UNITED STATES
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington, D.C. 20549 
 
 
__________
 
 
FORM F-1
 
 
REGISTRATION STATEMENT 
 
 
UNDER THE SECURITIES ACT OF 1933 
 
 
__________
 
 
ELECTRAMECCANICA VEHICLES CORP.  
 
 
(Exact name of registrant as specified in its charter)
 
British Columbia
3711
N/A
(State or other jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer
incorporation or organization)
Classification Code Number)
Identification Number)
 
102 East 1 st  Avenue 
 
Vancouver, British Columbia, Canada, V5T 1A4 
 
Telephone: (604) 428-7656  
 
 
(Address of principal executive offices, including zip code, and telephone number, including area code)
 
 
Ortoli Rosenstadt LLP 
 
501 Madison Avenue, 14 th Floor
 
New York, New York, U.S.A., 10022 
 
Telephone: (302) 738-6680  
 
 
(Name, address, including zip code, and telephone number, including area code, of agent of service)
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.
 
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ]
 
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
 
 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
 
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
 
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
 
Emerging growth company [X]
 
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [ ]
 
CALCULATION OF REGISTRATION FEE
 
Title of each class of securities to be registered
 
Proposed maximumaggregate offeringprice (1)
 
 
Amount ofregistration fee
 
Common Shares, $0.001 par value per share(2)
  $ 27,500,000  
  $ 3,424  
Total
  $    
  $    
 
 
(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act.
 
(2)
Includes                       common shares that may be purchased by the underwriters pursuant to their option to purchase additional common shares to cover over-allotments.
 
(3)
Pursuant to Rule 416 under the Securities Act, there are also being registered such additional securities as may be issued to prevent dilution resulting from share splits, share dividends or similar transactions.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine
 
 
 
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
PROSPECTUS
 
Subject to Completion: Preliminary Prospectus Dated February 1 , 2018
 
 
ELECTRAMECCANICA VEHICLES CORP.
 
 
                                    Common Shares
 
 
This prospectus relates to an offering of                    common shares of Electrameccanica Vehicles Corp.
 
Our common shares are quoted on the OTC Market Group Inc.’s Venture Market (the “OTCQB”) under the symbol “ECCTF”. On January 25 , 2018, the last reported sales price of our common share on the OTCQB was US$4.95 per share, and on January 25, 2018 we had approximately 47,994,209 common shares outstanding. We submitted our application for listing on the Nasdaq Capital Markets on October 17, 2017. This application might not be approved.
 
We are an “emerging growth company” as defined in section 3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are therefore eligible for certain exemptions from various reporting requirements applicable to reporting companies under the Exchange Act. (See “ Exemptions Under the Jumpstart Our Business Startups Act. ”)
 
 
 
Per Common Share (1)(2)
 
Assumed public offering price
 US
$
 
 
Underwriter fees and commissions (1)
 US
$
 
 
Proceeds to us, before expenses (1)(2)
 US
$
 
 
____________
(1)  
We will pay the underwriters a success fee of 5.5% for those gross proceeds originating from investors introduced by us and 7% on all other gross proceeds. See “Underwriting” in this prospectus for more information regarding our arrangements with the underwriter. This table sets out the maximum possible underwriting fees and commissions.
(2)  
The total estimated expenses related to this offering are set forth in the section entitled “Expenses Relating to This Offering.”
 
In addition to the fees discussed above, we have agreed to issue to the underwriters warrants to purchase up to a total of                   common shares (equal to 1.5% of the common shares sold in this offering to investors introduced to the underwriters by us and 5% of all other common shares sold in this offering). The warrants will be exercisable from time to time, in whole or in part, commencing from one year from the closing of the offering and expiring             years from the effective date of this registration statement. The warrants are exercisable at a per share price of US$             . The warrants are also exercisable on a cashless basis. We also have agreed to reimburse the underwriters for certain of their out-of-pocket expenses. See “Underwriting” for a description of these arrangements.
 
We expect our total cash expenses for this offering to be approximately US$           . The underwriters have agreed to purchase the shares from us on a firm commitment basis. The underwriters have an option exercisable within              days from the date of this prospectus to purchase up to            additional common shares from us at the public offering price, less the underwriting discount, solely to cover over-allotments.
 
The underwriters expect to deliver the common shares against payment in U.S. dollars in New York, New York on or about                  , 2018.
 
In reviewing this prospectus you should carefully consider the matters described under the caption “Risk Factors” beginning on page 1.
 
 
This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss.
 
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
This prospectus shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall the Underwriter sell any of these securities in any state where such an offer to sell or solicitation would be unlawful before registration or qualification under such state’s securities laws.
 
