
(b) arise out of or are based upon any failure or alleged failure of such Underwriter to pay any compensation to a Dealer or Dealers,
or (c) arise out of or are based solely upon an untrue statement or alleged untrue statement of a material fact contained in the
Offering Statement, any Preliminary Offering Circular or the Amended Final Offering Circular, or any amendment or supplement thereto,
or any Written Testing-the-Waters Communication, or arise out of or are based solely upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was
made in the Offering Statement, any Preliminary Offering Circular or the Amended Final Offering Circular, or any amendment or supplement
thereto, or any Written Testing-the-Waters Communication, in reliance upon and in conformity with written information furnished
to the Company by such Underwriter expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred.
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(c)
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Promptly after receipt by an Indemnified Party under subsection (i) or (ii) above of notice of the commencement of any action,
such Indemnified Party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any Indemnified Party otherwise than under such subsection. In case any
such action shall be brought against any Indemnified Party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel satisfactory to such Indemnified Party (who shall not, except
with the consent of the Indemnified Party, be counsel to the indemnifying party), and, after notice from the indemnifying party
to such Indemnified Party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such
Indemnified Party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently
incurred by such Indemnified Party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry
of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (a) includes an unconditional release of the Indemnified Party from all liability arising out
of such action or claim and (b) does not include a statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any Indemnified Party.
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(d)
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If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an Indemnified Party
under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred
to therein, then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of
such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriter on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the Indemnified
Party failed to give the notice required under subsection (iii) above, then each indemnifying party shall contribute to such amount
paid or payable by such Indemnified Party in such proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriter on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand and the Underwriter on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bears
to the Fee received by the Underwriter. The relative fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriter on the other and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriter agree that it
would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions
of this subsection (d), the Underwriter will not be required to contribute any amount in excess of the Fee received by the Underwriter.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
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(a)
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The obligations of the Underwriter under this Agreement may be terminated at any time prior to the initial Closing Date, by
notice to the Company from the Underwriter , without liability on the part of the Underwriter to the Company if, prior to delivery
and payment for the Shares, in the sole judgment of the Underwriter : (i) there has occurred any material adverse change in the
securities markets or any event, act or occurrence that has materially disrupted, or in the opinion of the Underwriter , will in
the future materially disrupt, the securities markets or there shall be such a material adverse change in general financial, political
or economic conditions or the effect of international conditions on the financial markets in the United States is such as to make
it, in the judgment of the Underwriter , inadvisable or impracticable to market the Shares or enforce contracts for the sale of
the Shares; (ii) there has occurred any outbreak of hostilities or escalation thereof or other calamity or crisis or any change
or development involving a prospective change in national or international political, financial or economic conditions, including
without limitation as a result of terrorist activities, such as to make it, in the judgment of the Underwriter, inadvisable or
impracticable to market the Shares or enforce contracts for the sale of the Shares; (iii) trading in the Shares or any securities
of the Company has been suspended or materially limited; (iv) trading generally on the New York Stock Exchange, Inc., NYSE Amex
or NASDAQ has been suspended or materially limited, or minimum or maximum ranges for prices for securities shall have been fixed,
or maximum ranges for prices for securities have been required, by any of said exchanges or by such system or by order of the Commission,
FINRA, or any other governmental or regulatory authority; (v) a banking moratorium has been declared by any state or Federal authority;
or (vi) in the judgment of the Underwriter , there has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Amended Final Offering Circular, any material adverse change in the assets, properties,
condition, financial or otherwise, or in the results of operations, business affairs or business prospects of the Company and its
Subsidiaries considered as a whole, whether or not arising in the ordinary course of business.
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(b)
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The obligations of the parties under this Agreement shall be automatically terminated in the event that notice is given to
the Agent as determined prior to the close of business on the latest date scheduled for receipt of the Requisite Funds, that the
Requisite Funds have not been deposited by the Investors into the Separate Account.
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(c)
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If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other
party except as provided in Section 6 hereof; provided that Section 8 (Indemnification) shall survive any termination of this Agreement.
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10.
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Notices. Notice given pursuant to any of the provisions of this Agreement shall be in writing and, unless otherwise
specified, shall be mailed or delivered (i) if to the Company, at the office of the Company, 544 Blair Boulevard, Eugene, OR 97402
Attn: Mark Frohnmayer, with copies to CrowdCheck, 1428 Duke St., Alexandria, VA 22314, Attn: Fanni Koszed., or (ii) if to the Underwriter,
at the office of W.R. Hambrecht + Co., LLC, 909 Montgomery Street, 3rd Floor, San Francisco, California 94133, Attention: John
Hullar, with copies to Wyrick Robbins Yates & Ponton LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina 27607 Att:
David Mannheim. Any such notice shall be effective only upon receipt. Any notice under Section 8 may be made by facsimile or telephone,
but if so made shall be subsequently confirmed in writing.
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11.
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Survival. The respective representations, warranties, agreements, covenants, indemnities and other statements of the
Company and the Underwriter set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement
shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers
or directors, the Underwriter or any controlling person referred to in Section 8 hereof and (ii) delivery of and payment for the
Shares. The respective agreements, covenants, indemnities and other statements set forth in Sections 3, 4, 5 and 7 hereof shall
remain in full force and effect, regardless of any termination or cancellation of this Agreement.
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12.
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Successors. This Agreement shall inure to the benefit of and shall be binding upon the Underwriter, the Company and
their respective successors, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained,
this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnification and contribution contained in Sections 8(a)
and (d) of this Agreement shall also be for the benefit of the directors, officers, employees and agents of the Underwriter and
any person or persons who control the Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnification and contribution contained in Sections 8(b) and (d) of this Agreement shall also be for the benefit
of the directors of the Company, the officers of the Company who have signed the Offering Statement and any person or persons who
control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Shares shall
be deemed a successor because of such purchase.
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13.
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Governing Law Provisions. This Agreement shall be governed by and construed in accordance with the internal laws of
the State of California applicable to agreements made and to be performed in such state. Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) may be instituted
in the California Courts, and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related Judgment”), as to which such jurisdiction
is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by
mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding
brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit,
action or other proceeding in the California Courts and irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
The Company has irrevocably appointed Scott Absher pursuant to a Form U-2 Uniform Consent to Service of Process filed with the
Secretary of State of the State of California, as its agent to receive service of process or other legal summons for purposes of
any such suit, action or proceeding that may be instituted in any state or federal court in Orange County, California.
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With respect to any Related Proceeding, each party irrevocably waives, to the fullest extent
permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of
process, attachment (both before and after judgment) and execution to which it might otherwise be entitled in the California
Courts, and with respect to any Related Judgment, each party waives any such immunity in the California Courts or any other
court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of any
such Related Proceeding or Related Judgment, including, without limitation, any immunity pursuant to the United
States Foreign Sovereign Immunities Act of 1976, as amended.
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The obligations of the Company pursuant to this Agreement in respect of any sum due to the
Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the
first business day following receipt by the Underwriter of any sum adjudged to be so due in such other currency, on which the
Underwriter may in accordance with normal banking procedures purchase United States dollars with such other currency. If the
United States dollars so purchased are less than the sum originally due to the Underwriter in United States
dollars hereunder, the Company agrees as a separate obligation and notwithstanding any such judgment, to indemnify the
Underwriter against such loss. If the United States dollars so purchased are greater than the sum originally due to the
Underwriter hereunder, the Underwriter agrees to pay to the Company an amount equal to the excess of the dollars so purchased
over the sum originally due to the Underwriter hereunder.
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14.
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Acknowledgement. The Company acknowledges and agrees that the Underwriter is acting solely in the capacity of an arm’s
length contractual counterparty to the Company with respect to the offering of Shares contemplated hereby. Additionally, the Underwriter
is not advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction
with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether the Underwriter has advised
or is advising the Company on other matters). The Company has conferred with its own advisors concerning such matters and shall
be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Underwriter
has no responsibility or liability to the Company or any other person with respect thereto. The Underwriter advises that it and
its affiliates are engaged in a broad range of securities and financial services and that it or its affiliates may have business
relationships or enter into contractual relationships with purchasers or potential purchasers of the Company’s securities.
Any review by the Underwriter of the Company, the transactions contemplated hereby or other matters relating to such transactions
will be performed solely for the benefit of the Underwriter and shall not be on behalf of, or for the benefit of, the Company.
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15.
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Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
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16.
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Entire Agreement. This Agreement constitutes the entire understanding between the parties hereto as to the matters covered
hereby and supersedes all prior understandings, written or oral, relating to such subject matter.
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[SIGNATURE PAGE FOLLOWS]
If the foregoing is in accordance with your understanding, please
sign and return to the Company one of the counterparts hereof, and upon the acceptance hereof by you as an Underwriter, this Agreement
and such acceptance hereof shall constitute a binding agreement between the Underwriter and the Company.
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Very truly yours,
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ARCIMOTO, INC.
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By:
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Name: Mark Frohnmayer
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Title: President
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Accepted as of the date hereof:
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W.R. HAMBRECHT + CO., LLC
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By:
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Name: John P. Hullar
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Title: Managing Partner
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[Signature Page to Underwriting Agreement]
SCHEDULE 1
PRICING INFORMATION
SCHEDULE 2
WRITTEN TESTING-THE-WATERS COMMUNICATION
Testing the Waters communications are available on the EDGAR
system and can be found at the following link:
SCHEDULE 3
SUBSIDIARIES
EXHIBIT A
FORM OF LOCK-UP AGREEMENT
EXHIBIT B
FORM OF OPINION AND 10B-5 OF COUNSEL
TO THE COMPANY
[To be provided]
EXHIBIT C
SCHEDULE OF MATERIAL PATENT RIGHTS
EXHIBIT D
FORM OF UNDERWRITER’S WARRANT
Exhibit 2.1
SECOND AMENDED AND
RESTATED
ARTICLES OF INCORPORATION
OF
ARCIMOTO, INC.
Pursuant to the Oregon
Business Company Act (including the present provisions thereof and future amendments thereto, the “Act”), the following
second amended and restated articles of incorporation (the “Restated Articles”) are hereby adopted and supersede and
replace in their entirety the original articles of incorporation and all amendments thereto and restatements thereof:
Article I. Name. The name of the
Company is Arcimoto, Inc. (the “Company”).
Article II. Oregon Domestic Company.
The Company is organized pursuant to the Oregon Business Corporation Act (the “Act”) under Chapter 60 of the Oregon
Revised Statutes.
Article III. Best Interests of the Company.
In all matters, including, but not limited to, the day-to-day operation and management of the Company, the best interests of
the Company shall include due consideration of (a) the Company’s social, legal and economic effects on its employees and
on the communities and geographic areas in which the Company operates; (b) the long-term as well as short-term interests of the
Company and its shareholders; and (c) the Company’s effects on the environment. Nothing in this Article III, express or implied,
is intended to create or grant any right(s) in or for any person or any causes(s) of action by or for any person. Notwithstanding
the preceding sentence, any shareholder of the Company is entitled to rely on the definition of “best interests” in
this Article III in enforcing his/her or its rights under the Act.
Article IV. Authorized
Shares
4.1 Number
of Shares. The Company is authorized to issue 20,000,000 shares of Common Stock, without par value, and 5,000,000 shares of
Preferred Stock, without par value.
4.2 Preferred
Stock. The Preferred Stock may be issued in one or more series at such time or times and for such consideration as the Board
of Directors may determine. Each series shall be so designated as to distinguish the shares thereof from the shares of all other
series and classes. The Board of Directors is expressly authorized, subject to the limitations prescribed by law and the provisions
of these Restated Articles, to provide for the issuance of all or any shares of the Preferred Stock in one or more series, each
with such designations, rights, preferences, voting powers (or no voting powers), relative, participating, optional or other special
rights and privileges and such qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions
adopted by the Board of Directors to create such series, and Articles of Amendment setting forth the resolution or resolutions
shall be filed in accordance with the Act. The authority of the Board of Directors with respect to each such series shall include
without limitation of the foregoing the right to provide that the shares of each such series may be (a) subject to redemption at
such time or times and at such price or prices; (b) entitled to receive dividends (which may be cumulative or non-cumulative) at
such rates, on such conditions and at such times, and payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (c) entitled to such rights upon the dissolution of, or upon any distribution
of the assets of, the Company; (d) convertible into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock of the Company at such price or prices or at such rates of
exchange, and with such adjustments, if any; (e) entitled to the benefit of such limitations, if any, on the issuance of additional
shares of such series or shares of any other series of Preferred Stock; or (f) entitled to such other preferences, powers, qualifications,
rights and privileges, all as the Board of Directors may deem advisable and as are not inconsistent with the law and the provisions
of these Restated Articles.
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Second Amended and Restated Articles of Incorporation—Page 1
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4.2.1 Designation
and Terms of Series A-1 Preferred Stock.
(a) Purpose.
This Section 4.2.1 sets forth the designation and the terms of the Company’s Series A-1 Preferred Stock.
(b) Designation.
1,500,000 shares of the Company’s authorized Preferred Stock are hereby designated as the Series A-1 Preferred Stock
(the “Series A-1 Preferred” or “Series A-1 Preferred Stock”).
(c) Dividends
and Distributions.
(i) Preference.
The holders of shares of Series A-1 Preferred shall be entitled to receive, out of any assets legally available therefor, prior
and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights
convertible into or entitling the holder to receive, directly or indirectly, additional shares of Common Stock of the Company)
on the Common Stock of the Company and pari passu with each other an amount equal to that paid on any other outstanding shares
of the Company, payable when, as, and if declared by the Board of Directors. Such dividends shall not be cumulative.
(ii) Limitation.
Unless full dividends on the Series A-1 Preferred for all past dividend periods and the then current dividend period shall
have been paid and a sum sufficient for the payment thereof set apart: (A) no dividend whatsoever (other than a dividend payable
solely in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the Company) shall be paid or declared, and no distribution shall be made, on
any Common Stock, and (B) no shares of Common Stock shall be purchased, redeemed, or acquired by the Company and no funds shall
be paid into or set aside or made available for a sinking fund for the purchase, redemption, or acquisition thereof; provided,
however, that this restriction shall not apply to the repurchase of shares of Common Stock held by employees, officers, directors,
consultants or other persons performing services for the Company or any wholly-owned subsidiary (including, but not by way of limitation,
distributors and sales representatives) that are subject to restrictive stock purchase agreements under which the Company has the
option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment.
(iii) Waiver.
The holders of any outstanding shares of Series A-1 Preferred may waive any dividend preference that such holders shall be
entitled to receive under Section 4.2.1(c)(i) or any limitation described in Section 4.2.1(c)(ii) upon the affirmative vote or
written consent of the holders of at least a majority-in-interest of all then outstanding shares of Series A- 1 Preferred.
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Second Amended and Restated Articles of Incorporation—Page 2
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(d) Liquidation,
Dissolution or Winding Up.
(i) Preference.
In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the assets of
the Company available for distribution to holders of the Company’s capital stock of all classes (whether such assets are
capital, surplus or earnings) shall be distributed in the following order and amounts:
(A) The
holders of Series A-1 Preferred shall be entitled to receive by reason of their ownership thereof, prior and in preference to any
distribution of any of the Company’s assets to the holders of the Common Stock, an amount per share equal to the Original
Issue Price of that share for each then outstanding share of Series A-1 Preferred plus any declared but unpaid dividends on such
share (together, the “Series A-1 Liquidation Amount”). The Series A-1 Liquidation Amount shall be subject to equitable
adjustment in the event of any share dividend, share split, share distribution or combination with respect to such shares. If,
upon the occurrence of any liquidation, dissolution or winding up of the Company, the assets thus distributed among the holders
of Series A-1 Preferred shall be insufficient to permit the payment to such holders of the full Series A-1 Liquidation Amount,
then the entire assets of the Company legally available for distribution shall be distributed ratably among the holders of Series
A-1 Preferred in the same proportion as the full preferential amount each such holder would otherwise be entitled to receive bears
to the total of the full preferential amount that would otherwise be distributable to the holders of Series A-1 Preferred, as provided
above.
(B) After
payment in full of the Series A-1 Liquidation, or after funds necessary for such payment shall have been set aside by the Company
in trust for the account of holders of such shares so as to be available for such payment, holders of Series A-1 Preferred shall
be entitled to no further participation in the distribution of the assets of the Company and shall have no further rights of conversion,
and the remaining assets available for distribution shall be distributed among the holders of Common Stock pro rata based on the
number of shares of Common Stock held by each.
(ii) Treatment
of Reorganizations, Consolidations, Mergers, and Sales of Assets. A reorganization, consolidation, merger (but excluding any
merger effected solely for the purpose of reincorporating in another state), sale of all or substantially all of the assets of
the Company or the Company’s undertaking of a transaction or a series of transactions in which more than fifty percent (50%)
of the voting power of the Company is disposed of or otherwise transferred shall be deemed (unless the holders of at least a majority-in-interest
of all then outstanding shares of Series A-1 Preferred shall determine otherwise) a liquidation, dissolution or winding up of the
affairs of the Company within the meaning of this Section 4.2.1(d) (any such event, a “Deemed Liquidation Event”).
(iii) Distributions
Other Than Cash. Whenever the distribution provided for in this Section 3.2.1(d) shall be paid in property other than cash,
the value of such distribution shall be the fair market value of such property as determined in good faith by the Board of Directors
and a majority-in-interest of all then outstanding shares of Series A-1 Preferred; provided, however, that:
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Second Amended and Restated Articles of Incorporation—Page 3
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(A) Any
securities to be delivered pursuant to this Section 4.2.1(d) not subject to investment letter or other similar restrictions on
free marketability covered by Section 4.2.1(d)(iii)(B) below:
(1) If
traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing
prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the distribution;
(2) If
traded over-the-counter or through an automated dealer quotation system, the value shall be deemed to be the average of the closing
bid or sale prices (whichever are applicable) over the 30-day period ending three (3) days prior to the distribution; or
(3) If
there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Board of Directors
and a majority-in- interest of all then outstanding shares of Preferred Stock (voting as a single class); and
(B) The
method of valuation of any securities to be delivered pursuant to this Section 4.2.1(d) subject to investment letter or other restrictions
on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former
affiliate) shall be to make an appropriate discount from the market value determined as provided above in Section 4.2.1(d)(iii)(A)(1),
(2), or (3) to reflect the approximate fair market value thereof, as mutually determined by the Board of Directors and the holders
of a majority-in- interest of all then outstanding shares of Series A-1 Preferred.
If the Board of Directors and the holders
of a majority-in-interest of all then outstanding shares of Series A-1 Preferred are unable to reach an agreement on the fair market
value of property other than cash within thirty (30) days after the Company gives notice of such liquidation, dissolution or winding-up,
then the Board of Directors and a majority-in-interest of all then outstanding shares of Series A-1 Preferred Stock shall mutually
appoint an appraiser for purposes of determining such value. The appraiser shall complete his, her or its appraisal within thirty
(30) days from the date of his, her or its appointment. If the Board of Directors and the holders of a majority-in-interest of
all then outstanding shares the Series A-1 Preferred are unable to agree upon the appointment of an appraiser, then the appraiser
shall be appointed by the Presiding Judge of the Multnomah County Circuit Court upon the written request of either party with written
notice of such request being given to the other party or parties, as the case may be. The determination of the appraiser shall
be final and binding on the parties. The cost of any such appraisal shall be borne by the Company.
(e) Voting
Power. Except as otherwise required by law, each holder of any shares of any series of Preferred Stock shall be entitled to
vote on all matters and shall be entitled to that number of votes equal to the number of votes that would be accorded to the largest
number of whole shares of Common Stock into which such holder’s shares of a series of Preferred Stock could then be converted,
pursuant to the provisions of Section 4.2.1(f) hereof, at the record date for the determination of shareholders entitled to vote
on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders
is solicited. Except as otherwise provided herein or required by law, the holders of shares Preferred Stock and Common Stock
shall vote together as a single class on all matters.
