Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

1.           Nature and continuance of operations

Electrameccanica Vehicles Corp (the “Company”) was incorporated on February 16, 2015, under the laws of the province of British Columbia, Canada, and its principal activity is the development and manufacture of electric vehicles. The Company acquired Intermeccanica International Inc. (“Intermeccanica”) on October 18, 2017, and its principal activity is the development and manufacture of high end custom built vehicles. On January 22, 2018 the Company incorporated a wholly-owned subsidiary EMV Automotive USA Inc. in Nevada, USA.

The head office and principal address of the Company are located at 102 East 1 ^st Avenue, Vancouver, British Columbia, Canada, V5T 1A4.

These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. As at June 30, 2018, the Company’s principal activity, the development and manufacture of electric vehicles, is in the development stage, and the Company’s continuation as a going concern is dependent upon the successful results from its electric vehicle development and manufacturing activities and its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. It is anticipated that significant additional funding will be required. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Management intends to finance its operations over the next twelve months through private placement of equity capital. Should the Company be unable to continue as a going concern, the net realizable value of its assets may be materially less than the amounts on its statement of financial position.

2.           Basis of preparation and significant accounting policies

The financial statements were authorized for issue on August 13, 2018 by the directors of the Company.

Statement of compliance with International Financial Reporting Standards

These interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). Therefore, these financial statements comply with International Accounting Standards (“IAS”) 34, Interim Financial Reporting.

Basis of preparation

The financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The Company’s functional and presentation currency is the Canadian dollar.

Consolidation

The interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, EMV Automotive USA Inc., and Intermeccanica from the date of its acquisition on October 18, 2017 (Note 7). Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.

Significant estimates and assumptions

The preparation of financial statements in accordance with IFRS requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

Estimates and assumptions where there is significant risk of material adjustments to assets and liabilities in future accounting periods include the fair value of the identifiable assets and liabilities acquired from Intermeccanica, the estimated recoverable amount of goodwill, intangible assets and other long-lived assets, the useful lives of plant and equipment, fair value measurements for financial instruments and share-based payments, and the recoverability and measurement of deferred tax assets.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Significant judgments

The preparation of financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include:

Change in accounting policy - Financial Instruments

The Company adopted the requirements of IFRS 9 Financial Instruments (“IFRS 9”) as of January 1, 2018. IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 utilizes a revised model for recognition and measurement of financial instruments and a single, forward-looking “expected loss” impairment model. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward in IFRS 9, so the Company’s accounting policy with respect to financial liabilities is unchanged. As a result of the adoption of IFRS 9, management has changed its accounting policy for financial assets retrospectively, for assets that continued to be recognized at the date of initial application. The change did not impact the carrying value of any financial assets or financial liabilities on the transition date.

The following is the Company’s new accounting policy for financial instruments under IFRS 9:

The Company classifies its financial instruments in the following categories: at fair value through profit or loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”) or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or if the Company has opted to measure them at FVTPL.

The Company completed a detailed assessment of its financial assets and liabilities as at January 1, 2018. The following table shows the original classification under IAS 39 and the new classification under IFRS 9:

The Company did not restate prior periods as it recognized the effects of retrospective application to shareholders’ equity at the beginning of the 2018 annual reporting period, which also includes the date of initial application. The adoption of IFRS 9 resulted in no impact to the opening accumulated deficit nor to the opening balance of accumulated comprehensive income on January 1, 2018.

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the consolidated statements of comprehensive loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidated statements of comprehensive loss in the period in which they arise.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

The Company recognizes a loss allowance for expected credit losses on financial assets that are measured at amortized cost. At each reporting date, the Company measures the loss allowance for the financial asset at an amount equal to the lifetime expected credit losses if the credit risk on the financial asset has increased significantly since initial recognition. If at the reporting date, the financial asset has not increased significantly since initial recognition, the Company measures the loss allowance for the financial asset at an amount equal to the twelve month expected credit losses. The Company shall recognize in the consolidated statements of comprehensive loss, as an impairment gain or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of net (loss) income.