THE DATE OF THIS PROSPECTUS IS  , 2018
 
 
 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS
 

  PROSPECTUS SUMMARY
 
iii
 
 RISK FACTORS
    1
 
 SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
    11  
 USE OF PROCEEDS
    11  
 DIVIDEND POLICY
    11  
 CAPITALIZATION
    11  
 DILUTION
    12  
 CURRENCY AND EXCHANGE RATES
    12  
 COMPANY INFORMATION
    13  
 BUSINESS OVERVIEW
    14  
 EXEMPTIONS UNDER THE JUMPSTART OUR BUSINESS STARTUPS ACT
    26  
 CAUTIONARY NOTE REGARDING FINANCIAL DISCLOSURE IN THIS PROSPECTUS
    26  
 DIRECTORS AND SENIOR MANAGEMENT
    27  
 KEY INFORMATION
    29  
 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    33  
 DIRECTORS AND SENIOR MANAGEMENT AND EMPLOYEES
    42  
 EXECUTIVE COMPENSATION
    47  
 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    57  
 MATERIAL AGREEMENTS
    62  
 MARKET FOR OUR COMMON SHARES
    62  
 NOTICE OF ARTICLES AND ARTICLES OF OUR COMPANY
    64  
 LIMITATIONS ON RIGHTS OF NON-CANADIANS
    66  
 MATERIAL INCOME TAX INFORMATION
    67  
 UNDERWRITING
    73  
 EXPENSES RELATED TO THIS OFFERING
    76  
 EXPERTS
    76  
 INTERESTS OF EXPERTS AND COUNSEL
    76  
  DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
    76  
  WHERE YOU CAN FIND MORE INFORMATION
    76  
  INDEX TO FINANCIAL STATEMENTS
    F-1  
 
You should rely only on the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by or on our behalf. Neither we, nor the Underwriter, have authorized any other person to provide you with different or additional information. Neither we, nor the Underwriter, take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The Underwriter is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates.
 
 
Except as otherwise set forth in this prospectus, neither we nor the Underwriter have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.
 
 
ii
 
 
 
 
 
 
Unless the context otherwise requires, in this prospectus, the term(s) “we”, “us”, “our”, “Company”, “our company”, “Electrameccanica” and “our business” refer to Electrameccanica Vehicles Corp.
 
PROSPECTUS SUMMARY
 
The following summary highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus. You should read carefully the entire document, including our financial statements and related notes, to understand our business, our common shares and the other considerations that are important to your decision to invest in our common shares. You should pay special attention to the “Risk Factors” section on page 1. Unless otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option.
 
 
All references to “$” or “dollars”, are expressed in Canadian dollars unless otherwise indicated.
 
 
Our Company
 
 
We are a development-stage electric vehicle, or EV, company focusing on EVs that are efficient, cost-effective and environmentally friendly methods for urban residents to commute. We believe that our flagship EV called the SOLO, a single person car, answers the market demand for such a vehicle. In addition, we have two other EV candidates in an advanced stage of development, the Super SOLO, a sports car model of the SOLO, and the Tofino, an all-electric, two-seater roadster.
 
 
As of January 25, 2018, we have built 16 pre-production vehicles. We have used some of these pre-production vehicles as prototypes, have delivered four to customers and have used others as test drive models in our two showrooms. At our facilities located in British Colombia, we can manufacture approximately two to four vehicles per month. Our ability to build EVs at our own facilities has been enhanced by our recent acquisition of Intermeccanica International Inc. (“Intermeccanica”) which has over 50 years of custom car manufacturing expertise. Intermeccanica commenced operations during 1959 in Turin, Italy selling speed equipment kits. This led to the production of a Formula Junior racer and eventually to the first unique bodied, hand assembled road car called the InterMeccanica Puch or IMP (21). The car competed at the Nurburgring, a 13.75 mile race circuit in Germany, where it won its 500 cc class. The success of the IMP led Intermeccanica to build the Apollo (101), Griffith (14), Italia (500) and Indra (125) during the period 1959 to 1975. Thereafter, Intermeccanica moved to North America where it started to construct the Porsche 356 Speedster replica and later Intermeccanica moved to Vancouver, Canada, where it developed the tooling to produce the Roadster RS based on the 1959 Porsche 356 D, Intermeccanica incorporated its own tubular chassis in 1986 and offered various powertrains from the original VW air-cooled engine to a six cylinder engine from a Porsche 911. Intermeccanica, throughout its operating history, has built approximately 2,500 vehicles.
 
 
To enable us to mass produce our EVs, we have entered into a manufacturing agreement with Chongqing Zongshen Automobile Co., Ltd (“Zongshen”) located in Chongqing, China. Under the agreement, Zongshen has begun the process of establishing tooling and has contracted to produce 75,000 SOLO vehicles. Zongshen, through its subsidiary, Chongqing Zongshen Engine Manufacturing Co., Ltd. is a subsidiary of Zongshen Power. Since its establishment in 1992, Zongshen Power has grown into a large-scale scientific and technical enterprise capable of researching, developing, manufacturing and selling a diverse range of motorcycles and motorcycle engines in China. Its products include over 130 models of two-wheeled motorcycles, electric motorcycles, three-wheeled motorcycles, cross-country vehicles and all-terrain vehicles with motors ranging from 35CC to 500CC. Zongshen has announced that its current annual production of motorcycles exceeds 2,000,000 per year. Zongshen beneficially owns approximately 11.1% of our common stock and has subscribed for common shares and warrants for a total investment of $1,017,532. If we complete this offering, we expect to begin placing orders with Zongshen in the first or second quarter of 2018 and to begin sales of SOLOs in August 2018. We anticipate that Zongshen will produce up to 5,000 of our cars in 2018, 20,000 of our cars in 2019 and 50,000 of our cars in 2020.
 