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Second Amended and Restated Articles of Incorporation—Page 4
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(f) Right
to Convert; Conversion Ratio. The holders of the Series A-1 Preferred shall have conversion rights as follows (the “Conversion
Rights”): Each share of Series A-1 Preferred shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing that share’s Original Issue Price by the Series A-1 Conversion Price
(as defined below) in effect at the time of conversion. The “Series A-1 Conversion Price” of each share shall initially
be equal to the Original Issue Price of that share. Such initial Series A-1 Conversion Price, and the rate at which shares of Series
A-1 Preferred may be converted into shares of Common Stock, shall be subject to adjustment as provided below.
(g) Termination
of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event,
the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of
any such amounts distributable on such event to the holders of Series A-1 Preferred.
(h) Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A-1 Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the fair
market value of a share of Common Stock as determined in good faith by the Board of Directors of the Company. Whether or not fractional
shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A-1 Preferred
the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.
(i) Notice
of Conversion. In order for a holder of Series A-1 Preferred to voluntarily convert shares of Series A-1 Preferred into shares
of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series A-1 Preferred (or, if such
registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account
of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series A-1 Preferred
(or at the principal office of the Company if the Company serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series A-1 Preferred represented by such certificate or certificates
and, if applicable, any event on which such conversion is contingent. Such notice shall state such holder’s name or the names
of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required
by the Company, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments
of transfer, in form satisfactory to the Company, duly executed by the registered holder or his, her or its attorney duly authorized
in writing. The close of business on the date of receipt by the transfer agent (or by the Company if the Company serves as its
own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice shall be the time of conversion
(the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such
certificate shall be deemed to be outstanding of record as of such date. The Company shall, as soon as practicable after
the Conversion Time, (i) issue and deliver to such holder of Series A-1 Preferred, or to his, her or its nominees, a certificate
or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof
and a certificate for the number (if any) of the shares of Series A-1 Preferred represented by the surrendered certificate that
were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsections 4.2.1(h) in lieu of any fraction
of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares
of Series A-1 Preferred converted.
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Second Amended and Restated Articles of Incorporation—Page 5
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(j) Reservation
of Shares. The Company shall at all times when the Series A-1 Preferred shall be outstanding, reserve and keep available out
of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A-1 Preferred, such number
of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding
Series A-1 Preferred; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A-1 Preferred, the Company shall take such corporate action
as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these Restated Articles.
(k) Effect
of Conversion. All shares of Series A-1 Preferred which shall have been surrendered for conversion as herein provided shall
no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion
Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in
lieu of any fraction of a share otherwise issuable upon such conversion and to receive payment of any dividends declared but unpaid
thereon. Any shares of Series A-1 Preferred so converted shall be retired and cancelled and may not be reissued as shares of such
series, and the Company may thereafter take such appropriate action (without the need for shareholder action) as may be necessary
to reduce the authorized number of shares of Series A-1 Preferred accordingly.
(l) No
Further Adjustment. Upon any such conversion, no adjustment to the Series A-1 Conversion Price shall be made for any declared
but unpaid dividends on the Series A-1 Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
(m) Taxes.
The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery
of shares of Common Stock upon conversion of shares of Series A-1 Preferred pursuant to this Section 4.2.1. The Company shall not,
however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares
of Common Stock in a name other than that in which the shares of Series A-1 Preferred so converted were registered, and no such
issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount
of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
(n) Adjustments
to Series A-1 Conversion Price for Diluting Issues.
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Second Amended and Restated Articles of Incorporation—Page 6
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(i) Special
Definitions. For purposes of this Article IV, the following definitions shall apply:
(A) “Option”
shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.
(B) “Series
A-1 Original Issue Date” shall mean the date on which the first share of Series A-1 Preferred was issued.
(C) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock, but excluding Options.
(D) “Additional
Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.2.1(f)(iii) below, deemed
to be issued) by the Company after the Series A-1 Original Issue Date, other than (1) the following shares of Common Stock and
(2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively,
“Exempted Securities”):
(1) shares
of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A-1 Preferred;
(2) shares
of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution
on shares of Common Stock that is covered by Subsection 4.2.1(o), 4.2.1(p), 4.2.1(q) or 4.2.1(r);
(3) shares
of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries
pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Company;
(4) shares
of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued
upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such
Option or Convertible Security; or
(5) shares
of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real
property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of
Directors of the Company; or
(6) shares
of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Company by
merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such
issuances are approved by the Board of Directors of the Company; or
(7) shares
of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license,
development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of
the Company.
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Second Amended and Restated Articles of Incorporation—Page 7
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(ii) No
Adjustment of Series A-1 Conversion Price. No adjustment in the Series A-1 Conversion Price shall be made as the result of
the issuance or deemed issuance of Additional Shares of Common Stock if the Company receives written notice from the holders of
at least fifty percent of the then outstanding shares of Series A-1 Preferred agreeing that no such adjustment shall be made as
the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
(iii) Deemed
Issue of Additional Shares of Common Stock.
(A) If
the Company at any time or from time to time after the Series A- 1 Original Issue Date shall issue any Options or Convertible Securities
(excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination
of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability,
convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or,
in case such a record date shall have been fixed, as of the close of business on such record date.
(B) If
the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A-1 Conversion Price
pursuant to the terms of Subsection 4.2.1(iv), are revised as a result of an amendment to such terms or any other adjustment pursuant
to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution
or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number
of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the Company upon such exercise, conversion and/or exchange, then,
effective upon such increase or decrease becoming effective, the Series A-1 Conversion Price computed upon the original issue of
such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such
Series A-1 Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of
such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (B) shall have the
effect of increasing the Series A-1 Conversion Price to an amount which exceeds the lower of (i) the Series A-1 Conversion Price
in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security,
or (ii) the Series A-1 Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other
than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security)
between the original adjustment date and such readjustment date.
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Second Amended and Restated Articles of Incorporation—Page 8
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(C) If
the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities),
the issuance of which did not result in an adjustment to the Series A-1 Conversion Price pursuant to the terms of Subsection 4.2.1(iv)
(either because the consideration per share (determined pursuant to Subsection 4.2.1(v)) of the Additional Shares of Common Stock
subject thereto was equal to or greater than the Series A-1 Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Series A-1 Original Issue Date), are revised after the Series A-1 Original Issue Date as a result
of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding
automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to
provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange
of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Company upon such exercise,
conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common
Stock subject thereto (determined in the manner provided in Subsection 4.2.1(iii)(A) shall be deemed to have been issued effective
upon such increase or decrease becoming effective.
(D) Upon
the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof)
which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A-1 Conversion
Price pursuant to the terms of Subsection 4.2.1(iv), the Series A-1 Conversion Price shall be readjusted to such Series A-1 Conversion
Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(E) If
the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security,
or the consideration payable to the Company upon such exercise, conversion and/or exchange, is calculable at the time such Option
or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series
A-1 Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on
such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent
adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3). If the number of shares of Common Stock
issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the
Company upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security
is issued or amended, any adjustment to the Series A-1 Conversion Price that would result under the terms of this Subsection 4.4.3
at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration
is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series
A-1 Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
(iv) Adjustment
of Series A-1 Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Company shall at any time
after the Series A-1 Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed
to be issued pursuant to Subsection 4.2.1(iii)), without consideration or for a consideration per share less than the Series A-1
Conversion Price in effect immediately prior to such issue, then the Series A-1 Conversion Price shall be reduced, concurrently
with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1* (A + B) ÷ (A + C).
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Second Amended and Restated Articles of Incorporation—Page 9
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For purposes of the foregoing formula,
the following definitions shall apply:
“CP2”
shall mean the Series A-1 Conversion Price in effect immediately after such issue of Additional Shares of Common Stock;
“CP1”
shall mean the Series A-1 Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;
“A”
shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock
(treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion or exchange of Convertible Securities (including the Series A-1 Preferred Stock) outstanding
(assuming exercise of any outstanding Options therefor) immediately prior to such issue);
“B”
shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been
issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Company in respect
of such issue by CP1); and
“C”
shall mean the number of such Additional Shares of Common Stock issued in such transaction.
(v) Determination
of Consideration. For purposes of this Subsection 4.2.1, the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(A) Cash
and Property: Such consideration shall (1) insofar as it consists of cash, be computed at the aggregate amount of cash received
by the Company, excluding amounts paid or payable for accrued interest; (2) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of
the Company; and (3) in the event Additional Shares of Common Stock are issued together with other shares or securities or other
assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided
in clauses (1) and (2) above, as determined in good faith by the Board of Directors of the Company.
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Second Amended and Restated Articles of Incorporation—Page 10
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(B) Options
and Convertible Securities. The consideration per share received by the Company for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 4.2.1(iii), relating to Options and Convertible Securities, shall be determined by dividing
(1) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise
of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by (2) the
maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities.
(vi) Multiple
Closing Dates. In the event the Company shall issue on more than one date Additional Shares of Common Stock that are a part
of one transaction or a series of related transactions and that would result in an adjustment to the Series A-1 Conversion Price
pursuant to the terms of Subsection 4.2.1(iv), and such issuance dates occur within a period of no more than 90 days from the first
such issuance to the final such issuance, then, upon the final such issuance, the Series A-1 Conversion Price shall be readjusted
to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any
additional adjustments as a result of any such subsequent issuances within such period).
(o) Adjustment
for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Series A-1 Original Issue
Date effect a subdivision of the outstanding Common Stock, the Series A-1 Conversion Price in effect immediately before that subdivision
shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series
shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Company
shall at any time or from time to time after the Series A-1 Original Issue Date combine the outstanding shares of Common Stock,
the Series A-1 Conversion Price in effect immediately before the combination shall be proportionately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease
in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(p) Adjustment
for Certain Dividends and Distributions. In the event the Company at any time or from time to time after the Series A-1 Original
Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series
A-1 Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event
such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series A-1
Conversion Price then in effect by a fraction:
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Second Amended and Restated Articles of Incorporation—Page 11
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the numerator of which shall be
the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and
the denominator of which shall
be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close
of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing, (a) if such
record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Series A-1 Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter
the Series A-1 Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends
or distributions; and (b) that no such adjustment shall be made if the holders of Series A-1 Preferred Stock simultaneously receive
a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A-1 Preferred Stock had been converted into Common Stock on the date of such
event.
(q) Adjustment
for Merger or Reorganization, etc. Subject to the provisions of Subsection 4.2.1(c), if there shall occur any reorganization,
recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock (but not the Series
A-1 Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by
Subsections 4.2.1(n), (p) or (o)), then, following any such reorganization, recapitalization, reclassification, consolidation or
merger, each share of Series A- 1 Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was
convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of
shares of Common Stock of the Company issuable upon conversion of one share of Series A-1 Preferred Stock immediately prior to
such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to
such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Company)
shall be made in the application of the provisions in this Section 4.2.1 with respect to the rights and interests thereafter of
the holders of the Series A-1 Preferred Stock, to the end that the provisions set forth in this Section 4.2.1 (including provisions
with respect to changes in and other adjustments of the Series A-1 Conversion Price) shall thereafter be applicable, as nearly
as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series
A-1 Preferred Stock.
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Second Amended and Restated Articles of Incorporation—Page 12
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(r) Certificate
as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A-1 Conversion Price pursuant to this
Section 4.2.1, the Company at its expense shall, as promptly as reasonably practicable but in any event not later than 20 days
thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series
A-1 Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash
or other property into which the Series A-1 Preferred Stock is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably practicable after the written request at any time of any
holder of Series A-1 Preferred Stock (but in any event not later than 20 days thereafter), furnish or cause to be furnished to
such holder a certificate setting forth (i) the Series A-1 Conversion Price then in effect, and (ii) the number of shares of Common
Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series
A-1 Preferred Stock.
(s) Notice
of Record Date. In the event:
(i) the
Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon
conversion of the Series A-1 Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution,
or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive
any other security; or
(ii) of
any capital reorganization of the Company, any reclassification of the Common Stock of the Company, or any Deemed Liquidation Event;
or
(iii) of
the voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
then, and in each such case, the Company
will send or cause to be sent to the holders of the Series A-1 Preferred Stock a notice specifying, as the case may be, (i) the
record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation
or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock
(or such other capital stock or securities at the time issuable upon the conversion of the Series A-1 Preferred Stock) shall be
entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up,
and the amount per share and character of such exchange applicable to the Series A-1 Preferred Stock and the Common Stock. Such
notice shall be sent at least 20 days prior to the record date or effective date for the event specified in such notice.
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Second Amended and Restated Articles of Incorporation—Page 13
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(t) Mandatory
Conversion.
(A) Trigger
Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $5.00 per share
(subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, resulting in at least $15,000,000 of proceeds, net of the underwriting discount and
commissions, to the Company; or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the
holders of at least fifty percent (50%) of the then outstanding shares of Series A-1 Preferred Stock (the time of such closing
or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the
“Mandatory Conversion Time”), (i) all outstanding shares of Series A-1 Preferred Stock shall automatically be converted
into shares of Common Stock, at the then effective conversion rate and; (ii) such shares may not be reissued by the Company.
(B) Procedural
Requirements. All holders of record of shares of Series A-1 Preferred Stock shall be sent written notice of the Mandatory Conversion
Time and the place designated for mandatory conversion of all such shares of Series A-1 Preferred Stock pursuant to this Section
4.2.1(t). Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice,
each holder of shares of Series A-1 Preferred Stock shall surrender his, her or its certificate or certificates for all such shares
(or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement
reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account
of the alleged loss, theft or destruction of such certificate) to the Company at the place designated in such notice. If so required
by the Company, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of
transfer, in form satisfactory to the Company, duly executed by the registered holder or by his, her or its attorney duly authorized
in writing. All rights with respect to the Series A-1 Preferred Stock converted pursuant to Subsection 4.2.1(t), including the
rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion
Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except
only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and
agreement) therefor, to receive the items provided for in the next sentence of this Subsection 4.2.1(t). As soon as practicable
after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement)
for Series A-1 Preferred Stock, the Company shall issue and deliver to such holder, or to his, her or its nominees, a certificate
or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof,
together with cash in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of
any declared but unpaid dividends on the shares of Series A-1 Preferred Stock converted. Such converted Series A-1 Preferred Stock
shall be retired and cancelled and may not be reissued as shares of such series, and the Company may thereafter take such appropriate
action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A-1 Preferred
Stock accordingly.
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Second Amended and Restated Articles of Incorporation—Page 14
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4.3 Common
Stock.
(a) Voting
Rights. Except as otherwise required by law or expressly provided in these Restated Articles, each holder of Common Stock shall
have one vote in respect of each share of stock held by him, her or it of record on the books of the Company for the election of
directors and on all matters submitted to a vote of shareholders of the Company.
(b) Dividends.
Subject to the preferential rights of the Preferred Stock, the holders of shares of the Common Stock shall be entitled to receive,
when and if declared by the Board of Directors, out of the assets of the Company which are legally available therefor, dividends
payable in either in cash, in property or in shares of capital stock.
(c) Dissolution,
Liquidation and Winding Up. In the event of any dissolution, liquidation or winding up of the affairs of the Company, after
distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock, holders
of the Common Stock shall be entitled, unless otherwise required by law or expressly provided in these Restated Articles, to receive
all of the remaining assets of the Company of whatever kind available for distribution to shareholders ratably in proportion to
the number of shares of Common Stock held by them respectively.
Article V. Registered Agent and Office.
The name and address of the Company’s registered agent and office are:
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Immix Services Inc.
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600 NW Naito Parkway, Suite G
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Portland, OR 97209
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Article VI. Mailing Address. The
address to which notices to the Company may be mailed is 1263 West 5th Avenue, Eugene, OR 97402.
Article VII. Director Liability. No
director of the Company shall be personally liable to the Company or its shareholders for monetary damages arising out of conduct
as a director, except for:
A. Any
breach of the director’s duty of loyalty to the Company or its shareholders;
B. Acts
or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
C. Any
unlawful distribution under ORS 60.367; or
D. Any
transaction from which the director derived an improper personal benefit.
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Second Amended and Restated Articles of Incorporation—Page 15
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Article VIII. Shareholder Action without
a Meeting by less than Unanimous Consent. Any action required or permitted by law to be taken at a shareholders’ meeting
may be taken without a meeting if the action is taken by shareholders having not less than the minimum number of votes that would
be necessary to take the action at a meeting at which all shareholders entitled to vote on the action were present and voted. Any
shareholder action taken under this Article VIII must be evidenced by one or more written consents describing the action taken,
signed by the shareholders taking the action and delivered to the Company for inclusion in the minutes or filing with the corporate
records. Action taken under this Article VIII is effective when the consent or consents bearing sufficient signatures are delivered
to the Company, unless the consent or consents specify an earlier or later effective date. If action is taken without a meeting
by less than unanimous consent under this Article VIII, the Company must give written notice of the action, promptly after the
action is taken, to shareholders who did not consent in writing to the action. The notice given must contain or be accompanied
by the same material that would have been required to be sent to those shareholders in a notice of meeting at which the proposed
action would have been submitted to those shareholders for action.”
Article IX. Shareholder Agreement Inconsistent
with the Act. To the extent any provisions of these Restated Articles are inconsistent with the Act, the inconsistent provisions
of these Restated Articles shall (a) be considered a shareholder agreement under Section 60.265 the Act and (b) be valid for so
long as the Company remains in existence or until those provisions are amended by the shareholders. Pursuant to Sections 60.265
and 60.952(3) of the Act, and as part of the shareholder agreement described in the preceding sentence, all remedies provided for
in Section 60.952(2) of the Act are hereby eliminated with the exception of subsections (e), (h), (j) and (m).
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Second Amended and Restated Articles of Incorporation—Page 16
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Exhibit 2.2
SECOND AMENDED AND RESTATED BYLAWS
OF
ARCIMOTO, INC.
SECOND AMENDED AND RESTATED BYLAWS
OF
ARCIMOTO, INC.
TABLE OF CONTENTS
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Page
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ARTICLE I - SHAREHOLDERS
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1
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Section 1. Annual Meetings
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1
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Section 2. Special Meetings
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1
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Section 3. Place and Manner of Meetings
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1
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Section 4. Notice of Meetings
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1
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Section 5. Quorum
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2
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Section 6. Proxies
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2
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Section 7. Shareholders of Record
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2
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Section 8. Voting of Shares
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2
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ARTICLE II - DIRECTORS
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3
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Section 1. Number of Directors
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3
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Section 3. Annual Meetings
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3
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Section 4. Special Meetings
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3
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Section 5. Place and Manner of Meetings
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3
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Section 6. Notice of Special Meetings
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4
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Section 7. Quorum
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4
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Section 8. Removal
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4
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Section 9. Resignation
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4
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Section 10. Vacancies
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5
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Section 11. Compensation
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5
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Section 12. Committees
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5
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ARTICLE III - OFFICERS
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5
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Section 1. Designation of Officers
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5
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Section 2. Term
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6
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Section 3. Removal
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6
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Section 4. Resignation
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6
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Section 5. Compensation
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6
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Section 6. Duties
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6
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Section 7. President
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6
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Section 8. Secretary
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6
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Section 9. Treasurer
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7
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Section 10. Vice President(s)
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7
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ARTICLE IV - CORPORATE RECORDS - INSPECTION
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7
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Section 1. Maintenance of Records
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7
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Section 2. Inspection of Books and Records
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7
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Section 3. Inspection of Bylaws and Articles of Incorporation
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7
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ARTICLE V - CERTIFICATES AND TRANSFER OF SHARES
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7
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Section 1. Certificates for Shares
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7
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Section 2. Transfer of Certificates
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8
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Section 3. Lost, Stolen or Destroyed Certificates
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8
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ARTICLE VI - INDEMNIFICATION
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8
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Section 1. Definitions
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8
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Section 2. Indemnification
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9
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Section 3. Determination
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9
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Section 4. Advancement of Expenses
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10
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Section 5. Insurance
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10
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Section 6. Application
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10
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ARTICLE VII - GENERAL PROVISIONS
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11
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Section 4. Execution of Documents
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11
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Section 1. Amendment of Bylaws
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11
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SECOND AMENDED AND RESTATED BYLAWS
OF
ARCIMOTO, INC.