Changes in Accounting Policies – Revenue from contracts with customers

The Company adopted all of the requirements of IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) as of January 1, 2018. IFRS 15 utilizes a methodical framework for entities to follow in order to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The change did not impact the cumulated revenue recognized or the related assets and liabilities on the transition date.

The following is the Company’s new accounting policy for revenue from contracts with customers under IFRS 15:

Revenue is recognized to the extent that the amount of revenue can be measured reliably and collection is probable .

Part sales:

Sales of parts are recognized when the Company has transferred control to the customer which generally occurs upon shipment.

Services, repairs and support services:

Services, repairs and support services are recognized in the accounting period when the services are rendered.

Sales of vehicles:

The Company manufactures and sells custom built vehicles typically on fixed fee arrangements with its customers. Revenue is recognized in the accounting period in which the services are rendered, by reference to the stage of completion. The stage of completion is determined as a percentage based on the amount of costs incurred compared to the estimated cost of completion. Revenue recognized in excess of amounts billed is recorded as accounts receivable. Amounts received in excess of work performed is recorded as deferred revenue.

Cash and cash equivalents

Cash and cash equivalents include cash and short-term investments with original maturities of less than 90 days and are presented at cost, which approximates market value.

Inventory

Inventory consists of parts held for resale or for use in fixed fee contracts and is valued at the lower of cost and net realizable value. Cost is determined on the first-in, first-out basis.

Trademarks and patents

The Company expenses legal fees and filing costs associated with the development of its trademarks and patents.

Plant and equipment

Plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive loss during the financial period in which they are incurred.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statement of comprehensive loss.

Amortization is calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The amortization rates applicable to each category of property, plant and equipment are as follows:

Share-based payments

Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using a Black–Scholes pricing model. The number of options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Loss per share

Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company. Fully diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of fully diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.

Research and development costs

Research costs are expensed when incurred and are stated net of government grants. Development costs including direct material, direct labour and contract service costs are capitalized as intangible assets when the Company can demonstrate that the technical feasibility of the project has been established; the Company intends to complete the asset for use or sale and has the ability to do so; the asset can generate probable future economic benefits; the technical and financial resources are available to complete the development; and the Company can reliably measure the expenditure attributable to the intangible asset during its development. After initial recognition, internally generated intangible assets are recorded at cost less accumulated amortization and accumulated impairment losses. These costs are amortized on a straight-line basis over the estimated useful life. To date, the Company did not have any development costs that met the capitalization criteria.

Impairment of assets

The carrying amount of the Company’s long-lived assets with finite useful lives (which include plant and equipment and intangible assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of comprehensive loss.

The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. Any reversal of impairment cannot increase the carrying value of the asset to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if indicators of impairment exist.

Income taxes

Current income tax:

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred income tax:

Deferred income tax is recognized, using the asset and liability method, on temporary differences at the reporting date arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

3 .            Accounting standards issued but not yet effective

New standard IFRS 16 “Leases”

This new standard replaces IAS 17 “Leases” and the related interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting is not substantially changed. The standard is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted for entities that have adopted IFRS 15.

The Company has not early adopted this new standard and is currently assessing the impact that this standard will have on its financial statements.

Other accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

4.           Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with original maturity of less than 90 days:

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

5.       Receivables

6.       Plant and equipment

On September 29, 2017 the Company entered into a manufacturing agreement with Chongqing Zongshen Automobile Co., Ltd. (“Zongshen”). Under the agreement the Company agrees to reimburse Zongshen for the cost of prototype tooling and molds estimated to be CNY ¥9.5 million (CAD $1.8 million), which was payable on or before March 18, 2018, subject to a 10% holdback, and mass production tooling and molds estimated to be CNY ¥29.3 million (CAD $6.0 million), which shall be payable 50% when Zongshen commences manufacturing the tooling and molds, 40% when Zongshen completes manufacturing the tooling and molds, and 10% upon delivery to the Company of the first production vehicle. At June 30, 2018 the Company had paid 90% of prototype tooling and molds and 32% of the mass production tooling and molds.