 
We estimate that we need approximately $3.6 million at our current burn rate to continue our business for the next twelve months and an additional $22.7 million to carry out our proposed business plan over the next 12 months. Due to the Company not achieving profitable operations, our auditors have issued a going concern opinion in our audited financial statements.
 
 
We were incorporated on February 16, 2015 under the laws of British Columbia, Canada, and have a December 31, fiscal year end. As of January 25, 2018, there were 47,994,209 shares of our common share outstanding.
 
 
Our principal executive offices are located at 102 East 1 st  Avenue, Vancouver, British Columbia, Canada, V5T 1A4. Our telephone number is (604) 428-7656. Our website address is www.electrameccanica.com. Information on our website does not constitute part of this prospectus. Our registered and records office is located at Suite 1500, 1055 West Georgia Street, P.O. Box 11117, Vancouver, British Columbia, Canada, V6E 4N7.
 
 
As of January 25, 2018, our executive officers and directors owned 71.8% of our common share, which includes shares that our executive officers and directors have the right to acquire within the next 60 days pursuant to warrants and stock options which have vested.
 
 
iii
 
 
 
 
 
 

Recent Developments
 
Shortly after our incorporation in 2015, we entered into an arrangement with Intermeccanica to leverage Intermeccanica’s over 50 years of quality car manufacturing expertise. On October 18, 2017, we entered into a Share Purchase Agreement (the “SPA”) by which we acquired all the shares of Intermeccanica for $2,500,000.
 
On October 2, 2017, we announced a manufacturing agreement with Zongshen to produce 75,000 SOLO all-electric vehicles over the next three years. Specifically, the plan calls for the production of 5,000 SOLOs in 2018; 20,000 in 2019; and 50,000 in 2020. Under the agreement the Company agrees to reimburse Zongshen for the cost of the prototype tooling and molds estimated to be $1.8 million, which shall be payable on or before March 18, 2018, and the mass production tooling and molds estimated to be $6.0 million, which shall be payable 50% when Zongshen commences manufacturing the tooling and molds (which we expect will be in the second quarter of 2018), 40% when Zongshen completes manufacturing the tooling and molds (which we expect will be in the third quarter of 2018), and 10% upon delivery to the Company of the first production vehicle (which we expect will be in the third quarter of 2018).
 
Offering Summary
 
The Issuer:
 
 
Electrameccanica Vehicles Corp.
 
 
 
Address: 102 East 1 st  Avenue, Vancouver, British Columbia, Canada, V5T 1A4
 
 
 
Telephone: (604) 428-7656.
 
 
 
 
 
Shares Offered:
 
               common shares
 
 
 
 
Offering Price:
 
US$25,000,000 (excluding the underwriters’ over-allotment option)
 
 
 
Over-allotment
 
 
We have granted                      a day option (commencing from the date of this prospectus) to the underwriters to purchase an additional                    common shares to cover over-allotments, if any.
 
 
 
 
Shares Outstanding Prior to the Offering:
 
 
47,994,209 common shares as of January 25, 2018
 
 
 
 
Gross Proceeds:
 
 
$25,000,0000
 
 
 
 
Warrants to purchase additional common share:
 
 
We have agreed to issue to the underwriters warrants to purchase up to a total of  common shares (equal to 1.5% of the common shares sold in this offering to investors introduced to the underwriters by us and 5% of all other common shares sold in this offering.) The warrants will be exercisable from time to time, in whole or in part, from one year of the closing of the offering until five years from the first public sale of common shares in the offering. The warrants are exercisable at a per share price of US$ .
 
 
 
The Underwriter:
 
 
 
 
 
 
Transfer Agent:
 
 
Computershare Investor Services Inc
 
 
 
 
Market for our Common share:
 
Our common share is quoted on OTCQB operated by the OTC Markets Group Inc . under the symbol “ECCTF.”
 
 
 
Use of Proceeds:
 
We intend to use the net proceeds from this offering for plant and equipment, production molds, furniture and fixtures, inventory, research and development, sales and marketing, repayment of a note issued in connection with the acquisition of Intermeccanica and for general working capital.
 
 
 
Risk Factors:
See “Risk Factors” and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in our securities.
 
 
 
iv
 
 
 
 
 
 
Summary Financial Data
 
 
The summary financial information set forth below has been derived from our financial statements for the fiscal year ended December 31, 2016, for the period from February 16, 2015 (date of inception) to December 31, 2015, and for the nine months ended September 30, 2017. You should read the following summary financial data together with our financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “ Operating and Financial Review and Prospects ”.
 