ARTICLE I - SHAREHOLDERS
1.1 Annual
Meetings. The annual meeting of the shareholders of Arcimoto, Inc. (the "Company") shall be held on the second Friday
in January each year. At the annual meeting, the shareholders shall elect a Board of Directors and transact any other business
that may legally come before the meeting. However, failure to hold an annual meeting on the stated date shall not affect the validity
of any corporate action.
1.2 Special
Meetings. Special shareholders' meetings may be called by the president, the Board of Directors or shareholders holding at
least 10 percent of all votes entitled to be cast on any issue proposed to be considered at the meeting. If a meeting is called
by shareholders, those shareholders shall sign, date and deliver to the Company's secretary one or more written demands for the
special meeting, describing the purpose(s) for which it is to be held. The record date for determining shareholders entitled to
demand a special meeting is the date the first shareholder signs the demand. Only business within the purpose(s) stated in the
meeting notice given under Section 1.4 of these Second Amended and Restated Bylaws (the “Bylaws”) may be conducted
at a special meeting.
1.3 Place
and Manner of Meetings. Shareholders' meetings shall be held at the Company's principal office or any other place designated
by the Board of Directors. Shareholders' meetings may be held by means of conference telephone or similar communications equipment
by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a
meeting by this means is deemed to be present in person at the meeting.
1.4 Notice
of Meetings.
a. Written
or printed notice stating the date, time and place of the meeting and, in the case of a special meeting, the purpose(s) for which
the meeting is called, shall be given not earlier than 60 days nor less than 10 days before the meeting date, personally or by
mail, fax or other form of wire or wireless communication, by or at the direction of the president, the secretary, the Board of
Directors or the persons calling the meeting, to each shareholder of record entitled to receive notice of the meeting. The notice
shall be effective upon personal delivery or when mailed, if it is mailed postpaid and is correctly addressed to the shareholder's
address shown in the Company's current record of shareholders. Notice by all other means shall be effective as specified in the
Oregon Business Corporation Act (the “Act”).
b. When
a meeting is adjourned for more than 120 days after the date fixed for the original meeting, or when a redetermination of the persons
entitled to receive notice of the resumed meeting is required by law, notice of the resumed meeting shall be given in the same
manner as required for an original meeting. In all other cases, no notice of the adjournment or of the business to be transacted
at the resumed meeting need be given other than by announcement at the original meeting before adjournment.
1.5 Waiver
of Notice. A shareholder may at any time waive any notice required by law, these Bylaws or the Articles of Incorporation. The
waiver shall be in writing, signed by the shareholder entitled to notice and delivered to the Company for inclusion in the minutes
or filing with the corporate records. A shareholder’s attendance at or participation in a meeting waives any required notice
of the meeting unless the shareholder, at the beginning of the meeting or promptly on his or her arrival, objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
1.6 Quorum.
a. A
majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum for the transaction of business
at any shareholders' meeting. If a person attends a meeting for the express purpose of objecting to transacting any business on
the grounds that the meeting was not lawfully called or convened, the shares held by that person or represented by a proxy given
to that person shall not be included for purposes of determining whether a quorum is present. Once a share is represented for any
purpose at a meeting, other than for the purpose of objecting as provided above, it is deemed present for quorum purposes for the
remainder of the meeting and any adjournment thereof, unless a new record date is or must be set for the resumed meeting. The persons
present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough
persons to leave less than a quorum.
b. In
the absence of a quorum, a majority of the shares represented in person or by proxy may adjourn the meeting from time to time until
a quorum shall attend. Any business that might have been transacted at the original meeting may be transacted at the resumed meeting
if a quorum exists.
1.7 Proxies.
A shareholder may vote in person or by written proxy signed by the shareholder personally or by the shareholder's duly authorized
attorney-in-fact. A proxy shall be effective when received by the secretary of the Company or other officer or agent authorized
to tabulate votes. No proxy shall be valid after 11 months from the date of its execution, unless a longer period is expressly
provided in the proxy.
1.8 Shareholders
of Record. The persons entitled to receive notice of or to vote at any shareholders' meeting shall be those persons designated
as shareholders on the Company's stock transfer books on the date that notice of the meeting is mailed, or on such other date as
determined in advance by the Board of Directors, which date shall be not more than 70 days nor less than 10 days before the meeting.
1.9 Voting
Requirements.
a. On
each matter submitted to a vote at a shareholders' meeting, each shareholder shall be entitled to one vote for each share of voting
stock standing in the shareholder's name on the Company's stock transfer books.
b. If
a quorum exists, action on any matter, other than the election of directors, is approved if the votes cast favoring the action
exceed the votes cast opposing the action, unless the vote of a greater number is required by law, the Articles of Incorporation
or these Bylaws, in which case the contrary provision shall control.
1.10 Action
Without Meeting. As provided in the Articles of Incorporation, any action required or permitted by law to be taken at a shareholders’
meeting may be taken without a meeting if the action is taken by shareholders having not less than the minimum number of votes
that would be necessary to take the action at a meeting at which all shareholders entitled to vote on the action were present and
voted. Any shareholder action taken under this Section 1.10 must be evidenced by one or more written consents describing the action
taken, signed by the shareholders taking the action and delivered to the Company for inclusion in the minutes or filing with the
corporate records. Action taken under this Section 1.10 is effective when the consent or consents bearing sufficient signatures
are delivered to the Company, unless the consent or consents specify an earlier or later effective date. If action is taken without
a meeting by less than unanimous consent under this Section 1.10, the Company must give written notice of the action, promptly
after the action is taken, to shareholders who did not consent in writing to the action. The notice given must contain or be accompanied
by the same material that would have been required to be sent to those shareholders in a notice of meeting at which the proposed
action would have been submitted to those shareholders for action.
ARTICLE II - DIRECTORS
2.1 Number
of Directors. The Company's business and affairs shall be managed and controlled by a Board of Directors. The Board of Directors
shall consist of not less than one or more than five directors. The Company initially shall have one director, and the number of
directors shall otherwise be determined from time to time by resolution of the Board of Directors. Each director shall hold office
until the earliest of: (a) the election of the director’s successor; (b) the director’s death; or (c) the resignation
or removal of the director in accordance with these Bylaws.
2.2 Annual
Meetings. A regular annual meeting of the Board of Directors shall be held without notice other than these Bylaws immediately
after the annual shareholders' meeting is adjourned.
2.3 Special
Meetings. Special meetings of the Board of Directors for any purpose(s) may be called at any time by the president or any director.
2.4 Place
and Manner of Meetings. Meetings of the Board of Directors shall be held at the Company's principal office or any other place
designated by the Board of Directors. Meetings of the Board of Directors may be held by means of conference telephone or similar
communications equipment by which all persons participating may simultaneously hear each other during the meeting. A director participating
in a meeting by this means is deemed to be present in person at the meeting.
2.5 Notice
of Special Meetings. Notice of the date, time and place of any special meeting of the Board of Directors shall be given at
least 24 hours before the meeting in person or by mail, telephone, fax or other form of wire or wireless communication. If mailed,
notice shall be effective at the earliest of: (a) two days after deposit in the U.S. mail, as evidenced by the postmark, if mailed
postpaid and correctly addressed; or (b) on the date shown on the return receipt, if sent by registered or certified mail, return
receipt requested, and the receipt is signed by or on behalf of the addressee. Notice by all other means shall be effective when
received by or on behalf of the director or as otherwise specified in the Act.
2.6 Waiver
of Notice. A director may at any time waive any notice required by law, these Bylaws or the Articles of Incorporation. The
waiver shall be in writing, signed by the director entitled to notice, specify the meeting for which notice is waived and delivered
to the Company for inclusion in the minutes or filing with the corporate records. A director’s attendance at or participation
in a meeting waives any required notice of the meeting unless the director, at the beginning of the meeting or promptly on his
or her arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
2.7 Quorum;
Manner of Acting. A majority of the total number of directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. The affirmative vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless the vote of a greater number of directors is required by law, the Articles
of Incorporation or these Bylaws, in which case the contrary provision shall control.
2.8 Action
Without Meeting. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a
meeting if one or more written consents describing the action taken are signed by all of the directors entitled to vote on the
matter and included in the minutes or filed with the corporate records reflecting the action taken. The action shall be effective
when the last director signs the consent, unless the consent specifies an earlier or later effective date.
2.9 Removal.
Any director may be removed by the shareholders, with or without cause. A director may be removed by the shareholders only
at a meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the
purposes, of the meeting is removal of the director.
2.10 Resignation.
A director may resign at any time by delivering written notice to the Board of Directors, its chairperson or the Company. A
resignation is effective as specified in Section 2.5, unless the notice specifies a later effective date. Once delivered, a notice
of resignation is irrevocable unless revocation is permitted by the Board of Directors. Unless otherwise specified in the notice,
acceptance of the resignation shall not be necessary to make it effective.
2.11 Vacancies.
a. A
vacancy in the Board of Directors shall exist upon the death, resignation or removal of any director.
b. Vacancies
in the Board of Directors may be filled by:
1. The
Board of Directors, by the earlier of 60 days after the creation of the vacancy or the annual shareholders' meeting provided for
in Section 1.1. The remaining directors may fill the vacancy by the affirmative vote of a majority of all directors remaining in
office.
2. The
shareholders, at an annual or special meeting, if the directors fail to fill the vacancy as provided above.
c. The
shareholders shall elect the additional directors if the number of directors is increased by amendment of these Bylaws.
d. A
director elected to fill a vacancy shall hold office until the next shareholders' meeting at which directors are elected.
e. If
the Board of Directors accepts the resignation of a director made effective at a later date, a successor may be elected by the
remaining directors to take office when the resignation becomes effective.
2.12 Compensation.
By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attending each meeting of the
Board of Directors, and may be paid a fixed sum for attending each meeting or a stated salary as director. No such payments shall
prevent any director from serving the Company in any other capacity and receiving compensation for that service.
2.13 Committees.
The Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Each
committee shall have two or more members, who serve at the pleasure of the Board of Directors. Creation of a committee and appointment
of members to it shall be approved by a majority of all the directors in office when the action is taken. Any such committee shall
have and may exercise all the authority of the Board of Directors in managing the Company, except to the extent prohibited by law.
ARTICLE III - OFFICERS
3.1 Designation
of Officers. The Company's officers shall consist of a president and a secretary, each of whom shall be appointed by the Board
of Directors. The Board of Directors may appoint additional officers or assistant officers from time to time. If not appointed
by the Board of Directors, the president may appoint additional officers or assistant officers from time to time.
3.2 Term.
Each officer shall hold office until the earliest of: (a) the appointment of the officer’s successor; (b) the officer’s
death; or (c) the resignation or removal of the officer in accordance with these Bylaws.
3.3 Removal.
The Board of Directors may remove any officer at any time, with or without cause. The president may remove any officer appointed
by the president at any time, with or without cause. Removal of an officer does not affect the contract rights, if any, of the
Company or the officer.
3.4 Resignation.
An officer may resign at any time by delivering written notice to the Company. A resignation is effective as specified in Section
2.5, unless the notice specifies a later effective date. If the Company accepts the resignation of an officer made effective at
a later date, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor
does not take office until the effective date. Unless otherwise specified in the notice, acceptance of the resignation shall not
be necessary to make it effective.
3.5 Compensation.
The compensation, if any, of all officers of the Company shall be fixed by the president, unless otherwise designated by the
Board of Directors.
3.6 Duties.
Each officer has the authority and shall perform the duties set forth in these Bylaws and, to the extent consistent with these
Bylaws, the duties prescribed by the Board of Directors or by direction of an officer authorized by the Board of Directors to prescribe
the duties of other officers.
3.7 President.
The president shall be the chief executive officer of the Company, shall preside at all meetings of the Board of Directors
and the shareholders and shall, subject to the control of the Board of Directors, be responsible for the conduct and management
of the Company's business and fiscal affairs and the general supervision of its property, business interests and agents. At the
annual shareholders' meeting, the president shall make an annual report on the Company's business and fiscal affairs and make such
recommendations as the president deems proper.
3.8 Secretary.
a. The
secretary shall keep or cause to be kept at the Company’s principal office, or such other place as the Board of Directors
may order, a book of minutes of all meetings of the directors and shareholders showing the time and place of the meeting; whether
it was a regular or special meeting, and if a special meeting, how authorized; the notice given; the names of those present at
directors’ meetings; the number of shareholders present or represented at shareholders' meetings; and the proceedings at
those meetings.
b. The
secretary shall keep or cause to be kept at the Company's registered office or at the office of the Company's transfer agent a
stock transfer book, or a duplicate stock transfer book, showing the shareholders' names and addresses, the number and classes
of shares held by each, the number and date of certificates issued for those shares and the number and date of cancellation of
certificates surrendered for cancellation.
c. The
secretary shall give or cause to be given notice of shareholders' and Board of Directors' meetings as required by these Bylaws.
3.9 Treasurer.
The treasurer shall have charge and custody and be responsible for all funds and securities of the Company, and shall have
any other duties prescribed from time by the Board of Directors.
3.10 Vice
President(s). Each vice president, if any, shall perform those duties that the president or the Board of Directors prescribes.
The vice president or, if there is more than one vice president, the vice president designated by the president, shall have the
same powers as the president in the president's absence or during the president's disability or inability to act.
ARTICLE IV - CORPORATE RECORDS - INSPECTION
4.1 Maintenance
of Records. The Company shall maintain adequate and correct books, records and accounts of its business and properties. Except
as otherwise provided by law, all books, records and accounts shall be kept at the Company's principal office.
4.2 Inspection
of Books and Records. A shareholder of the Company is entitled to inspect and copy, during regular business hours at a reasonable
location specified by the Company, all books, records and accounts of the Company if the shareholder gives the Company written
notice of his, her or its demand at least five business days before the date on which the shareholder wishes to inspect and copy.
The shareholder may inspect and copy such records only if the shareholder's demand is made in good faith and for a proper purpose;
the shareholder describes with reasonable particularity the shareholder's purpose and the records the shareholder desires to inspect;
and the records are directly connected with the shareholder's purpose.
4.3 Inspection
of Bylaws and Articles of Incorporation. A shareholder of the Company is entitled to inspect and copy, during regular business
hours at the Company's principal office, the Articles of Incorporation and all amendments or restatements, the Bylaws and all amendments
or restatements and any resolutions adopted by the Board of Directors, if the shareholder gives the Company written notice of his,
her or its demand at least five business days before the date on which the shareholder wishes to inspect and copy. The Company
may impose a reasonable charge covering the costs of labor and materials for copies of any documents provided to the shareholder.
The charge may not exceed the estimated cost of production or reproduction of the records.
ARTICLE V - CERTIFICATES AND TRANSFER
OF SHARES
5.1 Certificates
for Shares.
a. Certificates
for shares shall be in such form as the Board of Directors may determine. In addition to any other requirements of law, each certificate
for shares shall state the following on its face: (1) the name of the Company and that it is organized under Oregon law; (2)
the name of the person to whom issued; (3) the number and class of shares and the designation of the series, if any, that the certificate
represents; and (4) the number of the certificate and its date of issuance.
b. The
certificates shall be signed by the president or a vice president and the secretary or an assistant secretary of the Company.
5.2 Transfer
of Certificates. On surrender to the Company of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, the Company shall issue a new certificate to the person entitled to that certificate,
cancel the old certificate and record the transaction on its stock transfer books.
5.3 Lost,
Stolen or Destroyed Certificates. If a certificate is represented to be lost, stolen or destroyed, a new certificate shall
be issued in its place upon such proof of loss, theft or destruction and upon the giving of such bond or other security as the
Board of Directors may require.
ARTICLE VI - INDEMNIFICATION
6.1 Definitions.
As used in this Article VI:
a. "Company"
means the Company and any domestic or foreign predecessor entity of the Company in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
b. "Director"
means an individual who is or was a director of the Company or an individual who, while a director of the Company, is or was serving
at the Company's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise. A director is considered to be serving an employee
benefit plan at the Company's request if the director's duties to the Company also impose duties on or otherwise involve services
by the director to the plan or to participants in or beneficiaries of the plan. "Director" includes, unless the context
requires otherwise, a director's estate or personal representative.
c. "Expenses"
include counsel fees.
d. "Liability"
means the obligation to pay a judgment, penalty, fine, including an excise tax assessed with respect to an employee benefit plan,
or reasonable expenses incurred in connection with a proceeding. "Liability" includes the obligation to pay a settlement
amount actually and reasonably incurred in connection with a proceeding.
e. "Officer"
means an individual who is or was an officer of the Company or an individual who, while an officer of the Company, is or was serving
at the Company's request as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise. An officer is considered to be serving an employee
benefit plan at the Company's request if the officer's duties to the Company also impose duties on or otherwise involve services
by the officer to the plan or to participants in or beneficiaries of the plan. "Officer" includes, unless the
context requires otherwise, an officer's estate or personal representative.
f. "Party"
includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding.
g. "Proceeding"
means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative,
and whether formal or informal.
6.2 Indemnification.
Upon a determination that indemnification is permissible in the circumstances, the Company shall indemnify all directors and
officers against any liability incurred in a proceeding to which the director or officer was made a party because he or she is
or was a director or officer. However, indemnification in connection with a proceeding by or in the right of the Company shall
be limited to reasonable expenses in connection with the proceeding. Indemnification of reasonable expenses in connection with
any proceeding shall be deemed permissible in any proceeding in which a director or officer is wholly successful, on the merits
or otherwise, in the defense of the proceeding.
6.3 Determination.
a. For
the purposes of this Section 6.3, indemnification is permissible in the circumstances if:
1. The
conduct of the director or officer was in good faith;
2. The
director or officer reasonably believed that his or her conduct was in the Company's best interests, or at least not opposed to
its best interests; and
3. In
the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her conduct was unlawful.
4. A
director's or officer's conduct with respect to an employee benefit plan for a purpose the director or officer reasonably believed
to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of Section
6.3.a.(2) above.
b. Determination
that indemnification is permissible shall be made as follows:
1. By
the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding;
2. If
a quorum cannot be obtained, by a majority vote of a committee duly designated by the Board of Directors consisting solely of two
or more directors not at the time parties to the proceeding. Directors who are parties to the proceeding may participate
in the designation of the committee;
3. By
special legal counsel selected by the Board of Directors or its committee in the manner described in Section 6.3.b.(1) or (2) above
or, if a quorum of the Board of Directors cannot be obtained and a committee cannot be designated under Section 6.3.b.(2), the
special legal counsel shall be selected by a majority vote of the full Board of Directors, including directors who are parties
to the proceeding; or
4. By
the shareholders.
c. Evaluation
that expenses are reasonable or that a settlement obligation is reasonable shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination that indemnification is permissible is made by special legal
counsel, evaluation that expenses are reasonable or that a settlement obligation is reasonable shall be made by those entitled
to select counsel under Section 6.3.b.(3)
d. Termination
of a proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director or officer did not meet the standard of conduct described in Section 6.3.a.
e. Notwithstanding
any other provision of this Article VI, the Company shall not indemnify a director or officer:
1. In
connection with a proceeding by or in the right of the Company in which the director or officer was adjudged liable to the Company;
or
2. In
connection with any other proceeding charging improper personal benefit to the director or officer in which the director or officer
was adjudged liable on the basis that personal benefit was improperly received by the director or officer.