Under the agreement, the Company agreed that the minimum purchase commitments for units of the Solo vehicle are to be as follows: in calendar 2018, 5,000; in 2019, 20,000; and in 2020, 50,000, and which shall be payable following issue of Company’s purchase orders as follows: 30% after Zongshen schedules production, and 70% after accepted vehicle delivery.

On October 16, 2017 the President and CEO of the Company (as “Pledgor”) entered into a Share Pledge Agreement (“Share Pledge”) to guarantee the payment by the Company for the cost of the prototype tooling and molds estimated to be CNY ¥9.5 million (CAD $1.8 million) to Zongshen through the pledge of 800,000 common shares of the Company. The Company approved its obligations under the Share Pledge and has agreed to reimburse the Pledgor on a one for one basis for any pledged shares realized by Zongshen.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

7.           Acquisition of Intermeccanica

On October 18, 2017 the Company completed the acquisition of all of the outstanding shares of Intermeccanica, a developer and manufacturer of high end custom built vehicles and the contract assembler of the Company’s electric vehicles located in Greater Vancouver, BC. The acquisition of Intermeccanica is expected to accelerate the Company’s manufacture and delivery of its vehicles to customers, and the Company will develop and manufacture electric versions of Intermeccanica’s custom built vehicles.

Total purchase consideration was $2,500,000. On or before October 18, 2017 the Company paid $1,000,000, and entered into a Promissory Note for the balance of $1,500,000. The Promissory Note which bore interest at 5% per annum and was secured over the assets of Intermeccanica was paid in full on January 28, 2018.

Goodwill and other intangible assets recognized was primarily attributed to expected synergies arising from the Intermeccanica acquisition and the expertise and reputation of the assembled management and workforce. Goodwill is not expected to be deductible for income tax purposes. During the six month period ended June 30, 2018 the Company recorded amortization of $20,252 relating to the acquired intangible assets. No further impairment was identified at June 30, 2018.

Total goodwill and other intangible assets consist of:

9.           Commitments

On February 2, 2018 the joint business line of credit with Bank of Montreal (BMO), which was held by Intermeccanica, its President and his wife was paid in full. The line of credit was secured by a general security agreement, a specific charge over a vehicle, and a charge over the personal home of the President and his wife.

Lease obligations relate to the Company’s rent of office space and warehouse space. The term of the leases expire on November 1, 2020 and July 1, 2020 with the Company holding an option to renew for a further five years for the office space.

As at June 30, 2018, future payments required under non-cancellable operating leases contracted for but not capitalized in the financial statements are as follows:

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

10.         Derivative liability

The exercise price of certain warrants is denominated in US dollars; however, the functional currency of the Company is the Canadian dollar. Consequently, the value of the proceeds on exercise is not fixed and will vary based on foreign exchange rate movements. The warrants are therefore a derivative and are required to be recognized as a derivate liability and measured at fair value at each reporting period. Any changes in fair value from period to period are recorded as non-cash gain or loss in the consolidated statement of net loss and comprehensive loss. Upon exercise, the holders will pay the Company the respective exercise price for each warrant exercised in exchange for one common share of the Company and the fair value at the date of exercise and the associated non-cash liability will be reclassified to share capital. The non-cash liability associated with any warrants that expire unexercised will be recorded as a gain in the consolidated statement of net loss and comprehensive loss. There are no circumstances in which the Company would be required to pay any cash upon exercise or expiry of the warrants.

During the six month period ended June 30, 2018 the Company issued 200,000 warrants exercisable at USD $16.80, which expire on January 22, 2021.

A reconciliation of the changes in fair values of the derivative liability is below:

The fair value of the warrants was calculated using a Black-Scholes Option Pricing Model. The weighted average assumptions used in the Black-Scholes Option Pricing Model are:

11.         Share capital

Authorized share capital

Unlimited number of common shares without par value.