 
Statement of Operations
 
 
 
Nine Months ended September 30, 2017
 
 
Year ended
December 31, 2016
 
 
Period ended
December 31, 2015
 
Revenues
    -  
    -  
    -  
Gross Margin
    -  
    -  
    -  
Net Loss
  $ 6,749,268  
  $ 8,973,347  
  $ 995,833  
Basic and Diluted Earnings (Loss) per Share
    (0.16 )
  $ (0.27 )
  $ (0.22 )
Basic and Diluted Earnings (Loss) per Share after 1 for 5 share split
    N/A  
    N/A  
  $ (0.04 ) (1)
 
 
Balance Sheet
 
 
 
September 30, 2017
 
 
December 31, 2016
 
 
December 31, 2015
 
Cash
  $ 3,464,108  
  $ 3,916,283  
  $ 106,357  
Current Assets
  $ 4,208,556  
  $ 4,437,152  
  $ 197,309  
Total Assets
  $ 4,876,118  
  $ 4,787,766  
  $ 213,118  
Current Liabilities
  $ 2,309,337  
  $ 881,176  
  $ 346,416  
Total Liabilities
  $ 2,309,337  
  $ 881,176  
  $ 346,416  
Shareholders’ Equity (Deficiency)
  $ 2,566,781  
  $ 3,906,590  
  $ (133,298 )
 
 
 
(1)
After taking into account the one for five share split which was effective on June 22, 2016.
 
v
 
 
 
 
 
 
RISK FACTORS
 
An investment in our common shares carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our financial statements and related notes included elsewhere in this prospectus, before you decide to purchase our shares. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our common shares. Refer to “Forward-Looking Statements”.
 
 
We have not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.
 
 
Risks Related to our Business and Industry
 
 
We have a limited operating history and have not yet generated any revenues.
 
 
Our limited operating history makes evaluating our business and future prospects difficult. We were formed in February 2015, and we have not yet begun mass production or the commercial delivery of our first vehicle. To date, we have no revenues as any amounts received from the sale of our pre-production vehicles were netted off against research and development costs as cost recovery . We intend in the longer term to derive substantial revenues from the sales of our SOLO vehicle, our Super SOLO vehicle, our Tofino vehicle and other intended elective vehicles. The SOLO and Tofino are in development, and we do not expect to start delivering to the SOLO customers until the end of the second quarter or early third quarter of 2018 or to the Tofino customers until 2019. Our vehicles require significant investment prior to commercial introduction and may never be successfully developed or commercially successful.
 
 
We expect that we will experience an increase in losses prior to the launch of the SOLO, the Super SOLO or the Tofino.
 
 
In the period from inception to December 31, 2015, we generated a loss of $995,833. For the fiscal year ended December 31, 2016, we generated a loss of $8,973,347, bringing our accumulated deficit to $9,969,180. For the nine months ended September 30, 2017, we generated a loss of $6,749,268, bringing our accumulated deficit to $16,718,448. We anticipate generating a significant loss for the current fiscal year. The independent auditor’s report on our financial statements includes an explanatory paragraph relating to our ability to continue as a going concern.
 
 
We have no revenues, are currently in debt and expect significant increases in costs and expenses to forestall profits for the foreseeable future, even if we generate revenues in the near term. Even if we are able to successfully develop the SOLO, the Super SOLO or the Tofino, they might not become commercially successful. If we are to ever achieve profitability we must have a successful commercial introduction and acceptance of our vehicles, which may not occur.
 
 
We expect the rate at which we will incur losses to increase significantly in future periods from current levels as we:
 
 
design, develop and manufacture our vehicles and their components;
 
 
 
 
develop and equip our manufacturing facility;
 
 
 
 
build up inventories of parts and components for the SOLO, the Super SOLO and the Tofino;
 
 
 
 
open Electrameccanica stores;
 
 
 
 
expand our design, development, maintenance and repair capabilities;
 
 
 
 
develop and increase our sales and marketing activities; and
 
 
 
 
develop and increase our general and administrative functions to support our growing operations.
 
Because we will incur the costs and expenses from these efforts before we receive any revenues with respect thereto, our losses in future periods will be significantly greater than the losses we would incur if we developed the business more slowly. In addition, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in profits or even revenues, which would further increase our losses.
 
1
 
 
 
 
 
 
We currently have negative operating cash flows, and if we are unable to generate positive operating cash flows in the future our viability as an operating business will be adversely affected.
 
 
We have made significant up-front investments in research and development, sales and marketing, and general and administrative expenses to rapidly develop and expand our business. We are currently incurring expenditures related to our operations that have generated a negative operating cash flow. Operating cash flow may decline in certain circumstances, many of which are beyond our control. We might not generate sufficient revenues in the near future. Because we continue to incur such significant future expenditures for research and development, sales and marketing, and general and administrative expenses, we may continue to experience negative cash flow until we reach a sufficient level of sales with positive gross margins to cover operating expenses. An inability to generate positive cash flow until we reach a sufficient level of sales with positive gross margins to cover operating expenses or raise additional capital on reasonable terms will adversely affect our viability as an operating business.
 
 
To carry out our proposed business plan to develop, manufacture, sell and service electric vehicles, we will require a significant amount of capital.
 
 
To carry out our proposed business plan, we estimate that we will need approximately $3.6 million for the next 12 months. We intend to raise our cash requirements for the next 12 months through this offering and, if needed, the sale of our equity securities in private placements and shareholder loans. If we are unsuccessful in raising enough funds through such capital-raising efforts, we may review other financing possibilities such as bank loans. Financing might not be available to us or, if available, only on terms that are not acceptable to us.
 
 
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our current corporate structure. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
 
 
Terms of subsequent financings may adversely impact your investment.
 