6.4 Advancement
of Expenses. The Company shall pay for or reimburse the reasonable expenses incurred by any director or officer who is a party
to a proceeding before final disposition of the proceeding if the director or officer furnishes a written affirmation of the director's
or officer's good faith belief that the director or officer met the standard of conduct set forth in Section 3.a., and furnishes
a written undertaking executed personally or on the director's or officer's behalf, which is an unlimited general obligation of
the director or officer to repay the advance if it is ultimately determined that the director or officer is not entitled to indemnification
under this Article VI.
6.5 Insurance.
The Company may purchase and maintain insurance on behalf of each director and officer against liability asserted against or
incurred by the director or officer.
6.6 Application.
The provisions for indemnification and advancement of expenses under this Article VI shall not be deemed exclusive of any other
rights to which directors or officers may be entitled under any agreement with the Company, any general or specific action of
the Board of Directors, vote of shareholders or otherwise, or any rights under Oregon law, and the rights under this Article VI
shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of that person's heirs,
executors and administrators. However, the Company shall not indemnify any director or officer from or on account of acts or omissions
for which liability could not be eliminated under ORS 60.047(2)(d).
ARTICLE VII - GENERAL PROVISIONS
7.1 Notices
to Shareholders and Directors. In an effort to reduce the consumptive use of natural resources, notices and all other written
communications required to be sent to shareholders and directors shall, to the extent permitted by law and to the extent technically
practicable and fiscally prudent, be sent by electronic transmission in a manner authorized in writing by the shareholder or director.
The Board of Directors and the President shall cause the appropriate officers to implement this Section 7.1 in accordance with
the Articles of Incorporation, these Bylaws and the Act.
7.2 Execution
of Documents. Any documents may be executed on behalf of the Company by the president or any other officer(s) the Board of
Directors may designate.
7.3 Amendment
of Bylaws. The Board of Directors may amend or repeal these Bylaws, except as otherwise provided by law.
These Second Amended and Restated Bylaws
were adopted by the Board of Directors on July 21, 2017.
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By:
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Douglas M. Campoli, Secretary
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Exhibit 4
SUBSCRIPTION AGREEMENT
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS
INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO
BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH
AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), THAT OFFERING STATEMENT
DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS
OR INFORMATION MADE AVAILABLE TO SUBSCRIBER IN CONNECTION WITH THIS OFFERING OVER THE [COMPANY’S WEBSITE] OR THROUGH W.R.
HAMBRECHT AND CO. (THE “BROKER”). ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
INVESTORS WHO ARE NOT “ACCREDITED INVESTORS”
(AS THAT TERM IS DEFINED IN SECTION 501 OF REGULATION D PROMULGATED UNDER THE ACT) ARE SUBJECT TO LIMITATIONS ON THE AMOUNT THEY
MAY INVEST, AS SET OUT IN SECTION 4. THE COMPANY IS RELYING ON THE REPRESENTATIONS AND WARRANTIES SET FORTH BY EACH SUBSCRIBER
IN THIS SUBSCRIPTION AGREEMENT AND THE OTHER INFORMATION PROVIDED BY SUBSCRIBER IN CONNECTION WITH THIS OFFERING TO DETERMINE THE
APPLICABILITY TO THIS OFFERING OF EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT.
PROSPECTIVE INVESTORS MAY NOT TREAT THE CONTENTS OF THE SUBSCRIPTION
AGREEMENT, THE OFFERING CIRCULAR OR ANY OF THE OTHER MATERIALS AVAILABLE ON THE COMPANY WEBSITE OR PROVIDED BY THE BROKER (COLLECTIVELY,
THE “OFFERING MATERIALS”) OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS OFFICERS, EMPLOYEES
OR AGENTS (INCLUDING “TESTING THE WATERS” MATERIALS) AS INVESTMENT, LEGAL OR TAX ADVICE. IN MAKING AN INVESTMENT
DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND
THE RISKS INVOLVED. EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE INVESTOR’S OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL
ADVISOR AS TO INVESTMENT, LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING THE INVESTOR’S PROPOSED INVESTMENT.
THE OFFERING MATERIALS MAY CONTAIN FORWARD-LOOKING STATEMENTS
AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT.
WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,”
“INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS
REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE
THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY
DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER
SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE COMPANY MAY NOT BE OFFERING THE SECURITIES IN EVERY STATE.
THE OFFERING MATERIALS DO NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH THE SECURITIES ARE NOT
BEING OFFERED.
THE INFORMATION PRESENTED IN THE OFFERING MATERIALS WAS PREPARED
BY THE COMPANY SOLELY FOR THE USE BY PROSPECTIVE INVESTORS IN CONNECTION WITH THIS OFFERING. NO REPRESENTATIONS OR WARRANTIES
ARE MADE AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN ANY OFFERING MATERIALS, AND NOTHING CONTAINED IN THE
OFFERING MATERIALS IS OR SHOULD BE RELIED UPON AS A PROMISE OR REPRESENTATION AS TO THE FUTURE PERFORMANCE OF THE COMPANY.
THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION AND
FOR ANY REASON WHATSOEVER TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THE OFFERING AND/OR ACCEPT OR REJECT IN WHOLE OR
IN PART ANY PROSPECTIVE INVESTMENT IN THE SECURITIES OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF SECURITIES
SUCH INVESTOR DESIRES TO PURCHASE. EXCEPT AS OTHERWISE INDICATED, THE OFFERING MATERIALS SPEAK AS OF THEIR DATE. NEITHER THE
DELIVERY NOR THE PURCHASE OF THE SECURITIES SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THAT DATE.
544 Blair Blvd.
Eugene, OR 97402
Ladies and Gentlemen:
1. Subscription.
(a) The undersigned (“Subscriber”) hereby irrevocably
subscribes for and agrees to purchase common shares (the “Securities”), of Arcimoto, Inc., an Oregon Corporation (the
“Company”), at a purchase price of $6.50 per share (the “Per Security Price”), upon the terms and conditions
set forth herein. The minimum subscription is [$650]. The rights and preferences of the common shares are as set forth in the Company’s
Amended and Restated Certificate of Incorporation and Bylaws attached as Exhibits 2.1 and 2.2 to the Offering Statement of the
Company filed with the SEC (the “Offering Statement”).
(b) Subscriber understands that the Securities are being offered
pursuant to an offering circular dated [____,] 2017 (the “Offering Circular”) filed with the SEC as part of the Offering
Statement. By executing this Subscription Agreement, Subscriber acknowledges that Subscriber has received this Subscription Agreement,
copies of the Offering Circular and Offering Statement including exhibits thereto and any other information required by the Subscriber
to make an investment decision.
(c) The Subscriber’s subscription may be accepted or rejected
in whole or in part, at any time prior to a Closing Date (as hereinafter defined), by the Company at its sole discretion. In addition,
the Company, at its sole discretion, may allocate to Subscriber only a portion of the number of Securities Subscriber has subscribed
for. The Company will notify Subscriber whether this subscription is accepted (whether in whole or in part) or rejected. If Subscriber’s
subscription is rejected, Subscriber’s payment (or portion thereof if partially rejected) will be returned to Subscriber
without interest and all of Subscriber’s obligations hereunder shall terminate.
(d) The aggregate number of Securities sold shall not exceed
[4,600,000] (the “Maximum Offering”). The Company may accept subscriptions until [DATE], unless otherwise extended
by the Company in its sole discretion in accordance with applicable SEC regulations for such other period required to sell the
Maximum Offering (the “Termination Date”). Providing that subscriptions for [160,000] Securities are received (the
“Minimum Offering”), the Company may elect at any time to close all or any portion of this offering, on various dates
at or prior to the Termination Date (each a “Closing Date”).
(e) In the event of rejection of this subscription in its entirety,
or in the event the sale of the Securities (or any portion thereof) is not consummated for any reason, this Subscription Agreement
shall have no force or effect, except for Section 5 hereof, which shall remain in force and effect.
(f) The terms of this Subscription Agreement shall be binding
upon Subscriber and its transferees, heirs, successors and assigns (collectively, “Transferees”); provided that for
any such transfer to be deemed effective, the Transferee shall have executed and delivered to the Company in advance an instrument
in a form acceptable to the Company in its sole discretion, pursuant to which the proposed Transferee shall be acknowledge, agree,
and be bound by the representations and warranties of Subscriber, terms of this Subscription Agreement.
2. Purchase Procedure.
(a) Payment. The purchase price for the Securities shall
be paid simultaneously with the execution and delivery to the Company of the signature page of this Subscription Agreement. Subscriber
shall deliver a signed copy of this Subscription Agreement, along with payment for the aggregate purchase price of the Securities
by a check for available funds made payable to Prime Trust, LLC (payment instructions will be provided at the conclusion of the
invest now process), by ACH electronic transfer or wire transfer to an account designated by the Company, or by any combination
of such methods.
(b) Escrow arrangements. Payment for the Securities shall
be received by Prime Trust, LLC (the “Escrow Agent”) from the undersigned by transfer of immediately available
funds, check or other means approved by the Company at least two days prior to the applicable Closing Date, in the amount as set
forth in Appendix A on the signature page hereto. Upon such Closing Date, the Escrow Agent shall release such funds to the Company.
The undersigned shall receive notice and evidence of the digital entry of the number of the Securities owned by undersigned reflected
on the books and records of the Company and verified by Computershare (the “Transfer Agent”), which books and records
shall bear a notation that the Securities were sold in reliance upon Regulation A.
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Escrow Agent Name
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Prime Trust, LLC
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Address
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[2300 W. Sahara Ave. Suite 1170, Las Vegas, NV 89102]
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Routing Number
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Account Number
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Account Name
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Further Instructions
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3. Representations and Warranties of the Company.
The Company represents and warrants to Subscriber that the following
representations and warranties are true and complete in all material respects as of the date of each Closing Date, except as otherwise
indicated. For purposes of this Agreement, an individual shall be deemed to have “knowledge” of a particular fact or
other matter if such individual should be aware of such fact after due inquiry. The Company will be deemed to have “knowledge”
of a particular fact or other matter if one of the Company’s current officers has, or at any time had, knowledge of such
fact or other matter.
(a) Organization and Standing. The Company is a corporation
duly formed, validly existing and in good standing under the laws of the State of Oregon. The Company has all requisite power and
authority to own and operate its properties and assets, to execute and deliver this Subscription Agreement and any other agreements
or instruments required hereunder. The Company is duly qualified and is authorized to do business and is in good standing as a
foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
(b) Issuance of the Securities. The issuance, sale and
delivery of the Securities in accordance with this Subscription Agreement has been duly authorized by all necessary corporate action
on the part of the Company. The Securities, when so issued, sold and delivered against payment therefor in accordance with the
provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable.
(c) Authority for Agreement.
The execution and delivery by the Company of this Subscription
Agreement and the consummation of the transactions contemplated hereby (including the issuance, sale and delivery of the Securities)
are within the Company’s powers and have been duly authorized by all necessary corporate action on the part of the Company.
Upon full execution hereof, this Subscription Agreement shall constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other equitable remedies and (iii) with respect to provisions
relating to indemnification and contribution, as limited by considerations of public policy and by federal or state securities
laws.
(d) No filings. Assuming the accuracy of the Subscriber’s
representations and warranties set forth in Section 4 hereof, no order, license, consent, authorization or approval of, or exemption
by, or action by or in respect of, or notice to, or filing or registration with, any governmental body, agency or official is required
by or with respect to the Company in connection with the execution, delivery and performance by the Company of this Subscription
Agreement except (i) for such filings as may be required under Regulation A or under any applicable state securities laws, (ii)
for such other filings and approvals as have been made or obtained, or (iii) where the failure to obtain any such order, license,
consent, authorization, approval or exemption or give any such notice or make any filing or registration would not have a material
adverse effect on the ability of the Company to perform its obligations hereunder.
(e) Capitalization. The authorized and outstanding securities
of the Company immediately prior to the initial investment in the Securities is as set forth “Securities being Offered”
in the Offering Circular. Except as set forth in the Offering Circular, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), or agreements of any kind (oral or written) for the purchase or acquisition
from the Company of any of its securities.
(f) Financial statements. Complete copies of the Company’s
financial statements consisting of the balance sheets of the Company as at December 31, 2016 and the related statements of income,
stockholders’ equity and cash flows for the two-year period then ended December 31, 2016 (the “Financial Statements”)
have been made available to the Subscriber and appear in the Offering Circular. The Financial Statements are based on the books
and records of the Company and fairly present in all material respects the financial condition of the Company as of the respective
dates they were prepared and the results of the operations and cash flows of the Company for the periods indicated. DBB McKennon,
which has audited the Financial Statements, is an independent accounting firm within the rules and regulations adopted by the SEC.
(g) Proceeds. The Company shall use the proceeds from
the issuance and sale of the Securities as set forth in “Use of Proceeds to issuer” in the Offering Circular.
(h) Litigation. There is no pending action, suit, proceeding,
arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body,
or to the Company’s knowledge, currently threatened in writing (a) against the Company or (b) against any consultant, officer,
manager, director or key employee of the Company arising out of his or her consulting, employment or board relationship with the
Company or that could otherwise materially impact the Company.
4. Representations and Warranties of Subscriber. By executing
this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary
capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants, which representations and warranties
are true and complete in all material respects as of such Subscriber’s respective Closing Date(s):
(a) Requisite Power and Authority. Such Subscriber has
all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement and
other agreements required hereunder and to carry out their provisions. All action on Subscriber’s part required for the lawful
execution and delivery of this Subscription Agreement and other agreements required hereunder have been or will be effectively
taken prior to the Closing Date. Upon their execution and delivery, this Subscription Agreement and other agreements required hereunder
will be valid and binding obligations of Subscriber, enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’
rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.
(b) Investment Representations. Subscriber understands
that the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). Subscriber
also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities
Act based in part upon Subscriber’s representations contained in this Subscription Agreement.
(c) Illiquidity and Continued Economic Risk. Subscriber
acknowledges and agrees that there is no ready public market for the Securities and that there is no guarantee that a market for
their resale will ever exist. Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation
to list the Securities on any market or take any steps (including registration under the Securities Act or the Securities Exchange
Act of 1934, as amended) with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber
is able to bear the economic risk of losing Subscriber’s entire investment in the Securities. Subscriber also understands
that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors
relating to the purchase of Securities.
(d) Accredited Investor Status or Investment Limits.
Subscriber represents that either:
(i) Subscriber is an “accredited investor”
within the meaning of Rule 501 of Regulation D under the Securities Act. Subscriber represents and warrants that the information
set forth in response to question (c) on the signature page hereto concerning Subscriber is true and correct; or
(ii) The purchase price set out in paragraph (b) of
the signature page to this Subscription Agreement, together with any other amounts previously used to purchase Securities in this
offering, does not exceed 10% of the greater of the Subscriber’s annual income or net worth.
Subscriber represents that to the extent it has any questions
with respect to its status as an accredited investor, or the application of the investment limits, it has sought professional advice.
(e) Shareholder information. Within five days after receipt
of a request from the Company, the Subscriber hereby agrees to provide such information with respect to its status as a shareholder
(or potential shareholder) and to execute and deliver such documents as may reasonably be necessary to comply with any and all
laws and regulations to which the Company is or may become subject. Subscriber further agrees that in the event it transfers
any Securities, it will require the transferee of such Securities to agree to provide such information to the Company as a condition
of such transfer.
(f) Company Information. Subscriber understands that
the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out
in the Offering Circular. Subscriber has had such opportunity as it deems necessary (which opportunity may have presented through
online chat or commentary functions) to discuss the Company’s business, management and financial affairs with managers, officers
and management of the Company and has had the opportunity to review the Company’s operations and facilities. Subscriber has
also had the opportunity to ask questions of and receive answers from the Company and its management regarding the terms and conditions
of this investment. Subscriber acknowledges that except as set forth herein, no representations or warranties have been made to
Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect to the business or prospects
of the Company or its financial condition.
(g) Valuation. The Subscriber acknowledges that the price
of the Securities was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to
value. The Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result
that the Subscriber’s investment will bear a lower valuation.
(h) Domicile. Subscriber maintains Subscriber’s
domicile (and is not a transient or temporary resident) at the address shown on the signature page.
(i) No Brokerage Fees. There are no claims for brokerage
commission, finders’ fees or similar compensation in connection with the transactions contemplated by this Subscription Agreement
or related documents based on any arrangement or agreement binding upon Subscriber.
(j) Foreign Investors. If Subscriber is not a United
States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber hereby represents
that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe
for the Securities or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction
for the purchase of the Securities, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental
or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and
continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s
jurisdiction.
5. Survival of Representations and Indemnity. The representations,
warranties and covenants made by the Subscriber herein shall survive the Termination Date of this Agreement. The Subscriber agrees
to indemnify and hold harmless the Company and its respective officers, directors and affiliates, and each other person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act against any and all loss, liability, claim, damage
and expense whatsoever (including, but not limited to, any and all reasonable attorneys’ fees, including attorneys’
fees on appeal) and expenses reasonably incurred in investigating, preparing or defending against any false representation or
warranty or breach of failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any
other document furnished by the Subscriber to any of the foregoing in connection with this transaction.
6. Governing Law; Jurisdiction. This Subscription Agreement
shall be governed and construed in accordance with the laws of the State of Oregon and in the Oregon courts.
7. Notices. Notice, requests, demands and other communications
relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have
been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail,
postage prepaid, return receipt requested, in the third day after the posting thereof; or (c) emailed, telecopied or cabled, on
the date of such delivery to the address of the respective parties as follows:
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If to the Company, to:
Mark Frohnmayer
Arcimoto, Inc.
544 Blair Blvd.
Eugene, OR 97402
investor@arcimoto.com
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with a required copy to:
KHLK LLP
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If to a Subscriber, to Subscriber’s address as shown on the signature page hereto
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or to such other address as may be specified by written notice
from time to time by the party entitled to receive such notice. Any notices, requests, demands or other communications by telecopy
or cable shall be confirmed by letter given in accordance with (a) or (b) above.
8. Miscellaneous.
(a) All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons or entity or entities
may require.
(b) This Subscription Agreement is not transferable or assignable
by Subscriber.
(c) The representations, warranties and agreements contained
herein shall be deemed to be made by and be binding upon Subscriber and its heirs, executors, administrators and successors and
shall inure to the benefit of the Company and its successors and assigns.
(d) None of the provisions of this Subscription Agreement may
be waived, changed or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by
the Company and Subscriber.
(e) In the event any part of this Subscription Agreement is
found to be void or unenforceable, the remaining provisions are intended to be separable and binding with the same effect as if
the void or unenforceable part were never the subject of agreement.
(f) The invalidity, illegality or unenforceability of one or
more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality or enforceability
of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality or enforceability of this Subscription
Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
(g) This Subscription Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof.
(h) The terms and provisions of this Subscription Agreement
are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention
of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.
(i) The headings used in this Subscription Agreement have been
inserted for convenience of reference only and do not define or limit the provisions hereof.
(j) This Subscription Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
(k) If any recapitalization or other transaction affecting the
stock of the Company is effected, then any new, substituted or additional securities or other property which is distributed with
respect to the Securities shall be immediately subject to this Subscription Agreement, to the same extent that the Securities,
immediately prior thereto, shall have been covered by this Subscription Agreement.
(l) No failure or delay by any party in exercising any right,
power or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SIGNATURE PAGE FOLLOWS
Arcimoto, Inc.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned, desiring to purchase common stock of Arcimoto,
Inc., by executing this signature page, hereby executes, adopts and agrees to all terms, conditions and representations of the
Subscription Agreement.