On May 15, 2018 the Company completed a share consolidation of two pre-split common shares for one post-split common share. Previously, on June 22, 2016, the Company completed a share split of one pre-split common share for five post-split shares. All information related to common shares, options, warrants and per share amounts presented in these financial statements and accompanying notes have been retroactively adjusted to reflect the revised number of common shares resulting from the share split and subsequent share consolidation.

Issued share capital

At June 30, 2018 the Company had 25,060,133 issued and outstanding common shares (December 31, 2017 – 23,794,106).

During the six month period ended June 30, 2018, the Company issued a total of 1,182,543 common shares for gross proceeds of $6,897,647 and 75,000 common shares for services with a fair value of $622,777. Share issue costs related to these issuances was $698,051 and includes 2,286 common shares issued for finder’s fees with a fair value of $23,678. On exercise of 6,198 stock options included in the above, $19,274 was allocated to share capital from share-based payment reserve.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Basic and fully diluted loss per share

The calculation of basic and fully diluted loss per share for the six month period ended June 30, 2018 was based on the loss attributable to common shareholders of $5,020,189 and the weighted average number of common shares outstanding of 24,571,944. Fully diluted loss per share did not include the effect of stock options and warrants as the effect would be anti-dilutive.

Stock options

The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, grant to directors, officers, employees and technical consultants to the Company, non-transferable stock options to purchase common shares, provided that the number of common shares reserved for issuance will not exceed 30,000,000. Such options will be exercisable for a period of up to 7 years from the date of grant. Options may be exercised no later than 90 days following cessation of the optionee’s position with the Company.

Options granted typically vest one-quarter on the first anniversary subsequent to the grant date and the remaining three-quarters typically vest in thirty-six equal monthly instalments commencing on the first anniversary of the grant date.

On exercise, each option allows the holder to purchase one common share of the Company.

The changes in options during the six month period ended June 30, 2018 are as follows:

Details of options outstanding as at June 30, 2018 are as follows:

The weighted average grant date fair value of options granted during the six month period ended June 30, 2018 was $3.05. The fair value was calculated using the Black-Scholes option pricing model using the following weighted average assumptions:

During the six month period ended June 30, 2018, the Company recognized stock-based compensation expense of $1,884,415 (June 30, 2017 - $537,379).

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Warrants

On exercise, each warrant allows the holder to purchase one common share of the Company.

The changes in warrants during the six month period ended June 30, 2018 are as follows:

At June 30, 2018, all warrants outstanding were exercisable. Details of warrants outstanding as at June 30, 2018 are as follows:

12.        Reserve

Share-based payment reserve

The share-based payment reserve records items recognized as stock-based compensation expense and other share-based payments until such time that the stock options or warrants are exercised, at which time the corresponding amount will be transferred to share capital. If the options, or warrants expire unexercised, the amount remains in the share-based payment reserve account.

13.         General and administrative expenses

14.         Research and development expenses

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

15.         Sales and marketing expenses

16.         Segmented information

The Company operates in two reportable business segments in Canada.

The two reportable business segments offer different products, require different production processes, and are based on how the financial information is produced internally for the purposes of making operating decisions. The following summary describes the operations of each of the Company’s reportable business segments:

Sales between segments are accounted for at prices that approximate fair value. No business segments have been aggregated to form the above reportable business segments.

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

17.         Related party transactions

Related party balances

The following amounts are due to related parties

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

Directors & key management personnel compensation

18.         Financial instruments and financial risk management

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash and cash equivalents held in bank accounts. The majority of cash is deposited in bank accounts held with major financial institutions in Canada. As most of the Company’s cash is held by one financial institution there is a concentration of credit risk. This risk is managed by using major financial institutions that are high credit quality financial institutions as determined by rating agencies. The Company’s secondary exposure to risk is on its receivables. This risk is minimal as receivables consist primarily of government grant and refundable government goods and services taxes.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents.