 
We may have to engage in common equity, debt, or preferred stock financing in the future. Your rights and the value of your investment in our common shares could be reduced. Interest on debt securities could increase costs and negatively impacts operating results. Preferred stock could be issued in series from time to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock could be more advantageous to those investors than to the holders of common shares. In addition, if we need to raise more equity capital from the sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment. C ommon shares which we sell could be sold into any market which develops, which could adversely affect the market price.
 
 
Our future growth depends upon consumers’ willingness to adopt three-wheeled single passenger electric vehicles.
 
 
Our growth highly depends upon the adoption by consumers of, and we are subject to an elevated risk of any reduced demand for, alternative fuel vehicles in general and electric vehicles in particular. If the market for three-wheeled single passenger electric vehicles does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be negatively impacted. The market for alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:
 
 
perceptions about electric vehicle quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles;
 
 
 
 
 
perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology, including vehicle electronics and braking systems;
 
 
 
 
 
the limited range over which electric vehicles may be driven on a single battery charge;
 
 
 
 
 
the decline of an electric vehicle’s range resulting from deterioration over time in the battery’s ability to hold a charge;
 
 
 
 
 
concerns about electric grid capacity and reliability, which could derail our efforts to promote electric vehicles as a practical solution to vehicles which require gasoline;
 
 
 
 
 
the availability of alternative fuel vehicles, including plug-in hybrid electric vehicles;
 
 
 
 
 
improvements in the fuel economy of the internal combustion engine;
 
 
 
 
 
the availability of service for electric vehicles;
 
 
 
 
 
the environmental consciousness of consumers;
 
 
 
 
 
volatility in the cost of oil and gasoline;
 
 
 
 
 
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
 
 
 
 
 
access to charging stations, standardization of electric vehicle charging systems and consumers’ perceptions about convenience and cost to charge an electric vehicle;
 
 
 
 
 
the availability of tax and other governmental incentives to purchase and operate electric vehicles or future regulation requiring increased use of nonpolluting vehicles; and
 
 
 
 
 
perceptions about and the actual cost of alternative fuel.
 
 
The influence of any of the factors described above may cause current or potential customers not to purchase our electric vehicles, which would materially adversely affect our business, operating results, financial condition and prospects.
 
 
2
 
 
 
 
 
 
 
The range of our electric vehicles on a single charge declines over time which may negatively influence potential customers’ decisions whether to purchase our vehicles.
 
 
The range of our electric vehicles on a single charge declines principally as a function of usage, time and charging patterns. For example, a customer’s use of their vehicle as well as the frequency with which they charge the battery of their vehicle can result in additional deterioration of the battery’s ability to hold a charge. We currently expect that our battery pack will retain approximately 85% of its ability to hold its initial charge after approximately 3,000 charge cycles and 8 years, which will result in a decrease to the vehicle’s initial range. Such battery deterioration and the related decrease in range may negatively influence potential customer decisions whether to purchase our vehicles, which may harm our ability to market and sell our vehicles.
 
Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for our electric 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 we do not currently anticipate. For example, fuel which is abundant and relatively inexpensive in North America, such as compressed natural gas, may emerge as consumers’ preferred alternative to petroleum based propulsion. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced electric vehicles, which could result in the loss of competitiveness of our vehicles, decreased revenue and a loss of market share to competitors.
 
 
If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.
 
 
We may be unable to keep up with changes in electric vehicle technology and, as a result, may suffer a decline in our competitive position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position which would materially and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not be sufficient to adapt to changes in electric vehicle technology. As technologies change we plan to upgrade or adapt our vehicles and introduce new models to continue to provide vehicles with the latest technology, in particular battery cell technology. However, our vehicles may not compete effectively with alternative vehicles if we are not able to source and integrate the latest technology into our vehicles. For example, we do not manufacture battery cells which makes us depend upon other suppliers of battery cell technology for our battery packs.
 
 
If we are unable to design, develop, market and sell new electric vehicles and services that address additional market opportunities, our business, prospects and operating results will suffer.
 
 
We may not be able to successfully develop new electric vehicles and services, address new market segments or develop a significantly broader customer base. To date, we have focused our business on the sale of the SOLO, a three-wheeled single passenger electric vehicle and have targeted mainly urban residents of modest means. We will need to address additional markets and expand our customer demographic to further grow our business. Our failure to address additional market opportunities would harm our business, financial condition, operating results and prospects.
 
 
Demand in the vehicle industry is highly volatile.
 
 
Volatility of demand in the vehicle industry may materially and adversely affect our business, prospects, operating results and financial condition. The markets in which we will be competing have been subject to considerable volatility in demand in recent periods. Demand for automobile sales depends to a large extent on general, economic, political and social conditions in a given market and the introduction of new vehicles and technologies. As a new start-up manufacturer, we will have fewer financial resources than more established vehicle manufacturers to withstand changes in the market and disruptions in demand.
 
 
We depend on a third-party for our near-term manufacturing needs.
 
 
In October 2017, we entered into a manufacturing agreement with Zongshen, a company located in the People’s Republic of China, to produce 75,000 SOLO vehicles over the next three years. The delivery of SOLO vehicles to our future customers and the revenue derived therefrom depends on Zongshen’s ability to fulfill its obligations under that manufacturing agreement. Zongshen’s ability to fulfill its obligations is outside of our control and depends on a variety of factors including Zongshen’s operations, Zongshen’s financial condition and geopolitical and economic risks that could affect China. If Zongshen is unable to fulfill its obligations or is only able to partially fulfill its obligations, we will not be able to sell our SOLO vehicle in the volumes anticipated on the timetable that we anticipate, if at all.
 