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(a) The number of common stock the undersigned hereby irrevocably subscribes for is:
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(print number of
Securities)
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(b) The aggregate
purchase price (based on a purchase price of $6.50 per Security) for the common stock the undersigned hereby irrevocably subscribes
for is:
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$
(print aggregate
purchase price)
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(c) EITHER (i) The
undersigned is an accredited investor (as that term is defined in Regulation D under the Securities Act because the undersigned
meets the criteria set forth in the following paragraph(s) of Appendix A attached hereto:
OR (ii) The amount set forth in paragraph (b) above
(together with any previous investments in the Securities pursuant to this offering) does not exceed 10% of the greater of the
undersigned’s net worth or annual income.
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(print applicable
number from Appendix A)
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(d) The Securities being subscribed for will be owned by, and should be recorded on the Company’s books as held in the name of:
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___________________________________________
(print name of owner or joint owners)
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If the Securities are to be purchased in joint names, both Subscribers must sign:
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________________________________________
Signature
________________________________________
Name (Please Print)
________________________________________
Email address
________________________________________
Address
________________________________________
________________________________________
Telephone Number
________________________________________
Social Security Number/EIN
________________________________________
Date
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________________________________________
Signature
________________________________________
Name (Please Print)
________________________________________
Email address
________________________________________
Address
________________________________________
________________________________________
Telephone Number
________________________________________
Social Security Number
________________________________________
Date
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* * * * *
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This Subscription is accepted
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Arcimoto, Inc.
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on _____________, 201X
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By:
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APPENDIX A
An accredited investor includes the following categories
of investor:
(1) Any bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or
a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the
U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions,
for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section
3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of
that issuer;
(5) Any natural person whose individual net worth, or joint
net worth with that person's spouse, exceeds $1,000,000.
(i) Except as provided in paragraph (a)(5)(ii) of
this section, for purposes of calculating net worth under this paragraph (a)(5):
(A) The person's primary residence shall not be included
as an asset;
(B) Indebtedness that is secured by the person's primary
residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included
as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount
outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess
shall be included as a liability); and
(C) Indebtedness that is secured by the person's primary
residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be
included as a liability;
(ii) Paragraph (a)(5)(i) of this section will not
apply to any calculation of a person's net worth made in connection with a purchase of securities in accordance with a right to
purchase such securities, provided that:
(A) Such right was held by the person on July 20, 2010;
(B) The person qualified as an accredited investor on
the basis of net worth at the time the person acquired such right; and
(C) The person held securities of the same issuer, other
than such right, on July 20, 2010.
(6) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described
in §230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited
investors.
Exhibit 6.1
ARCIMOTO, INC.
SECOND AMENDED AND RESTATED
2012 EMPLOYEE STOCK BENEFIT PLAN
SECTION 1. PURPOSE
The purpose of the
Arcimoto, Inc. Second Amended and Restated 2012 Employee Stock Benefit Plan (the “Plan”) is to enhance the long-term
shareholder value of Arcimoto, Inc., an Oregon corporation (the “Company”), by offering opportunities to selected
persons to participate in the Company’s growth and success, and to encourage them to remain in the service of the Company
and to acquire and maintain stock ownership in the Company.
SECTION 2. DEFINITIONS
“Award” means any Warrant or Stock
Award.
“Board” means the Board of Directors
of the Company.
“Cause,”
means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, violations
of the non-competition provisions of this Plan, or conviction or confession of a crime punishable by law (except minor violations),
or any termination of Participant’s employment with the Company for cause under any employment agreement between the Participant
and the Company. The foregoing, however, shall not be deemed an exclusive list of all acts or omissions that the Company, as the
case may be, may consider as grounds for the discharge of the Participant without Cause. Determinations of whether the Participant
was terminated for Cause shall be made by the Plan Administrator, which determination shall be conclusive and binding on all parties.
“Code”
means the Internal Revenue Code of 1986, as amended from time to time, together with regulatory guidance issued thereunder.
“Common Stock” means the Common
Stock of the Company.
“Company Transaction,”
unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between
the Participant and the Company, means consummation of either
(a) a
merger or consolidation of the Company with or into any other company, entity or person, or
(b) a
sale, lease, exchange or other transfer in a single transaction or a series of related transactions undertaken with a common purpose
of all or substantially all the Company’s then outstanding securities or all or substantially all the Company’s assets;
provided, however, that a Company Transaction shall not include
a Related Party Transaction.
“Disability,”
unless otherwise defined by the Plan Administrator or in the instrument evidencing the Award or in a written employment or
services agreement between the Participant and the Company, means a mental or physical impairment of the Participant that is expected
to result in death or that has lasted or is expected to last for a continuous period of twelve (12) months or more and that causes
the Participant to be unable, in the opinion of the Plan Administrator, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity.
“Early Retirement”
means Termination of Service prior to Retirement on terms and conditions approved by the Plan Administrator.
“Exchange Act” means the Securities
Exchange Act of 1934, as amended.
“Exercise
Price” means the amount of consideration required from a Participant to exercise the Warrant, which amount shall not
be less than the Fair Market Value of the shares of Common Stock to which the Warrant relates.
“Fair Market
Value” means the per share value of the Common Stock as established in good faith by the Board, through the reasonable
application of a reasonable valuation method, consistent with the requirements of Code Section 409A.
“Grant Date”
means the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later
date specified by the Plan Administrator provided that conditions to the exercisability or vesting of Awards shall not defer the
Grant Date.
“Participant” means the person
to whom an Award is granted.
“Plan Administrator” has the meaning
set forth in Section 3.1.
“Related Party
Transaction” means (a) a merger or consolidation of the Company in which the holders of the outstanding voting securities
of the Company immediately prior to the merger or consolidation hold at least a majority of the outstanding voting securities of
the Successor Company immediately after the merger or consolidation; (b) a sale, lease, exchange or other transfer of the Company’s
assets to a majority-owned subsidiary company; (c) a transaction undertaken for the principal purpose of restructuring the capital
of the Company, including but not limited to, reincorporating the Company in a different jurisdiction or creating a holding company;
or (d) a corporate dissolution or liquidation.
“Retirement,”
unless otherwise defined by the Plan Administrator from time to time for purposes of the Plan, means Termination of Service
on or after the date the individual reaches age sixty-five (65).
“Securities Act” means the Securities
Act of 1933, as amended.
“Stock Award”
means an Award of shares of Common Stock or units denominated in Common Stock granted under Section 8, the rights of ownership
of which may be subject to restrictions prescribed by the Plan Administrator.
“Successor
Company” means the surviving company, the successor company or its parent, as applicable, in connection with a Company
Transaction.
“Termination
of Service” means a termination of employment or service relationship with the Company for any reason, whether voluntary
or involuntary, including death, Disability, Early Retirement or Retirement, as determined by the Plan Administrator in its sole
discretion. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause
of such Termination of Service shall be determined by the Plan Administrator and its determination shall be final. Transfers of
a Participant’s service status between an employee and a consultant shall not be considered a Termination of Service for
purposes of an Award unless the Plan Administrator determines otherwise.
“Vesting Commencement
Date” means the Grant Date or such other date selected by the Plan Administrator as the date from which the Warrant begins
to vest for purposes of Section 7.4.
“Warrant”
means the right to purchase Common Stock pursuant to the terms of a Common Stock Purchase Warrant substantially in the form
attached hereto as Exhibit A (the “Warrant Form”), or such other form as may be established by the Plan
Administrator from time to time, as granted under Section 7.
“Warrant Award”
means an Award of Warrants. The Warrant Award shall set forth, among other things, the Warrant Shares covered by the Warrant
and the Exercise Price of the Warrant.
“Warrant Expiration Date” has the
meaning set forth in Section 7.6.
“Warrant Shares”
means the shares of Common Stock issuable or issued upon exercise of a Warrant.
“Warrant Term” has the meaning
set forth in Section 7.3.
SECTIONS 3. ADMINISTRATION
3.1 Plan
Administrator
The Plan shall be administered
by the Board and/or a committee or committees (which term includes subcommittees) appointed by, and consisting of two (2) or more
members of, the Board (a “Plan Administrator”). Notwithstanding the foregoing, the Board may delegate the responsibility
for administering the Plan with respect to designated classes of eligible persons to different committees consisting of one (1)
or more members of the Board, subject to such limitations as the Board deems appropriate. Committee members shall serve for such
term as the Board may determine, subject to removal by the Board at any time.
3.2 Administration
and Interpretation by Plan Administrator
Except for the terms
and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine
all matters relating to Awards under the Plan, including selecting the persons to be granted Awards, determining the type of Awards,
the number of shares of Common Stock subject to an Award, and all terms, conditions, restrictions and limitations, if any, of an
Award, and approving the forms of agreement for use under the Plan. The Plan Administrator shall also have exclusive authority
to interpret the Plan and the terms of any instrument evidencing the Award and may from time to time adopt and change rules and
regulations of general application for the Plan’s administration. The Plan Administrator’s interpretation of the Plan
and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall
be conclusive, final and binding on all parties involved or affected. The Plan Administrator may delegate ministerial duties to
such of the Company’s officers as it so determines. For purposes of determining the effect on vesting an Award of a Company-approved
leave of absence or a Participant’s working less than full time, the human resources director or other person performing
that function may be deemed the Plan Administrator.
3.3 Notices
Notices to the Company
(or an employee or officer thereof) shall be delivered to the Company’s office manager, at the Company’s principal
place of business.
Notices to a Participant
(or successor in interest thereto) shall be delivered to the Participant at the Participant’s last known address, as maintained
in the Company’s records. The Participant bears responsibility for updating the Company’s records with respect to Participant’s
address changes, if any.
SECTION 4. STOCK
SUBJECT TO THE PLAN
4.1 Authorized
Number of Shares
Subject to adjustment
from time to time as provided in Section 11.1, a maximum of 1,000,000 shares of Common Stock shall be available for issuance under
the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares of the Company.
4.2 Reuse
of Shares
(a) Shares
of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant.
If any Award lapses, expires, terminates or is cancelled prior to the issuance of shares thereunder or if shares of Common Stock
are issued under the Plan to a Participant and are thereafter reacquired by the Company, the shares subject to such Awards or the
reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant
or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding
obligations, or (ii) covered by an Award that is settled in cash shall be available for Awards under the Plan.
(b) The
Plan Administrator shall have the authority to grant awards as an alternative to or as the form of payment for grants or rights
earned or due under other compensation plans or arrangements of the Company.
SECTION 5. ELIGIBILITY
An Award may be granted
to any officer, director, or employee of the Company that the Plan Administrator from time to time selects. An Award may also be
granted to any consultant, advisor or independent contractor who provides services to the Company, so long as such Participant
(a) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a
capital-raising transaction and (b) does not directly or indirectly promote or maintain a market for the Company’s securities.
SECTION 6. AWARDS
6.1 Form
and Grant of Awards
The Plan Administrator
shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Awards
may be granted singly or in combination.
6.2 Settlement
of Awards
The Company may settle
Awards through the delivery of shares of Common Stock, the granting of replacement Awards or any combination thereof as the Plan
Administrator shall determine. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan
Administrator shall determine. The Plan Administrator may permit or require the deferral of any Award payment, subject to such
rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents.
SECTION 7. AWARDS
OF WARRANTS
7.1 Grant
of Warrants
Subject to the terms
of this Plan, the Plan Administrator shall have the authority, in its sole discretion, to grant Warrants.
7.2 Warrant
Exercise Price
The exercise price
for shares purchased under a Warrant shall be the amount set forth in Section 2.1 of the Warrant Form, with the fair market value
of a Warrant Share (as defined in the Warrant Form) as determined by the Plan Administrator.
7.3 Term
of Warrants
Subject to earlier
termination in accordance with the terms of the Plan and the instrument evidencing the Warrant, the maximum term of a Warrant (the
“Warrant Term”) shall be as established for that Warrant by the Plan Administrator or, if not so established,
shall be ten (10) years from the Grant Date.
7.4 Exercise
of Warrants
The Plan Administrator
shall establish and set forth in each Warrant Form the time at which, or the installments in which, the Warrant shall vest and
become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time.
To the extent a Warrant
has vested and become exercisable, the Warrant may be exercised in whole or from time to time in part by delivery to the Company
of a written stock Warrant exercise form or notice, in the form attached to the Warrant Form or in such other form and in accordance
with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Warrant is
being exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any, and such representations
and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5. A Warrant
may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as
determined by the Plan Administrator.
7.5 Payment
of Exercise Price
The exercise price
for shares purchased under a Warrant shall be paid in full to the Company by delivery of consideration equal to the product of
the Warrant exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the
shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase,
which forms may include:
(a) cash;
(b) check;
(c) such
other consideration as the Plan Administrator may permit.
In addition, to assist
a Participant (including a Participant who is an officer or a director of the Company) in acquiring shares of Common Stock pursuant
to an Award granted under the Plan, the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or
at any time before the acquisition of Common Stock pursuant to the Award, (i) the payment by a Participant of the purchase price
of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third
party; provided that the Company is not then subject to the Sarbanes-Oxley Act of 2002. Such notes or loans must be full recourse
to the extent necessary to avoid charges to the Company’s earnings for financial reporting purposes. Subject to the foregoing,
the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate
and terms of and security for repayment.
7.6 Post-Termination
Exercises
The Plan Administrator
shall establish and set forth in each Warrant Form or other instrument that evidences a Warrant whether the Warrant shall continue
to be exercisable, and the terms and conditions of such exercise, if a Participant ceases to be employed by, or to provide services
to, the Company, which provisions may be waived or modified by the Plan Administrator at any time. Where such waiver or modification
provides for an extension of the Warrant Expiration Date, such extension cannot exceed the Warrant Term or, if shorter, ten (10)
years from the Warrant’s Grant Date. If not so established in the Warrant Form or other instrument evidencing the Warrant,
the Warrant shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator
at any time:
(a) Any
portion of a Warrant that is not vested and exercisable on the date of a Participant’s Termination of Service shall expire
on such date.
(b) Any
portion of a Warrant that is vested and exercisable on the date of a Participant’s Termination of Service shall expire on
the earliest to occur of:
(i) if
the Participant’s Termination of Service occurs for reasons other than Cause, Retirement or Early Retirement, Disability
or death, the date which is three (3) months after such Termination of Service;
(ii) if
the Participant’s Termination of Service occurs by reason of Retirement or Early Retirement, Disability or death, the six
(6) month anniversary of such Termination of Service; and
(iii) the
last day of the Warrant Term (the “Warrant Expiration Date”).
Notwithstanding the
foregoing, if a Participant dies after his or her Termination of Service but while a Warrant is otherwise exercisable, the portion
of the Warrant that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur
of (y) the Warrant Expiration Date and (z) the six (6) month anniversary of the date of death, unless the Plan Administrator determines
otherwise.
Also notwithstanding
the foregoing, in case a Participant’s Termination of Service occurs for Cause, all Warrants granted to the Participant,
vested or otherwise, shall automatically expire upon first notification to the Participant of such termination, unless the Plan
Administrator determines otherwise. If a Participant’s employment or service relationship with the Company is suspended pending
an investigation of whether the Participant shall be terminated for Cause, all the Participant’s rights under any Warrant
shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered
after a Participant’s Termination of Service, any Warrant then held by the Participant may be immediately terminated by the
Plan Administrator, in its sole discretion.
(c) A
Participant’s change in status from an employee to a consultant, advisor or independent contractor or a change in status
from a consultant, advisor or independent contractor to an employee, shall not be considered a Termination of Service for purposes
of this Section 7.
(d) The
effect of a Company-approved leave of absence on the application of this Section 7 shall be determined by the Plan Administrator,
in its sole discretion.
SECTION 8. STOCK
AWARDS
8.1 Grant
of Stock Awards
Subject to the terms
of this Plan, the Plan Administrator is authorized to make Awards of Common Stock or Awards denominated in units of Common Stock
on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any (which may be based on continuous
service with the Company or the achievement of performance goals where such goals may be stated in absolute terms or relative to
comparison companies), as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions
shall be set forth in the instrument evidencing the Award. The terms, conditions and restrictions that the Plan Administrator shall
have the power to determine shall include, without limitation, the manner in which shares subject to Stock Awards are held during
the periods they are subject to restrictions and the circumstances under which repurchase or forfeiture of the Stock Award shall
occur by reason of a Participant’s Termination of Service.
8.2 Issuance
of Shares
Upon the satisfaction
of any terms, conditions and restrictions prescribed in respect to a Stock Award, or upon a Participant’s release from any
terms, conditions and restrictions of a Stock Award, as determined by the Plan Administrator, the Company shall release, as soon
as practicable, to the Participant or, in the case of the Participant’s death, to the personal representative of the Participant’s
estate or as the appropriate court directs, the appropriate number of shares of Common Stock.
8.3 Waiver
of Restrictions
Notwithstanding any
other provisions of the Plan, the Plan Administrator may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Stock Award under such circumstances and subject to such terms and conditions as the Plan Administrator
shall deem appropriate, to the extent such waiver is consistent with the applicable Shareholder Agreement.
SECTION 9. WITHHOLDING
As a condition to the
exercise of any Warrant or portion of a Warrant, the Participant must make such arrangements as the Company may require for the
satisfaction of any federal, state, local or foreign tax withholding obligations that may arise in connection with such exercise.
The Company may require the Participant to pay to the Company the amount of any taxes that the Company is required by applicable
federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award. The Company shall
not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
The Plan Administrator
may permit or require a Participant to satisfy all or part of his or her tax withholding obligations by (a) paying cash to the
Company, (b) having the Company withhold from cash amounts otherwise due or to become due from the Company to the Participant,
or (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become
vested in the case of Stock Awards) having a value equal to the tax withholding obligations, or (d) surrendering a number of shares
of Common Stock the Participant already owns having a value equal to the tax withholding obligations. The value of the shares so
withheld may not exceed the employer’s minimum required tax withholding rate, and the value of the shares so tendered may
not exceed such rate to the extent the Participant has owned the tendered shares for less than six (6) months if such limitation
is necessary to avoid a charge to the Company for financial reporting purposes.
SECTION 10. ASSIGNABILITY
No Award or interest
in an Award may be assigned, pledged or transferred by the Participant or made subject to attachment or similar proceedings otherwise
than by will or by the applicable laws of descent and distribution, except to the extent a Participant designates a beneficiary
on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death. During
a Participant’s lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing, the Plan Administrator,
in its sole discretion, may permit a Participant to assign or transfer an Award; provided, however, that an Award so assigned or
transferred shall be subject to all the terms and conditions of the Plan and those contained in the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 Adjustment
of Shares
In the event of a subdivision
of the outstanding capital stock of the Company, a declaration of a dividend payable in Company capital stock, a declaration of
an extraordinary dividend payable in a form other than capital stock in an amount that has a material effect on the fair market
value of the Shares, a combination or consolidation of the outstanding Company capital stock into a lesser number of shares, a
stock-split, reverse stock-split, a recapitalization, a spin-off, a reclassification or a similar occurrence, the Board will make
appropriate adjustments, except as otherwise set forth in the Warrant Form (or other instrument evidencing the Award), in one or
more of (i) the number of Shares covered by each outstanding Warrant or (ii) the Exercise Price under each outstanding Warrant.
The determination by the Board as to the terms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding
the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 11.1
but shall be governed by Sections 11.2 and 11.3, respectively.
11.2 Dissolution
or Liquidation
To the extent not previously
exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Warrants and Stock Awards
denominated in units shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a forfeiture
provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited
immediately prior to the consummation of the dissolution or liquidation.