Historically, the Company's source of funding has been shareholder loans and the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

The following is an analysis of the contractual maturities of the Company’s non-derivative financial liabilities as at June 30, 2018:

Foreign exchange risk

Foreign currency risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective functional currency. The Company is exposed to currency risk as it incurs expenditures that are denominated in US dollars while its functional currency is the Canadian dollar. The Company does not hedge its exposure to fluctuations in foreign exchange rates.

The following is an analysis of Canadian dollar equivalent of financial assets and liabilities that are denominated in US dollars:

Based on the above net exposures, as at June 30, 2018, a 10% change in the US dollars to Canadian dollar exchange rate would impact the Company’s net loss by $165,793 (December 31, 2017 - $545,784).

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its cash equivalents as these instruments have original maturities of twelve months or less and are therefore exposed to interest rate fluctuations on renewal. A 1% change in market interest rates would have an impact on the Company’s net loss of $1,000 for the six month period ended June 30, 2018 (December 31, 2017 - $18,950).

Classification of financial instruments

Financial assets included in the statement of financial position are as follows:

Financial liabilities included in the statement of financial position are as follows:

Electrameccanica Vehicles Corp.

Notes to the Interim Consolidated Financial Statements

(Unaudited - Expressed in Canadian dollars)

For the six months ended June 30, 2018

Fair value

The fair value of the Company’s financial assets and liabilities approximates the carrying amount.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Financial liabilities measured at fair value at June 30, 2018 consisted of the derivative liability, which is measured using level 3 inputs.

The fair value of the derivative liability was calculated using the Black-Scholes Option Pricing Model using volatility of a comparable company as an estimate of volatility.

19.         Capital management

The Company’s policy is to maintain a strong capital base so as to safeguard the Company’s ability to maintain its business and sustain future development of the business. The capital structure of the Company consists of equity. There were no changes in the Company’s approach to capital management during the year. The Company is not subject to any externally imposed capital requirements.

20.         Subsequent events

On July 18, 2018, the Company completed a private placement of 150,847 units at a price of USD $5.90 per unit for gross proceeds of USD $890,000 (CAD $1,171,162). Each unit was comprised of one common share and a warrant to purchase one additional common share at a price of $12.00. The Company paid third party finder’s fees of $116,590 relating to this private placement.

On July 19, 2018 the Company and certain executive officers entered into stock option cancellation agreements and agreed to cancel 21,477,273 stock options that were exercisable at $0.30 per share and 3,522,727 stock options that were exercisable at $0.80 per share.

On July 20, 2018, the Company completed a private placement of 54,746 units at a price of USD $5.90 per unit for gross proceeds of USD $323,000 (CAD $426,388). Each unit was comprised of one common share and a warrant to purchase one additional common share at a price of $12.00. The company paid third party finder’s fees of $42,313 relating to this private placement.

On July 31, 2018 the Company filed a F1/A Registration Statement with the Securities and Exchange Commission, which was declared effective on August 3, 2018.

On August 8, 2018, the Company entered into an underwriting agreement with respect to an underwritten public offering of 2,353,000 units at a price of USD $4,25 per unit for gross proceeds of USD $10 million, and expected net proceeds of USD $8.8 million, which closed on August 13, 2018. Each unit was comprised of one common share and two warrants each to purchase one additional common share at a price of USD $4.25 for a period of five years from issue. The underwriters also have a 45-day option to purchase up to an additional 352,950 common shares and/or warrants to purchase up to an additional 705,900 common shares, representing 15% of the common shares sold in the public offering and 15% of the warrants sold in the public offering.

Under the underwriting agreement and related “lock-up” agreements, the Company, each director and executive officer of the Company, and certain shareholders have agreed not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of underwriters for a period of 180 days after the date of the underwriting agreement.

The common shares and the warrants have been approved to list on the Nasdaq Capital Market under the symbols SOLO and SOLOW, respectively, and began trading on August 9, 2018.

On August 8, 2018 the Company granted stock options to acquire 275,000 common shares of the Company at an exercise price of USD $6.18 for a period of 7 years. The options vest over a 48 month period.