3
 
 
 
 
 
 
We do not currently have arrangements in place that will allow us to fully execute our business plan.
 
 
To sell our vehicles as envisioned, we will need to enter into agreements and arrangements that are not currently in place. These include, entering into agreements with dealerships, arranging for the transportation of SOLOs delivered pursuant to our manufacturing agreement with Zongshen, obtaining battery and other essential supplies in the quantities that we require, entering into manufacturing agreements for the Super SOLO and the Tofino and acquiring additional manufacturing capability. If we are unable to enter into such agreements or are only able to do so on terms that are unfavorable to us, we may not be able to fully carry out our business plans.
 
 
We depend on certain key personnel, and our success will depend on our continued ability to retain and attract such qualified personnel.
 
 
Our success depends on the efforts, abilities and continued service of Jerry Kroll - Chief Executive Officer, Henry Reisner - Chief Operating Officer, Kulwant Sandher - Chief Financial Officer, and Ed Theobald – General Manager. A number of these key employees and consultants have significant experience in the automobile manufacturing industry. A loss of service from any one of these individuals may adversely affect our operations, and we may have difficulty or may not be able to locate and hire a suitable replacement. We have not obtained any “key person” insurance on certain key personnel.
 
 
Since we have little experience in mass-producing electric vehicles, any delays or difficulties in transitioning from producing custom vehicles to mass-producing vehicles may have a material adverse effect on our business, prospects and operating results.
 
 
Our management team has experience in producing custom designed vehicles and is now switching focus to mass producing electric vehicles in a rapidly evolving and competitive market. If we are unable to implement our business plans in the timeframe estimated by management and successfully transition into a mass-producing electric vehicle manufacturing business, then our business, prospects, operating results and financial condition will be negatively impacted and our ability to grow our business will be harmed.
 
 
We are subject to numerous environmental and health and safety laws and any breach of such laws may have a material adverse effect on our business and operating results.
 
 
We are subject to numerous environmental and health and safety laws, including statutes, regulations, bylaws and legal requirements contained in approvals or that arise under common law. These laws relate to the generation, use, handling, storage, transportation and disposal of regulated substances, including hazardous substances, dangerous goods and waste, emissions or discharges into soil, water and air, including noise and odors (which could result in remediation obligations), and occupational health and safety matters, including indoor air quality. These legal requirements vary by location and can arise under federal, provincial, state or municipal laws. Any breach of such laws and/or requirements would have a material adverse effect on our company and its operating results.
 
 
Our vehicles are subject to motor vehicle standards and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.
 
 
All vehicles sold must comply with federal, state and provincial motor vehicle safety standards. In both Canada and the United States vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. In this regard, Canadian and U.S. motor vehicle safety standards are substantially the same. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have the SOLO, the Super Solo, the Tofino or any future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.
 
 
If we are unable to reduce and adequately control the costs associated with operating our business, including our costs of manufacturing, sales and materials, our business, financial condition, operating results and prospects will suffer.
 
 
If we are unable to reduce and/or maintain a sufficiently low level of costs for designing, manufacturing, marketing, selling and distributing and servicing our electric vehicles relative to their selling prices, our operating results, gross margins, business and prospects could be materially and adversely impacted.
 
 
If our vehicles fail to perform as expected, our ability to develop, market and sell our electric vehicles could be harmed.
 
 
Our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair. For example, our vehicles use a substantial amount of software code to operate. Software products are inherently complex and often contain defects and errors when first introduced. While we have performed extensive internal testing, we currently have a very limited frame of reference by which to evaluate the performance of our SOLO in the hands of our customers and currently have no frame of reference by which to evaluate the performance of our vehicles after several years of customer driving. A similar evaluation of the Super SOLO and the Tofino is further behind.
 
4
 
 
 
 
 
 
 
 
We have very limited experience servicing our vehicles. If we are unable to address the service requirements of our future customers our business will be materially and adversely affected.
 
 
If we are unable to successfully address the service requirements of our future customers our business and prospects will be materially and adversely affected. In addition, we anticipate the level and quality of the service we will provide our customers will have a direct impact on the success of our future vehicles. If we are unable to satisfactorily service our customers, our ability to generate customer loyalty, grow our business and sell additional vehicles could be impaired.
 
 
We have very limited experience servicing our vehicles. As of January 25, 2018, we had not sold any vehicles and had only delivered four pre-production vehicles to customers. We do not plan for mass production to begin for of any SOLO vehicles until the end of the second quarter or during the third quarter of 2018 or for the Tofino until 2019. The total number of SOLOs that we have produced is 16, of which four have been delivered to customers. Throughout its history, Intermeccanica has produced approximately 2,500 cars, which includes, providing after sales support and servicing. We do not have any experience servicing these cars as they do not exist currently. Servicing electric vehicles is different than servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques.
 
 
We may not succeed in establishing, maintaining and strengthening the Electrameccanica brand, which would materially and adversely affect customer acceptance of our vehicles and components and our business, revenues and prospects.
 