11.3 Company
Transaction
11.3.1 Warrants
In the event of a Company
Transaction, except as otherwise set forth in the Warrant Form (or other instrument evidencing the Award), each outstanding Warrant
shall be assumed or continued or an equivalent Warrant or right substituted by the surviving corporation, the successor corporation
or its parent corporation, as applicable (the “Successor Corporation”). In the event that the Successor Corporation
refuses to assume, continue or substitute for the Warrant, the Plan Administrator may provide in the Warrant Form or other instrument
evidencing the Award, or subsequently, that a Participant may vest in and have the right to exercise the Warrant as to some or
all the shares of Common Stock subject thereto, including shares as to which the Warrant would not otherwise be vested or exercisable,
but unless so provided no such vesting shall occur. The Plan Administrator shall notify the Participant in writing or electronically
of any such vesting and of the time period in connection with the Company Transaction in which the Warrant must be exercised, and
the Warrant shall terminate upon the expiration of such period. If the consideration received in the Company Transaction is not
solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide
for the consideration to be received upon the exercise of the Warrant, for each share of Common Stock subject thereto, to be solely
common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common
Stock in the Company Transaction. All Warrants shall terminate and cease to remain outstanding immediately following the consummation
of the Company Transaction, except to the extent assumed by the Successor Corporation.
11.3.2 Stock
Awards
In the event of a Company
Transaction, except as otherwise set forth in the Warrant Form (or other instrument evidencing the Award) and unless otherwise
provided in any written agreement between a Participant and the Company, the vesting of shares subject to Stock Awards shall continue
in effect, and the forfeiture provisions to which such shares are subject shall continue in effect. The number of shares subject
to such converted restricted stock awards shall be adjusted in the same manner as provided in Section 11.3.2 for Warrants.
11.4 Further
Adjustment of Awards
Subject to Sections
11.2 and 11.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation, dissolution or change of control of the Company, as defined by the Plan Administrator, to take such
further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall
not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so
as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the
Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual
Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before
or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or
change of control that is the reason for such action.
11.5 Limitations
The grant of Awards
shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
11.6 Fractional
Shares
In the event of any
adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from
such adjustment.
SECTION 12. MARKET
STANDOFF
In the event of an
underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under
the Securities Act, including the Company’s initial public offering, no person may sell, make any short sale of, loan, hypothecate,
pledge, grant any Warrant for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any
of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written
consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by
the Company or such underwriters; provided, however, that in no event shall such period exceed 180 days. The limitations of this
Section 12 shall in all events terminate two (2) years after the effective date of the Company’s initial public offering.
In the event of any
stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company’s
outstanding Common Stock effected as a class without the Company’s receipt of consideration, any new, substituted or additional
securities distributed with respect to the purchased shares shall be immediately subject to the provisions of this Section 12,
to the same extent the purchased shares are at such time covered by such provisions.
In order to enforce
the limitations of this Section 12, the Company may impose stop- transfer instructions with respect to the purchased shares until
the end of the applicable standoff period.
SECTION 13. AMENDMENT
AND TERMINATION
13.1 Amendment,
Suspension or Termination of Plan
This Plan, together
with any Warrant Form or other written instrument issued by the Plan Administrator evidencing an Award, constitutes the entire
agreement and understanding of the Company and a Participant with respect to the subject matter hereof. The Board may amend, suspend
or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however,
that to the extent required for compliance with any applicable law or regulation, shareholder approval shall be required for any
amendment that would (a) increase the total number of shares available for issuance under the Plan, (b) modify the class of employees
eligible to receive Warrants, or (c) otherwise require shareholder approval under any applicable law or regulation. Any amendment
made to the Plan that would constitute a “modification” to Warrants outstanding on the date of such amendment shall
not, without the consent of the Participant, be applicable to such outstanding Warrants but shall have prospective effect only.
13.2 Compliance
with Code Section 409A
The Plan and any written
instrument issued by the Plan Administrator evidencing an Award are intended to comply with the requirements of Code Section 409A
and applicable regulatory guidance issued thereunder and shall be interpreted in a manner that is consistent with such intent.
Notwithstanding anything in the Plan to the contrary, the Plan and any written instrument issued by the Plan Administrator evidencing
an Award may be amended by the Company without the consent of Participants as may be required for compliance with the requirements
of Code Section 409A and applicable regulatory guidance issued thereunder. Although the Plan Administrator intends to administer
the Plan so that Awards will be exempt from, or will comply with, the requirements of Code Section 409A, the Company does not warrant
that any Award under the Plan will qualify for favorable tax treatment under Code Section 409A or any other provision of federal,
state, local, or non-United States law. The Company shall not be liable to any Participant for any tax, interest, or penalties
the Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
13.3 Term
of Plan
The Plan shall have
no fixed expiration date; provided, however, that no Warrants may be granted more than ten (10) years after the the adoption by
the Board of the Plan.
13.4 Consent
of Participant
The suspension, amendment
or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s
consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change
or adjustment to an outstanding Warrant shall not, without the consent of the Participant, be made in a manner so as to constitute
a “modification” that would cause such Warrant to fail to continue to qualify as a Warrant. Notwithstanding the foregoing,
any adjustments made pursuant to Sections 11.1 through 11.3 shall not be subject to these restrictions.
SECTION 14. GENERAL
14.1 Evidence
of Awards
Awards granted under
the Plan shall be evidenced by a Warrant Form or other written instrument that shall contain such terms, conditions, limitations
and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.
14.2 No
Individual Rights
Nothing in the Plan
or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other relationship with, the Company or limit in any way
the right of the Company to terminate a Participant’s employment or other relationship at any time, with or without Cause.
14.3 Issuance
of Shares
Notwithstanding any
other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan
or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance,
delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities
Act or the laws of any state or foreign jurisdiction), and the applicable requirements of any securities exchange or similar entity.
The Company shall be
under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act,
or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest
in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications
if made.
To the extent the Plan
or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock,
the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules
of any stock exchange. As a condition to the exercise of a Warrant or any other receipt of Common Stock pursuant to an Award under
the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that
such shares are being purchased or received only for the Participant’s own account and without any present intention to sell
or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply
with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares
may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged,
sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that
such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption
from registration. The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase agreement
or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to
the shares.
14.4 No
Rights as a Shareholder
No Warrant or Stock
Award denominated in units shall entitle the Participant to any cash dividend, voting or other right of a shareholder unless and
until the date of issuance under the Plan of the shares that are the subject of such Award.
14.5 Compliance
With Laws and Regulations
Notwithstanding
anything in the Plan to the contrary, the Plan Administrator, in its sole discretion, may bifurcate the Plan so as to restrict,
limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of
the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Finally, the
Plan and Awards granted hereunder are intended to comply with the requirements of Code Section 409A (and the regulations promulgated
thereunder) or to avoid the requirements thereof, and shall be interpreted in a manner consistent with such intent. Any provision
of this Plan or an Award thereunder that does not meet such requirements shall be reformed so as to satisfy such requirements if
such reformation may be accomplished without substantially adversely affecting a Participant’s benefits hereunder, and if
in the good faith determination of the Company such result cannot be achieved, shall be treated as void. Moreover, for purposes
of applying the provisions of Code Section 409A to this Plan or any Award issued thereunder, each separately identified amount
to which a Participant is entitled under this Plan shall be treated as a separate payment.
14.6 Waiver
No waiver of any breach
of any term or condition of this Plan (or any Award thereunder) shall be deemed to be a waiver of any subsequent breach of any
term or condition of a like or different nature.
14.7 Captions
The captions used herein
are inserted only as a matter of convenience and are not to be used in the interpretation of any provision hereof.
14.8 Legal
Fees
If any party to an
Award, including the Company, institutes any action or proceeding to enforce an Award, the prevailing party in such action or proceeding
shall be entitled to recover from the non-prevailing party or parties all legal costs and expenses incurred by the prevailing party
in such action, including but not limited to reasonable attorney fees, paralegal fees, law clerk fees and other legal costs and
expenses, whether incurred at or before trial, and whether incurred at the trial level or in any appellate, bankruptcy or other
legal proceeding.
14.9 No
Trust or Fund
The Plan is intended
to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other
property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts
payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor
of the Company.
14.10 Taxes
All taxes in connection
with a Participant’s Awards are the responsibility of the individual Participant. Participants should consult their own accounting
or tax advisors as to the specific tax consequences to them resulting from any grant, exercise or sale of the Awards or the underlying
securities, including the applicability and effect of any state, local or foreign tax laws and of changes in applicable tax laws.
14.11 Severability
If any provision of
the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or
deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator’s
determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
14.12 Choice
of Law
The Plan and all determinations
made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed
by the laws of the State of Oregon without giving effect to principles of conflicts of law.
SECTION 15. EFFECTIVE DATE
The effective date is the date on which the Plan is
adopted by the Board.
Date Adopted by Board: July 21, 2017
Exhibit 6.2
ARCIMOTO,
INC.
AMENDED AND RESTATED
2015 STOCK INCENTIVE PLAN
1. Purpose.
The purpose of this Amended and Restated 2015 Stock Incentive Plan (the "Plan") is to enable ARCIMOTO,
INC., an Oregon corporation, (the "Corporation") to attract and retain the services of selected employees,
officers, directors and other key contributors (including consultants, advisors and non-employee agents) of the Corporation or
any Parent or Subsidiary of the Corporation.
Capitalized terms used herein
shall have the meanings ascribed to such terms in Section 3.3.
2. Shares
Subject to the Plan. Subject to adjustment as provided below, the shares to be offered under the Plan shall consist of
Common Stock of the Corporation, and the total number of shares of Common Stock that may be issued under the Plan shall not exceed
One Million (1,000,000) shares. The shares issued under the Plan may be authorized and unissued shares or reacquired shares. If
an option or stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued shares subject
to such option or stock appreciation right shall again be available under the Plan. If shares sold or awarded as a bonus under
the Plan are forfeited to the Corporation, the number of shares forfeited shall again be available under the Plan.
3. Effective
Date, Duration and Definitions.
3.1 Effective
Date. The Plan shall become effective as of July 21, 2017 the date that the shareholders of the Company ratified, adopted
and approved the Plan.
3.2 Duration.
The Plan shall continue in effect until all shares available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board may suspend or terminate the Plan at any time except with respect to options and shares
subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding option or the forfeitability
of shares issued under the Plan.
3.3 Definitions.
The following definitions shall apply to the respective capitalized terms used herein:
Board means the Board of Directors of
Arcimoto, Inc.
Code means the Internal Revenue Code of
1986, as amended.
Common Stock means the Common Stock of
Arcimoto, Inc.
Corporation means Arcimoto, Inc., an Oregon
corporation.
Employee means
an individual who is in the employ of the Corporation or one or more Parent or Subsidiary corporations. An optionee shall be considered
to be an Employee for so long as such individual remains in the employ of the Corporation or one or more Parent or Subsidiary corporations,
subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.
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Exercise Date shall
be the date on which written notice of the exercise of an outstanding option under the Plan is delivered to the Corporation. Such
notice shall be in the form of a stock purchase agreement incorporating any first refusal rights or repurchase rights retained
by the Corporation with respect to the Common Stock purchased under the option.
Fair Market Value
of a share of Common Stock on any relevant date shall be determined in accordance with the following provisions:
(a) If
the Common Stock is not at the time listed or admitted to trading on any stock exchange but is traded in the over-the-counter market,
the Fair Market Value shall be the mean between the highest bid and the lowest asked prices (or if such information is available
the closing selling price) per share of Common Stock on the date in question in the over-the-counter market, as such prices are
reported by the National Association of Securities Dealers through its NASDAQ National Market System or any successor system. If
there are no reported bid and asked prices (or closing selling price) for the Common Stock on the date in question, then the mean
between the highest bid and lowest asked prices (or closing selling price) on the last preceding date for which such quotations
exist shall be determinative of Fair Market Value.
(b) If
the Common Stock is at the time listed or admitted to trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange.
If there is no reported sale of Common Stock on such exchange on the date in question, then the Fair Market Value shall be the
closing selling price on the exchange on the last preceding date for which such quotation exists.
(c) If
the Common Stock is at the time neither listed nor admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the valuation provisions of subsections (i) and (ii) above will not result
in a true and accurate valuation of the Common Stock, then the Fair Market Value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall deem appropriate under the circumstances.
Incentive Option
means an incentive stock option, which satisfies the requirements of Section 422 of the Code.
Non-Statutory Option
means an option not intended to meet the statutory requirements prescribed for an Incentive Option.
Parent corporation
means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
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Plan means this Arcimoto, Inc. 2015 Stock
Incentive Plan.
Plan Administrator
means the Board or the Committee, to the extent the Committee is responsible for plan administration in accordance with
Section 4.
Retirement or
Retire means, unless otherwise defined by the Plan Administrator from time to time for the purposes of the Plan,
termination of Service on or after the date the individual reaches “normal retirement age” as that term is defined
in Section 411(a)(8) of the Code.
Service means
the performance of services for the Corporation or one or more Parent or Subsidiary corporations by an individual in the capacity
of an Employee, a non-employee member of the board of directors or an independent consultant or advisor, unless a different meaning
is specified in the option agreement evidencing the option grant, the purchase agreement evidencing the purchased option shares
or the issuance agreement evidencing any direct stock issuance. An optionee shall be deemed to remain in Service for so long as
such individual renders services to the Corporation or any Parent or Subsidiary corporation on a periodic basis in the capacity
of an Employee, a non-employee member of the board of directors or an independent consultant or advisor.
Subsidiary corporation
means each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided
each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such
chain.
10% Shareholder
means the owner of stock (as determined under Section 424(d) of the Code) possessing 10% or more of the total combined
voting power of all classes of stock of the Corporation or any Parent or Subsidiary corporation.
4. Administration.
4.1 Board
of Directors. The Plan shall be administered by the Board of Directors of the Corporation, which shall determine and designate
from time to time the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of
the awards. Subject to the provisions of the Plan, the Plan Administrator may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting period, accelerate any Exercise Date, waive or modify
any restriction applicable to shares (except those restrictions imposed by law) and make all other determinations in the judgment
of the Plan Administrator necessary or desirable for the administration of the Plan. The interpretation and construction of the
provisions of the Plan and related agreements by the Plan Administrator shall be final and conclusive. The Plan Administrator
may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner
and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency.
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4.2 Committee.
The Plan Administrator may delegate to a committee of the Board or specified officers of the Corporation, or both (the "Committee")
any or all authority for administration of the Plan. If authority is delegated to a Committee, all references to the Plan Administrator
in the Plan shall mean and relate to the Committee except
(a) as
otherwise provided by the Board,
(b) that
only the Board may amend or terminate the Plan as provided in Section 3.2 and Section 12; and
(c) that
a Committee including officers of the Corporation shall not be permitted to grant options to persons who are officers of the Corporation.
5. Types
of Awards: Eligibility. The Plan Administrator may, from time to time, take the following actions, separately or in combination,
under the Plan:
5.1 grant
Incentive Options, as defined in Section 422 of the Code, as provided in Sections 6.1 and 6.2;
5.2 grant
options other than Incentive Options ("Non-Statutory Options") as provided in Sections 6.1 and
6.3;
5.3 award
stock bonuses as provided in Section 7; and
5.4 sell
shares subject to restrictions as provided in Section 8.
Any such awards may
be made to Employees, directors, officers, consultants and advisors; provided, however, that awards shall only be made to consultants
and advisors if (i) they are natural persons; (ii) they provide bona fide services to the Corporation, its Parents, its majority-owned
subsidiaries or majority-owned subsidiaries of its Parent; and (iii) the services are not in connection with the offer or sale
of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Corporation’s
securities. Further, only Employees of the Corporation, or any Parent or Subsidiary corporation, shall be eligible to receive Incentive
Options under the Plan. The Plan Administrator shall select the individuals to whom awards shall be made and shall specify the
action taken with respect to each individual to whom an award is made. At the discretion of the Plan Administrator, an individual
may be given an election to surrender an award in exchange for the grant of a new award.
6. Option
Grants.
6.1 General
Rules Relating to Options.
(a) Terms
of Grant. The Plan Administrator may grant options under the Plan. With respect to each option grant, the Plan Administrator
shall determine the number of shares subject to the option, the option price, the period of the option, the time or times
at which the option may be exercised and whether the option is an Incentive Option or a Non-Statutory Option.
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(b) Exercise
of Options. Except as provided in Section 6.1(d) or as determined by the Plan Administrator, no option granted under the
Plan may be exercised unless at the time of such exercise the optionee is in Service with the Corporation and shall have been
so employed or provided such service continuously since the date such option was granted. Absence on leave or on account of illness
or disability under rules established by the Plan Administrator shall not, however, be deemed an interruption of Service for this
purpose. Unless otherwise determined by the Plan Administrator, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. Except as provided in Section 6.1(d) and Section 10, options granted
under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall
be prescribed by the Plan Administrator, provided that options shall not be exercised for fractional shares. Unless otherwise
determined by the Plan Administrator, if the optionee does not exercise an option in any one year with respect to the full number
of shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase
those shares in any subsequent year during the term of the option.
(c) Nontransferability.
Each Incentive Option and, unless otherwise determined by the Plan Administrator, each other option granted under the Plan by
its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will
or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option
by its terms shall be exercisable during the optionee's lifetime only by the optionee.
(d) Termination
of Service.
(i) General
Rule. Unless otherwise determined by the Plan Administrator, in the event the Service of the optionee with the Corporation,
Parent or Subsidiary terminates for any reason other than because of Retirement, physical disability or death as provided in Sections
6.1(d)(ii) and 6.1(d)(iii), or for Cause, the option may be exercised at any time prior to the expiration date of the option or
the expiration of 90 days after the date of such termination, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option at the date of such termination.
(ii) Termination
Because of Retirement or Physical Disability. Unless otherwise determined by the Plan Administrator, in the event of the
termination of Service because of Retirement, or physical disability (as that term is defined in Section 22(e)(3) of the Code),
the option may be exercised at any time prior to the expiration date of the option or the expiration of 12 months after the date
of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
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(iii) Termination
Because of Death. Unless otherwise determined by the Plan Administrator, in the event of the death of an optionee while
in Service with the Corporation or a Parent or Subsidiary, the option may be exercised at any time prior to the expiration date
of the option or the expiration of 12 months after the date of such death, whichever is the shorter period, but only if and to
the extent the optionee was entitled to exercise the option at the date of such termination and only by the person or persons
to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of
the state or country of domicile at the time of death.
(iv) Amendment
of Exercise Period Applicable to Termination. The Plan Administrator, at the time of grant or at any time thereafter,
may extend the 90-day and 12- month exercise periods to any length of time that is not later than the original expiration date
of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Plan
Administrator may determine.
(v) Failure
to Exercise Option. To the extent that the option of any deceased optionee or of any optionee whose Service terminates
is not exercised within the applicable period, all further rights to purchase shares pursuant to such option shall cease and terminate.
(e) Purchase
of Shares. Unless the Plan Administrator determines otherwise, shares may be acquired pursuant to an option granted under
the Plan only upon receipt by the Corporation of notice in writing from the optionee of the optionee's intention to exercise,
specifying the number of shares as to which the optionee desires to exercise the option and the date on which the optionee desires
to complete the transaction, and if required in order to comply with the Securities Act of 1933, as amended, containing a representation
that it is the optionee's present intention to acquire the shares for investment and not with a view to distribution, and any
other information the Plan Administrator may request. Unless the Plan Administrator determines otherwise, on or before the date
specified for completion of the purchase of shares pursuant to an option, the optionee must have paid the Corporation the full
purchase price of such shares in cash (including, with the consent of the Plan Administrator, cash that may be the proceeds of
a loan from the Corporation) or, with the consent of the Plan Administrator, in whole or in part, in Common Stock of the Corporation
valued at Fair Market Value on the Exercise Date, restricted stock valued at Fair Market Value on the Exercise Date without regard
to such restrictions, or other contingent awards denominated in either stock or cash, deferred compensation credits, promissory
notes and other forms of consideration. No shares shall be issued until full payment therefore has been made. Each optionee who
has exercised an option shall immediately upon notification of the amount due, if any, pay to the Corporation in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Corporation
on demand. If the optionee fails to pay the amount demanded, the Corporation may withhold that amount from other amounts payable
by the Corporation to the optionee, including salary, subject to applicable law. Upon the exercise of an option, the number of
shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon exercise of the option, less
the number of shares surrendered in payment of the option exercise.
(f) Right
of First Refusal. The Corporation shall have the right of first refusal with respect to any proposed sale or other disposition
by optionee of any shares of Common Stock issued pursuant to the Plan, until the date on which the Common Stock is registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended. Such right of first refusal shall be exercisable
in accordance with the terms and conditions established by the Plan Administrator and set forth in the stock purchase agreement
evidencing the purchase of such option shares.
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6.2 Incentive
Options. The terms and conditions specified below shall be applicable to all Incentive Options granted under the Plan.
Incentive Options may only be granted to individuals who are Employees. Options, which are specifically designated as Non-Statutory
Options when issued under the Plan shall not be subject to such terms and conditions.
(a) Limitation
on Amount of Grants. No Employee may be granted Incentive Options under the Plan if the aggregate Fair Market Value, on
the date of grant, of the Common Stock with respect to which Incentive Options are exercisable for the first time by that Employee
during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of
the Code) of the Corporation or any Parent or Subsidiary of the Corporation exceeds $100,000.
(b) Limitations
on Grants to 10% Shareholders. An Incentive Option may be granted under the Plan to an Employee possessing more than 10%
of the total combined voting power of all classes of stock of the Corporation or of any Parent or Subsidiary of the Corporation
only if the option price is at least 110% of the Fair Market Value of the Common Stock subject to the option on the date it is
granted, as described in Section 6.2(d), and the option by its terms is not exercisable after the expiration of five years from
the date it is granted.
(c) Duration
of Options. Subject to Sections 6.1(d) and 6.2(b), Incentive Options granted under the Plan shall continue in effect for
the period fixed by the Plan Administrator, except that no Incentive Option shall be exercisable after the expiration of 10 years
from the date it is granted.
(d) Option
Price. The option price per share shall be determined by the Plan Administrator at the time of grant, and shall not be
less than 100% of the Fair Market Value of the Common Stock covered by the Incentive Option at the date the option is granted.
The Fair Market Value shall be determined by the Plan Administrator.
(e) Limitation
on Time of Grant. No Incentive Option shall be granted on or after the tenth anniversary of the effective date of the
Plan.
(f) Conversion
of Incentive Options. The Plan Administrator may at any time without the consent of the optionee convert an Incentive
Option to a Non-Statutory Option.
6.3 Non-Statutory
Options. Non-Statutory Options shall be subject to the following additional terms and conditions:
(a) Option
Price. The option price for Non-Statutory Options shall be determined by the Plan Administrator at the time of grant.
The option price for Non-Statutory Options shall not be less than 100% of the Fair Market Value of the Common Stock covered by
the Non-Statutory Options at the date the option is granted.
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(b) Duration
of Options. Non-Statutory Options granted under the Plan shall continue in effect for the period fixed by the Plan Administrator.
7. Stock
Bonuses. The Plan Administrator may award shares under the Plan as stock bonuses. Shares awarded as a bonus shall be subject
to the terms, conditions, and restrictions determined by the Plan Administrator. The restrictions may include restrictions concerning
transferability and forfeiture of the shares awarded, together with such other restrictions as may be determined by the Plan Administrator.
The Plan Administrator may require the recipient to sign an agreement as a condition of the award. The agreement may contain any
terms, conditions, restrictions, representations and warranties required by the Plan Administrator. The certificates representing
the shares awarded shall bear any legends required by the Plan Administrator. The Corporation may require any recipient of a stock
bonus to pay to the Corporation in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the recipient fails to pay the amount demanded, the Corporation may withhold that amount from other amounts payable
by the Corporation to the recipient, including salary or fees for services, subject to applicable law. Upon the issuance of a
stock bonus, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued.
8. Restricted
Stock. The Plan Administrator may issue shares under the Plan for such consideration (including promissory notes and services)
as determined by the Plan Administrator, which consideration may be less than Fair Market Value of the Common Stock at the time
of issuance. Shares issued under the Plan shall be subject to the terms, conditions and restrictions determined by the Plan Administrator.
The restrictions may include restrictions concerning transferability and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Plan Administrator. All Common Stock issued pursuant to this Section 8 shall be subject
to a purchase agreement, which shall be executed by the Corporation and the prospective recipient of the shares prior to the delivery
of certificates representing such shares to the recipient. The purchase agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Plan Administrator. The certificates representing the shares shall bear any legends
required by the Plan Administrator. The Corporation may require any purchaser of restricted stock to pay to the Corporation in
cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser
fails to pay the amount demanded, the Corporation may withhold that amount from other amounts payable by the Corporation to the
purchaser, including salary, subject to applicable law. Upon the issuance of restricted stock, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued.
9. Changes
in Capital Structure. If the outstanding Common Stock of the Corporation is hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities of the Corporation or of another corporation by
reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, appropriate
adjustment shall be made by the Plan Administrator in the number and kind of shares available for awards under the Plan. In addition,
the Plan Administrator shall make appropriate adjustment in the number and kind of shares as to which outstanding options, or
portions thereof then unexercised, shall be exercisable, so that the optionee's proportionate interest before and after the occurrence
of the event is maintained. The Plan Administrator may also require that any securities issued in respect of or exchanged for
shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the
Plan Administrator shall have no obligation to effect any adjustment that would or might result in the issuance of fractional
shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by
the Plan Administrator. Any such adjustments made by the Plan Administrator shall be conclusive.
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8—Amended and Restated Stock Incentive Plan
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10. Effect
of Liquidation or Reorganization.
10.1 Cash,
Stock or Other Property for Stock. Except as provided in Section 10.2, upon a merger, consolidation, acquisition of property
or stock, reorganization or liquidation of the Corporation, as a result of which the shareholders of the Corporation receive cash,
stock or other property in exchange for or in connection with their shares of Common Stock, each option outstanding under the
Plan shall terminate and cease to be exercisable, unless assumed by the successor corporation or parent thereof.
10.2 Conversion
of Options on Stock for Stock Exchange. If the shareholders of the Corporation receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any transaction involving a merger,
consolidation, acquisition of property or stock, separation or reorganization, the Plan Administrator may, at its sole discretion,
(i) accelerate each or any outstanding option under the Plan so that each or any such option shall, immediately prior to the specified
effective date for such transaction, become fully exercisable with respect to any number of shares of Common Stock at the time
subject to such option and may be exercised for all or any portion of such shares; (ii) arrange for each or any outstanding option
to either to be assumed by the successor corporation or parent thereof or to be replaced with a comparable option to purchase
shares of the capital stock of the successor corporation or parent thereof; (iii) arrange for the option to be replaced by a comparable
cash incentive program of the successor corporation based on the option spread (the amount by which the Fair Market Value of the
shares of Common Stock at the time subject to the option exceeds the option price payable for such shares); or (iv) provided that
15 day advance written notice and an opportunity to exercise has been provided to the holder of each option where the consideration
from such transaction equals or exceeds the exercise price of such option, allow the option to terminate as provided in Section
10.1 above. The determination of comparability under clauses (ii) and (iii) above shall be made by the Plan Administrator, and
such determination shall be final and conclusive.
10.3 Incentive
Options. The exercisability as incentive stock options under the Federal tax laws of any options accelerated in connection
with this Section 10 shall remain subject to the applicable dollar limitation of Section 6.2(a).
11. Corporate
Mergers, Acquisitions, etc. The Plan Administrator may also grant options, stock bonuses and cash bonuses and issue restricted
stock under the Plan having terms, conditions and provisions that vary from those specified in this Plan provided that any such
awards are granted in substitution for, or in connection with the assumption of, existing options, stock bonuses, cash bonuses
and restricted stock granted, awarded or issued by another corporation and assumed or otherwise agreed to be provided for by the
Corporation pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation to which the Corporation or any Parent or Subsidiary corporation is a party.
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9—Amended and Restated Stock Incentive Plan
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12. Amendment
of Plan; Compliance With Rule 701. The Board may at any time, and from time to time, modify or amend the Plan in such
respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except
as provided in Section 6.1(d), 6.2(f), 9 and 10, however, no change in an award, already granted shall be made without the written
consent of the holder of such award. It is the intent of the Corporation that all provisions of the Plan comply with the requirements
for exemption under Rule 701 of the Securities Act of 1933 and, to the extent any provisions of the Plan do not comply with the
requirements of Rule 701, such provisions shall be deemed amended so as to comply with Rule 701 without further action by the
Corporation or Plan Administrator.
13. Approvals.
The obligations of the Corporation under the Plan are subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Corporation shall not be obligated to issue or deliver Common Stock under the Plan if such issuance
or delivery would violate applicable state or federal securities laws.
14. Service
Rights. Nothing in the Plan or any award pursuant to the Plan shall (a) confer upon any Employee any right to be continued
in the employment of the Corporation or any Parent or Subsidiary corporation or interfere in any way with the right of the Corporation
or any Parent or Subsidiary corporation by whom such Employee is employed to terminate such Employee's employment at any time,
for any reason, with or without cause, or to decrease such Employee's compensation or benefits; or (b) confer upon any person
engaged by the Corporation any right to be retained or employed by the Corporation or to the continuation, extension, renewal,
or modification of any compensation, contract, or arrangement with or by the Corporation.
15. Rights
as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any
Common Stock until the date of issue to the recipient of a stock certificate for such shares. Except as otherwise expressly provided
in the Plan, no adjustment shall be made for dividends or other rights for which the record date occurs prior to the date such
stock certificate is issued.
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10—Amended and Restated Stock Incentive Plan
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Exhibit 8
ESCROW
SERVICES AGREEMENT
This Escrow Services
Agreement (this “Agreement”) is made and entered into as of _________, by and between Prime Trust, LLC (“Prime
Trust”, or “Escrow Agent”), Arcimoto Inc. (“Issuer”), and W.R. Hambrecht & Co., LLC (“Broker”).
RECITALS
WHEREAS, Issuer
proposes to offer for sale to investors the securities as disclosed in its offering documents (the “Securities”) pursuant
to the Securities Act of 1933, as amended, underwritten by Broker on a best efforts basis (the “Offering”), in the
minimum amount of $1,040,000 (the “Minimum Amount of the Offering”) and up to the maximum offering amount of $29,900,000
(the “Maximum Amount of the Offering”).
WHEREAS, Issuer
and Broker desire to establish an Escrow Account in which funds received from prospective investors (“Subscribers”)
will be held during the Offering, subject to the terms and conditions of this Agreement. Prime Trust agrees to serve as Escrow
Agent with respect to such Escrow Account in accordance with the terms and conditions set forth herein to be held at a FDIC insured
bank (the “Bank”), in a segregated account as defined below.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, it
is hereby agreed as follows:
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1.
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Establishment of Escrow Account. Prior to the date the offering commences (the “Commencement
Date”), the Escrow Agent shall establish an account at the Bank, for the benefit of investors in the offering (the “Escrow
Account”). The Escrow Account shall be a segregated, deposit account at the Bank. All parties agree to maintain the Escrow
Account and escrowed funds in a manner that is compliant with SEC Rules 10b-9 and 15c2-4, promulgated under the Securities Exchange
Act of 1934, as amended.
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2.
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Escrow Period. The Escrow Period shall begin on the Commencement Date and shall terminate
in whole or in part upon the earlier to occur of the following:
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a.
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[___________], one year from the date of qualification
of this Offering by the Securities and Exchange Commission;
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b.
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The date upon which the Maximum Amount of the Offering is sold in bona fide transactions that are
fully paid for with cleared funds; or
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c.
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The date upon which a determination is made by Issuer and/or its authorized representatives to
terminate the Offering prior to closing.
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During the Escrow Period, the
parties agree that (i) the Escrow Account and escrowed funds will be held for the benefit of the Subscribers, and that (ii) the
Issuer is not entitled to any funds received into escrow, and that no amounts deposited into the Escrow Account shall become the
property of Issuer or any other entity, or be subject to any debts, liens or encumbrances of any kind of Issuer or any other entity,
until the Issuer has triggered closing of such funds. Even after the sale of securities to investors, the Issuer may elect to continue
to leave funds in the Escrow Account in order to protect investors as needed.
In addition, Issuer and Escrow
Agent acknowledge that the total funds raised cannot exceed the Maximum Amount of the Offering permitted by the Offering Statement.
Issuer represents that no funds have yet been raised for the Issuer and that all funds to be raised for the Offering will be deposited
in the Escrow Account established by Prime Trust at the Bank.
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3.
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Deposits into the Escrow Account. All Subscribers will be instructed by Issuer or its
agents to transfer funds by ACH, wire or check into the Escrow Account. Escrow Agent shall cause the Bank to process all Escrow
Amounts for collection through the banking system and shall maintain an accounting of each deposit posted to its ledger, which
also sets forth, among other things, each Subscriber’s name and address, the quantity of Securities purchased, and the amount
paid. All monies so deposited in the Escrow Account and which have cleared the banking system are hereinafter referred to as the
"Escrow Amount." Issuer or its agents shall promptly, concurrent with any new or modified subscription, provide Escrow
Agent with a copy of the Subscriber’s signed subscription agreement and other information as may be reasonably requested
by Escrow Agent in the performance of its duties under this Agreement. As required by government regulations pertaining to the
US Treasury, Homeland Security, the Internal Revenue Service and the SEC, federal law requires financial institutions to obtain,
reasonably verify and record information that identifies each person (natural person or legal entity, including its authorized
persons) who funds and executes securities transactions. Information requested of the Issuer and Subscribers will be typical information
requested in the gathering and verification guidelines and best practices promulgated by anti-money laundering (“AML”)
rules and regulations and those regulatory agencies that enforce them. Escrow Agent is under no duty or responsibility to enforce
collection of any wire, check, or ACH delivered to it hereunder.
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Escrow Agent reserves the right
to deny, suspend or terminate participation in the Escrow Account of any Subscriber to the extent Escrow Agent deems it advisable
or necessary to comply with applicable laws or to eliminate practices that are not consistent with securities industry laws, rules,
regulations or best practices. Escrow Agent may at any time reject or return funds to any Subscriber (i) that do not clear background
checks (anti-money laundering, USA PATRIOT Act, social security number issues, etc.) to the satisfaction of Escrow Agent, in its
sole and absolute discretion, or, (ii) for which Escrow Agent determines, in its sole discretion, that it would be improper or
unlawful for Escrow Agent to accept or hold the applicable Subscriber’s funds, as Escrow Agent, due to, among other possible
issues, issues with the Subscriber or the source of the Subscriber’s funds. Escrow Agent shall promptly inform Issuer of
any such return or rejection.
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4.
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Disbursements from the Escrow Account. In the event Escrow Agent does not receive written
instructions from the Issuer and Broker to release funds from Escrow on or prior to the termination of the Escrow Period, Escrow
Agent shall terminate Escrow and make a full and prompt return of funds so that refunds are made to each Subscriber in the exact
amount received from said Subscriber, without deduction, penalty, or expense to Subscriber.
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In the event Escrow Agent receives
cleared funds for the Minimum Amount of the Offering prior to the termination of the Escrow Period and Escrow Agent receives a
written instruction from Issuer and Broker (generally via notification in the application programming interface (“API”)),
Escrow Agent shall, pursuant to those instructions, distribute funds from such Escrow Amount pursuant to the instructions of Issuer.
Issuer and Broker acknowledge that there is a 24 hour (one business day) processing time once a request has been received to break
Escrow. Issuer’s and Broker’s written instructions to Escrow Agent shall certify that all conditions set forth in the
Offering Statement for release of funds have been met for a closing of the Offering and include a schedule of deductions from the
Escrow Account for any funds for management and offering and selling expenses from the gross proceeds of the Escrow Account prior
to remitting such funds, if and when due, to Issuer. Escrow Agent is hereby directed to remit such funds as directed by Issuer
directly to the appropriate parties, if any, to which they are due. Net proceeds (meaning gross proceeds less amounts remitted
pursuant to Issuer’s instructions to brokers and other parties, and minus interest earned or accumulated in the Escrow Account)
will then be remitted to Issuer as described above.
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5.
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Collection Procedure. Escrow Agent is hereby authorized, upon receipt of Subscriber
funds not transmitted directly into the Escrow Account, to promptly deposit them in the Escrow Account. Any Subscriber funds which
fail to clear or are subsequently reversed, including but not limited to ACH charge-backs and wire recalls, shall be debited to
the Escrow Account, with such debits reflected on the escrow ledger. Any and all fees paid by Issuer for funds receipt and processing
are non-refundable, regardless of whether ultimately cleared, failed, rescinded, returned or recalled. In the event of any Subscriber
refunds, returns or recalls after funds have already been remitted to Issuer, then Issuer hereby irrevocably agrees to immediately
and without delay or dispute send equivalent funds to Escrow Agent to cover the refund, return or recall. If Issuer has any dispute
or disagreement with its Subscriber then that is separate and apart from this Agreement and Issuer will address such situation
directly with said Subscriber, including taking whatever actions necessary to return such funds to Subscriber, but Issuer shall
not involve Escrow Agent in any such disputes.
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6.
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Escrow Administration Fees, Compensation of Escrow Agent. Escrow Agent will charge Escrow
Administration Fees to Issuer as listed on Exhibit A and attached hereto. No fees, charges or expense reimbursements of Escrow
Agent are reimbursable, and are not subject to pro-rata analysis. All fees and charges, if not paid by a representative of Issuer
(e.g. funding platform, lead syndicate broker, etc.), may be made via either the Issuer’s credit card or ACH information
on file with Prime Trust. It is acknowledged and agreed that no fees, reimbursement for costs and expenses, indemnification for
any damages incurred by the Issuer or the Escrow Agent shall be paid out of or chargeable to the investor funds on deposit in the
escrow account.
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7.
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Representations and Warranties.
The Issuer covenants and makes the following representations and warranties to Escrow Agent:
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a.
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It is duly organized, validly existing, and in good standing under the laws of the state of its
incorporation or organization, and has full power and authority to execute and deliver this Agreement and to perform its obligations
hereunder.
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b.
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This Agreement has been duly approved by all necessary actions, including any necessary shareholder
or membership approval, has been executed by its duly authorized officers, and constitutes its valid and binding agreement enforceable
in accordance with its terms.
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c.
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The execution, delivery, and performance of this Agreement is in accordance with the agreements
related to the Offering and will not violate, conflict with, or cause a default under its articles of incorporation, bylaws, management
agreement or other organizational document, as applicable, any applicable law, rule or regulation, any court order or administrative
ruling or decree to which it is a party or any of its property is subject, or any agreement, contract, indenture, or other binding
arrangement, including the agreements related to the Offering, to which it is a party or any of its property is subject.
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d.
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The Offering shall contain a statement that Escrow Agent has not investigated the desirability
or advisability of investment in the Securities nor approved, endorsed or passed upon the merits of purchasing the Securities;
and the name of Escrow Agent has not and shall not be used in any manner in connection with the Offering of the Securities other
than to state that Escrow Agent has agreed to serve as escrow agent for the limited purposes set forth in this Agreement.
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e.
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No party other than the parties hereto has, or shall have, any lien, claim or security interest
in the funds held in the Escrow Account or any part thereof. No financing statement under the Uniform Commercial Code is on file
in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the funds held in the Escrow
Account or any part thereof.