 
Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Electrameccanica brand. Any failure to develop, maintain and strengthen our brand may materially and adversely affect our ability to sell our planned electric vehicles. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Promoting and positioning our brand will likely depend significantly on our ability to provide high quality electric cars and maintenance and repair services, and we have very limited experience in these areas. In addition, we expect that our ability to develop, maintain and strengthen the Electrameccanica brand will also depend heavily on the success of our marketing efforts. To date, we have limited experience with marketing activities as we have relied primarily on the internet, word of mouth and attendance at industry trade shows to promote our brand. To further promote our brand, we may be required to change our marketing practices, which could result in substantially increased advertising expenses, including the need to use traditional media such as television, radio and print. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly automobile manufacturers headquartered in Detroit, Japan and the European Union, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
 
 
Increases in costs, disruption of supply or shortage of raw materials, in particular lithium-ion cells, could harm our business.
 
 
We may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. Any such increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials in our business including aluminum, steel, carbon fiber, non-ferrous metals such as copper and cobalt. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for lithium-ion cells. These risks include:
 
 
the inability or unwillingness of current battery manufacturers to build or operate battery cell manufacturing plants to supply the numbers of lithium-ion cells required to support the growth of the electric or plug-in hybrid vehicle industry as demand for such cells increases;
 
 
 
 
 
disruption in the supply of cells due to quality issues or recalls by the battery cell manufacturers; and
 
 
 
 
an increase in the cost of raw materials, such as cobalt, used in lithium-ion cells.
 
Our business depends on the continued supply of battery cells for our vehicles. We do not currently have any agreements for the supply of batteries and depend upon the open market for their procurement. Any disruption in the supply of battery cells from our supplier could temporarily disrupt the planned production of our vehicles until such time as a different supplier is fully qualified. Moreover, battery cell manufacturers may choose to refuse to supply electric vehicle manufacturers to the extent they determine that the vehicles are not sufficiently safe. Furthermore, current fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased electric vehicle prices. We might not be able to recoup increasing costs of raw materials by increasing vehicle prices. We have also already announced an estimated price for the base model of our planned SOLO, Super SOLO and Tofino. However, any attempts to increase the announced or expected prices in response to increased raw material costs could be viewed negatively by our potential customers, result in cancellations of SOLO, Super SOLO and Tofino reservations and could materially adversely affect our brand, image, business, prospects and operating results.
 
 
5
 
 
 
 
 
 
 
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, financial condition, operating results and prospects.
 
 
Any reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle, fiscal tightening or other reasons may result in the diminished competitiveness of the alternative fuel vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.
 
 
If we fail to manage future growth effectively, we may not be able to market and sell our vehicles successfully.
 
 
Any failure to manage our growth effectively could materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our operations in the near future in connection with the planned production of our vehicles. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully. Risks that we face in undertaking this expansion include:
 
 
training new personnel;
 
 
 
 
forecasting production and revenue;
 
 
 
 
controlling expenses and investments in anticipation of expanded operations;
 
 
 
 
establishing or expanding design, manufacturing, sales and service facilities;
 
 
 
 
implementing and enhancing administrative infrastructure, systems and processes;
 
 
 
 
addressing new markets; and
 
 
 
 
establishing international operations.
 
We intend to continue to hire a number of additional personnel, including design and manufacturing personnel and service technicians for our electric vehicles. Competition for individuals with experience designing, manufacturing and servicing electric vehicles is intense, and we may not be able to attract, assimilate, train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these additional employees could seriously harm our business and prospects.
 
 
Our business may be adversely affected by labor and union activities.
 
 
Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We have a manufacturing agreement with Chongqing Zongshen Automobile Co., Ltd. to produce 75,000 SOLO vehicles over the next three years. Zongshen’s workforce is not currently unionized, though they may become so in the future or industrial stoppages could occur in the absence of a union. We also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs within our business, that of Zongshen or that of our key suppliers, it could delay the manufacture and sale of our electric vehicles and have a material adverse effect on our business, prospects, operating results or financial condition. Additionally, if we expand our business to include full in-house manufacturing of our vehicles, our employees might join or form a labor union and we may be required to become a union signatory.
 
 
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
 
 
We may become subject to product liability claims, which could harm our business, prospects, operating results and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given we have limited field experience of our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates which would have material adverse effect on our brand, business, prospects and operating results. We plan to maintain product liability insurance for all our vehicles with annual limits of approximately $5 million on a claims-made basis, but any such insurance might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.
 
6
 
 
 
 
 
 
 
Our patent applications may not result in issued patents, which may have a material adverse effect on our ability to prevent others from interfering with our commercialization of our products.
 
 
The status of patents involves complex legal and factual questions and the breadth and effectiveness of patented claims is uncertain. We cannot be certain that we are the first creator of inventions covered by pending patent applications or the first to file patent applications on these inventions, nor can we be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford sufficient protection against someone creating a knockoff of our products, or as a defensive portfolio against a competitor who claims that we are infringing its patents. In addition, patent applications filed in foreign countries are subject to laws, rules and procedures that differ from those of the United States, and thus we cannot be certain that foreign patent applications, if any, will result in issued patents in those foreign jurisdictions or that such patents can be effectively enforced, even if they relate to patents issued in the U.S. In addition, others may obtain patents that we need to take a license to or design around, either of which would increase costs and may adversely affect our business, prospects, financial condition and operating results.
 