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f.
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It possesses such valid and current licenses, certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct its respective businesses, and it
has not received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such license,
certificate, authorization or permit.
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g.
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Its business activities are in no way related to cannabis, gambling, pornography, or firearms.
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h.
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The Offering complies in all material respects with all applicable laws, rules and regulations.
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All of its representations and
warranties contained herein are true and complete as of the date hereof and will be true and complete at the time of each disbursement
of funds held in the Escrow Account.
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8.
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Term and Termination. This Agreement will remain in full force during the Escrow Period.
Even after this Agreement is terminated, certain provisions will remain in effect which are by their nature meant to survive termination,
including, but not limited to, items 3, 4, 5, 7, 9, 10, 11, and 12 of this Agreement.
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9.
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Binding Arbitration, Applicable Law and Venue, Attorneys Fees: This Agreement is governed
by, and will be interpreted and enforced in accordance with the regulations of the SEC and trust and banking laws of the State
of Nevada, without regard to principles of conflict of laws. Any claim or dispute arising under this Agreement may only be brought
in arbitration, pursuant to the rules of the American Arbitration Association, with venue in Clark County, Nevada. Each of the
parties hereby consents to this method of dispute resolution, as well as jurisdiction, and waives any right it may have to object
to either the method, venue or jurisdiction for such claim or dispute. Any award an arbitrator makes will be final and binding
on all parties and judgment on it may be entered in any court having jurisdiction. Furthermore, the prevailing party shall be entitled
to recover damages plus reasonable attorney’s fees.
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10.
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Liability. The Escrow Agent shall not be liable for any action taken or omitted hereunder,
or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence.
The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow
Amounts, the Fund or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the
Fund or any part thereof.
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11.
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Indemnity. Issuer agrees to defend, indemnify and hold Prime Trust and its affiliates,
directors, employees, service providers, officers, agents, and partners and third-party service providers, including the Bank (the
“Indemnified Parties”) harmless from any loss, liability, claim, or demand, including reasonable attorney’s fees,
made by any third party due to or arising out of this Agreement and/or arising from a breach of any provision in this Agreement,
except to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) result from the
willful misconduct or gross negligence of the Indemnified Parties. This defense and indemnification obligation will survive termination
of this Agreement. Prime Trust reserves the right to assume, at its sole expense, the exclusive defense and control of any such
claim or action and all negotiations for settlement or compromise, and you agree to reasonably cooperate with Prime Trust in the
defense of any such claim, action, settlement or compromise negotiations, as requested by Prime Trust.
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12.
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Entire Agreement, Severability and Force Majeure. This Agreement contains the entire
agreement between Issuer and Prime Trust regarding the Escrow Account. If any provision of this Agreement is held invalid, the
remainder of this Agreement shall continue in full force and effect. Furthermore, no party shall be responsible for any failure
to perform due to acts beyond its reasonable control, including acts of God, terrorism, shortage of supply, labor difficulties
(including strikes), war, civil unrest, fire, floods, electrical outages, equipment or transmission failures, internet interruptions,
vendor failures (including information technology providers), or other similar causes.
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13.
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Changes. Escrow Agent may, at its sole discretion, comply with any new, changed, or
reinterpreted regulatory or legal rules, laws or regulations, and any interpretations thereof, and without necessity of notice,
to modify either this Agreement and/or the Escrow Account to comply or conform to such changes or interpretations. Furthermore,
all parties agree that this Agreement shall continue in full force and be valid, unchanged and binding upon any successors of Prime
Trust, Issuer and Broker. Changes to this Agreement will be sent to you via email.
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a.
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Any communication in connection with this agreement must be in writing and, unless otherwise stated, may be given:
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ii)
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in person, by post or fax; or
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iii)
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by e-mail or other electronic communication.
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b.
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Such communications shall be addressed as follows:
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If to Escrow Agent:
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Prime Trust LLC
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Attn: Escrow Services
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2300 West Sahara Ave, Suite 1170
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Las Vegas, NV 89102
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Phone: (702) 840-4000
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E-mail: escrow@primetrust.com
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If to the Company:
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Arcimoto Inc.
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544 Blair Boulevard
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Eugene, OR 97402
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Attn: _____________
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Phone: ____________
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Fax : _____________
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E-mail: ___________
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Tax identification #:
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If to Hambrecht:
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W.R. Hambrecht + Co., LLC
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Address: 909 Montgomery Street, 3rd Floor
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San Francisco, California 94133
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Attention: John Hullar
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Phone #:(415) 551-8654
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E-mail: jhullar@wrhambrecht.com
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c. Any
party may change their notice or email address and/or facsimile number by giving written notice thereof in accordance with this
Paragraph. All notices hereunder shall be deemed given: (1) if served in person, when served; (2) if sent by facsimile or email,
on the date of transmission if before 6:00 p.m. Eastern time, provided that a hard copy of such notice is also sent by either a
nationally recognized overnight courier or by U.S. Mail, first class; (3) if by overnight courier, by a nationally recognized courier
which has a system of providing evidence of delivery, on the first business day after delivery to the courier; or (4) if by U.S.
Mail, on the third day after deposit in the mail, postage prepaid, certified mail, return receipt requested.
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15.
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Counterparts. This Agreement may be executed in several counterparts or by separate instruments and by email transmission
and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.
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[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as of the date first above written.
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Arcimoto Inc.
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By:
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Title:
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Prime Trust, LLC
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By:
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Title:
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W.R. Hambrecht & Co., LLC
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By:
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Title:
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EXHIBIT A
Fees and Costs
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Service
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Fees
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Escrow Setup (one-time fee)
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$500
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Escrow Bank Account Fee (monthly)
|
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$25
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Accounting Fee (per transaction)
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$5
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Funds Processing
(per transaction)
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ACH/BAC - $0.50
Check - $10
Wire - $15 (US) / $35 (International)
ACH Exceptions - $5
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Reconciliation & Cash Management
(Prime Trust Custodial Account)
|
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25 basis points (.0025)
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Bank Surcharges
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May apply for check returns, NSF’s, etc. (vary)
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Specialized Services
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Quotes upon request
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Legal Fees
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Reimbursement of legal expenses.
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Bad Actor
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US Individual - $45
US Entity - $45
International Individual - $100
International Entity - $160
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Anti-Money Laundering Review
(provides identity verification and other PATRIOT Act compliant
BSA checks. This also includes automated exception handling and email notifications to investors but does not include manual processing)
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US Individual - $2
US Entity - $5
CA/UK individual - $5
CA/US Entity - $75
International Individual - $60
International Entity - $75
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Brokerage Process Settlement Facilitation Fee (one time fee)
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$4,000
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Misc Administrative, investment management,
cash disbursement, accounting and other services are per the most current and then in effect fee schedule for Prime Trust, a copy
of which is available on www.primetrust.com
EXHIBIT 11
CONSENT OF INDEPENDENT
AUDITOR
We consent to the
use, in this Offering Statement on Form 1-A, as it may be amended, of our independent auditors’ report dated May 12,
2017, except for the paragraphs in Notes 3, 5, 6, and 10, for which the date is August 7, 2017 on our audits related to the
financial statements of Arcimoto, Inc. as of December 31, 2016 and 2015 and the related statements of operations,
stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the financial
statements.
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Very truly yours,
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/s/ dbbmckennon
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Newport Beach, California
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August 7, 2017
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Exhibit 12
August 4, 2017
Arcimoto, Inc.
544 Blair Blvd.
Eugene, OR 97402
To the Board of Directors:
We are acting as counsel to Arcimoto, Inc. (the “Company”)
with respect to the preparation and filing of an offering statement on Form 1-A. The offering statement covers the contemplated
sale of up to 4,600,000 shares of the Company's Common Stock.
In connection with the opinion contained herein, we have examined
the offering statement, the certificates of incorporation and bylaws, the minutes of meetings of the Company’s board of directors,
as well as all other documents necessary to render an opinion. In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies.
Based upon the foregoing, we are of the opinion that the Common
Stock being sold pursuant to the offering statement will be duly authorized and will be, when issued in the manner described in
the offering statement, legally and validly issued, fully paid and non-assessable. No opinion is being rendered hereby with respect
to the truth and accuracy, or completeness of the offering statement or any portion thereof.
We further consent to the use of this opinion as an exhibit
to the offering statement.
Yours truly,
KHLK, LLP
/s/KHLK LLP
By Andrew Stephenson, Partner
Exhibit
13.1
Arcimoto Files for IPO Under Reg
A+,
Aims to List on NASDAQ
WR Hambrecht + Co Acting
as Sole and Exclusive Underwriter for Arcimoto Reg A+ Initial Public Offering
San Francisco (June 22,
2017) — WR Hambrecht + Co announces that Arcimoto® has filed its Form 1-A Offering Circular for the
offering of common stock under SEC Regulation A, setting the stage for a potential future listing on the NASDAQ Capital
Market. WR Hambrecht + Co is acting as the sole and exclusive underwriter for the Regulation A+ Initial Public Offering for
Arcimoto.
Arcimoto was founded in 2007 to catalyze
the shift to a sustainable transportation system. The name Arcimoto means “Future I Drive,” and it is the company’s
aspiration to devise new technologies and patterns of mobility that raise the bar for environmental efficiency, footprint and
affordability. Arcimoto plans to achieve its mission by replacing the global urban and suburban use of 4,000 lb. internal combustion
engine vehicles for regular daily trips with the Arcimoto SRK®, a pure electric solution that is a quarter of the
weight, a third the purchase cost, and ten times as efficient as the U.S. average passenger car.
The Arcimoto SRK
defines the Fun Utility VehicleTM category. The SRK delivers a thrilling ride
experience, exceptional maneuverability, full comfort for two passengers with gear, optimal urban parking flexibility, and
ultra-efficient operation — all at an affordable target base model price of $11,900. Arcimoto has taken the SRK from a
napkin sketch, through eight generations of product development, to a refined design on the cusp of series production and
market availability. As we shift to a self-driving future, the Arcimoto SRK platform will provide the low cost,
ultra-efficient foundation for urban fleet autonomy as well.
“Our team is excited
and honored to support this offering from Arcimoto, because their vehicles hold the potential to create a significant paradigm
shift in how we all think about mobility, which could represent a tremendous opportunity for all classes of investors,”
said John Hullar, Managing Partner, WR Hambrecht + Co. “We are pleased to represent the Arcimoto IPO and we look forward
to bringing this offering to the NASDAQ market.”
About Arcimoto
Headquartered and
manufactured in Eugene, Oregon, Arcimoto is devising new technologies and patterns of mobility that together raise the bar
for environmental efficiency, footprint and affordability. Available for pre-order today with a target purchase price of
$11,900, the Arcimoto SRK defines the Fun Utility Vehicle category: it’s the lightest, most affordable and
performance-packed electric vehicle suitable for the daily driver. For more information please visit
www.arcimoto.com.
WRH+Co Posted June 23, 2017
About WR Hambrecht
+ Co
WR Hambrecht + Co has
been focused on opening the investing world to as many people as possible at fair market prices and was instrumental in reforming
Regulation A to help accomplish that for growth companies and investors. Its Regulation A+ strategy is a continuation of the Hambrecht
legacy of conducting small public offerings for what were once considered high-risk start-ups that are now household names and
Fortune 500 companies.
Legal Disclaimer
No money or consideration
is being solicited by the information in this press release or any other communication and, if sent, money will not be accepted
and will be promptly returned. No offer by a potential investor to buy our securities can be accepted and, if made, any such offer
can be withdrawn before qualification of this offering by the SEC. A potential investor’s indication of interest does not
create a commitment to purchase the securities we are offering. Any such indication of interest may be withdrawn or revoked, without
obligation or commitment of any kind, at any time before notice of its acceptance is given and all other requirements to accept
an investment from a potential investor are met after the offering qualification date.
The offering, after
qualification by the SEC, will be made only by means of the Offering Circular. Any information in this press release or any other
communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these
securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to qualification for
sale as provided in Regulation A+ in any such state or jurisdiction.
WRH+Co Posted June 23, 2017
Exhibit 13.2
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APPROVED FOR GENERAL DISTRIBUTION
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REGULATION A INITIAL
PUBLIC OFFERING: INTRODUCTION
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John Hullar, Managing Partner
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Chris Hannan, Equity Sales
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415-551-8654
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415-551-3200
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jhullar@wrhambrecht.com
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channan@wrhambrecht.com
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Robert Malin, Equity Capital Markets
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Helen Miazga, Project Manager
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212-313-5984
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415-551-3237
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rmalin@wrhambrecht.com
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160,000 to 4,600,000 Shares
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hmiazga@wrhambrecht.com
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Common Stock
COMPANY OVERVIEW
Arcimoto®
(“the Company”)
was founded in 2007 to catalyze the shift to a sustainable
transportation system. The name Arcimoto means “Future I
Drive,” and it is the Company’s
aspiration: to devise new technologies and patterns of mobility that raise the bar for environmental efficiency, footprint and
affordability. Arcimoto plans to achieve its mission by replacing the global urban and suburban use of 4,000 lb. internal combustion
engine vehicles for regular daily trips with the SRK®, a pure electric solution that is a quarter of the weight, a third the
cost of purchase, and ten times as efficient as the US average passenger car. We believe that the SRK best addresses the tradeoffs
inherent to the vehicle marketplace and will be the ideal transportation solution for the global urban driver. Arcimoto’s
SRK defines the Fun Utility VehicleTM category. The SRK delivers a thrilling ride experience, exceptional maneuverability,
full comfort for two passengers with gear, optimal urban parkability, and ultra-efficient operation, at an affordable target base
model price of $11,900. Arcimoto has taken the SRK from a napkin sketch, through eight generations and nine and a half years of
product development, to a refined design on the cusp of series production. Arcimoto’s
business model is entirely focused on low-end market disruption. Website: https://www.arcimoto.com
THE OFFERING
Arcimoto offers a minimum of $1 million and a maximum of $29.9
million of common stock, consisting of up to 4,600,000 shares within an expected offering price of $6.50 per share. Net proceeds
to Arcimoto are anticipated to be $29.9 million, assuming the Company sells all of the shares being offered, after underwriting
discount and commissions of $1.8 million and $0.115 million respectively, th eCompany will net $28.0 million.
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Price Range:
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$6.50 / Share
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Maximum Proceeds (at mid-point price):
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$29.9 million
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Total Shares Offered (min/max):
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160,000 to 4,600,000
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Pro Forma Market Cap:
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~$113 million
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MARKETING MATERIALS
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OFFERING TIMETABLE
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Offering Circular:
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SEC Edgar Website
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Test-the-Waters/Roadshow:
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July/August
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Marketing Material:
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www.wrhambrecht.com/ARCIMOTO
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Closing Date (Expected):
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August 2017
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INVESTMENT HIGHLIGHTS
Value Proposition:
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·
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Disruptive
Product: Existing manufacturers have not provided a viable vehicle in this class.
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|
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·
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Disruptive
Price Point: Arcimoto is targeting an end user price below $10,000 USD inclusive of purchase incentives. An urban-focused
vehicle must be ultra-affordable to fundamentally shift the marketplace. We believe our product is more affordable than our competition’s
offerings.
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|
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·
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Daily
Utility: Unlike other small-form electric vehicles in the market, such as neighborhood electric vehicles (NEVs) that are limited
to neighborhood roads, the SRK’s 80 mph top speed allows
it to be used both on city streets and high-speed expressways, and SRK’s
right-sized footprint allows three to be parked in a single space, while still providing two comfortable seats, plenty of room
for groceries, safety features, optional doors, storage options, solo access to the carpool lane and delivery capability.
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|
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·
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Capital
Efficient Development: Arcimoto’s lean operations have
designed and brought the SRK to pre-production ready with approximately $10 million invested. Arcimoto’s
capital-efficient philosophy influences every aspect of the business.
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|
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·
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Capital
Efficient Production: Arcimoto’s use of design patterns
that leverage flexible, advanced manufacturing equipment means a significant reduction in capital cost to start serial production
versus typical automotive programs.
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·
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Incredibly
Fun: Hundreds of customer test drives performed in Arcimoto’s
generation 8 alpha vehicles have shown that consumers are consistently impressed with the SRK’s
handling and fun factor. The SRK provides full torque right off the line and accelerates from 0 to 60 mph in approximately seven
and a half seconds. The SRK’s three-wheeled vehicle architecture
has been refined through the development of eight fully functional vehicle prototype generations and features a low-and-forward
center of gravity and dual-motor front-wheel drive.
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(over)
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APPROVED FOR GENERAL DISTRIBUTION
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Large Potential Market:
Nearly
every major automotive manufacturer in the world is developing an electric vehicle, and a handful of small companies are doing
the same. This broad development of electric vehicles supports the concept of electric vehicles and provides evidence that the
future of transportation technology is electric drive. Arcimoto’s
initial focus is on delivery to the U.S. market, but it plans to expand worldwide. The Company believes that the SRK is well suited
to European and emerging markets in terms of size, cost, capabilities and environmental efficiency.
RISK FACTORS
Risks Relating to the Business:
Arcimoto has incurred a net loss in the last fiscal year, has fewer than ten years of operating history and has generated no revenues
from operations since inception. Limited operating history makes evaluating business and future prospects difficult, and may increase
the risk of investment. The Company currently has limited sales and marketing and/or distribution capabilities and therefore may
be unable to compete successfully against companies that currently have extensive and well-funded marketing and sales operations.
Industry
Risks: Arcimoto is subject to the risk of future disruptive technologies. If new vehicle technologies (electric or otherwise)
develop that are superior to Company’s vehicles, or are perceived
to be superior by consumers, it could have a material adverse effect on the Company. The Company’s
future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products
and services and enhance its current products and services on a timely and cost-effective basis.
Regulatory
changes: The motorized vehicle industry is governed by a substantial amount of government regulation, which often differs by
state and region. In addition, many governments regulate local product content and/or impose import requirements as a means of
creating jobs, protecting domestic producers, and influencing the balance of payments. The cost to comply with existing government
regulations is substantial, and future, additional regulations could have a substantial adverse impact on the Company’s
financial condition.
Risks
Related to this Offering: There is no formal marketplace for the resale of the shares. Arcimoto’s
common stock may be traded on the over-the- counter market to the extent any demand exists. Investors should assume that they may
not be able to liquidate their investment for some time, or be able to pledge their shares as collateral.
The
offering is being made only by means of an offering circular. An offering statement on Form 1-A relating to these securities has
been filed with the Securities and Exchange Commission but has not yet become qualified. You may obtain a copy of the most recent
version of the preliminary offering circular by clicking on the “SEC
EDGAR Website” link: https://www.sec.gov/Archives/edgar/data/1558583/000114420417033680/v469178_partiiandiii.htm
This document contains forward-looking
statements reflecting current expectations that involve risks and uncertainties. These forward looking statements include statements
regarding commercialization plans, projected timeline for the start of serial production, the potential market for these shares,
and the offering timetable. Actual results and the timing of events may differ materially from those contained in these forward-looking
statements due to a number of factors, including those discussed in the section entitled "Risk Factors" and elsewhere
in the offering circular.
These securities may not be sold nor may
offers to buy be accepted prior to the time the offering statement is qualified. This document shall not constitute an offer to
sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which
such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such
state or jurisdiction.
No money or other consideration is being
solicited in connection with this document, and if sent in response, will not be accepted. No offer to buy the securities can be
accepted and no part of the purchase price can be received until the offering statement on Form 1-A is qualified pursuant to Regulation
A of the Securities Act of 1933, as amended, and any such offer may be withdrawn or revoked, without obligation or commitment of
any kind, at any time before notice of its acceptance given after the qualification date. Any person's indication of interest involves
no obligation or commitment of any kind.
6.27.2017
Exhibit 13.3
Exhibit 13.4