 
We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and would cause us to incur substantial costs.
 
 
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
 
 
cease selling, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;
 
 
 
 
 
pay substantial damages;
 
 
 
 
seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all;
 
 
 
 
 
redesign our vehicles or other goods or services; or
 
 
 
 
establish and maintain alternative branding for our products and services.
 
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
 
 
You may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited because we are incorporated under the laws of the Province of British Columbia, a substantial portion of our assets are in Canada and all of our directors and executive officers reside outside the United States
 
 
We are organized under the laws of the  Business Corporations Act  (British Columbia) (the “Business Corporation Act”) and our executive offices are located outside of the United States in Vancouver, British Columbia. All of our directors and officers, as well as our auditor, reside outside the United States. In addition, a substantial portion of their assets and our assets are located outside of the United States. As a result, you may have difficulty serving legal process within the United States upon us or any of these persons. You may also have difficulty enforcing, both in and outside of the United States, judgments you may obtain in U.S. courts against us or these persons in any action, including actions based upon the civil liability provisions of U.S. Federal or state securities laws. Furthermore, there is substantial doubt as to the enforceability in Canada against us or against any of our directors, officers and the expert named in this prospectus who are not residents of the United States, in original actions or in actions for enforcement of judgments of U.S. courts, of liabilities based solely upon the civil liability provisions of the U.S. federal securities laws. In addition, shareholders in British Columbia companies may not have standing to initiate a shareholder derivative action in U.S. federal courts.
 
 
As a result, our public shareholders may have more difficulty in protecting their interests through actions against us, our management, our directors or our major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
 
 
7
 
 
 
 
 
 
 
Risks Related to Our Common Shares
 
 
Our executive officers and directors own 71.8% of our common shares.
 
 
Our executive officers and directors beneficially own, in the aggregate, 71.8% of our common share, which includes shares that our executive officers and directors have the right to acquire pursuant to warrants and stock options which have vested. As a result, they will be able to exercise a significant level of control over all matters requiring shareholder approval, including the election of directors, amendments to our Articles and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholders.
 
 
The continued sale of our equity securities will dilute the ownership percentage of our existing stockholders and may decrease the market price for our common shares.
 
 
Given our lack of revenues, we will likely have to issue additional equity securities to obtain working capital we require for the next 12 months. Our efforts to fund our intended business plans will therefore result in dilution to our existing stockholders. In short, our continued need to sell equity will result in reduced percentage ownership interests for all of our investors, which may decrease the market price for our common shares.
 
 
Additionally, we have approximately 35,244,271 vested options and 23,713,716 warrants outstanding as of December 31, 2017. The exercise price of the majority of these options and warrants is significantly below our current market price. If the holders of these options and warrants elect to exercise them, your ownership position will be diluted and the per share value of the shares in this offering will be diluted as well. As a result, the market value of our shares could significantly decrease as well.
 
 
Additional issuances of our common shares may result in dilution to our existing common shareholders and issuances of our preferred stock may adversely affect the rights of the holders of our common shares and reduce the value of our common shares.
 
 
Our Notice of Articles authorize the issuance of an unlimited number of common shares. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price, if one exists at the time, of the outstanding common shares. If we do issue any such additional common shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, if you acquire common shares, your proportionate ownership interest and voting power could be decreased. Further, any such issuances could result in a change of control.
 
 
In addition, our Notice of Articles authorize the issuance of an unlimited number of shares of preferred stock. Our Board of Directors has the authority to create one or more series of preferred stock and, without shareholder approval, issue shares of preferred stock with rights superior to the rights of the holders of common shares. As a result, shares of preferred stock could be issued quickly and easily, adversely affecting the rights of holder of common shares and could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult. Although we currently have no plans to create any series of preferred stock and have no present plans to issue any shares of preferred stock, any creation and issuance of preferred stock in the future could adversely affect the rights of the holders of common shares and reduce the value of the common shares.
 
The market price of our common shares may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
 
Our common shares began trading on the OTCQB in September 2017. The volume of trading has been low and the share price has fluctuated significantly. Although we have applied to list on the Nasdaq, we may not eventually list on the Nasdaq Capital Markets and, if we do, such listing might not affect our volume or volatility. The value of your investment could decline due to the impact of any of the following factors upon the market price of our common shares:
 
 
sales or potential sales of substantial amounts of our common shares;
 
  
 
announcements about us or about our competitors;
 
  
 
litigation and other developments relating to our patents or other proprietary rights or those of our competitors;
 
  
 
conditions in the automobile   industry;
 
  
 
governmental regulation and legislation;
 
  
 
variations in our anticipated or actual operating results;
 
  
 
change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations;
 
 
 
change in general economic trends; and
 
 
 
investor perception of our industry or our prospects.
 
 
 
Many of these factors are beyond our control. The stock markets in general, and the market for automobile companies in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our common shares, regardless of our actual operating performance.
 
8
 
 
 
 
 
 
We do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.
 
 
We have never paid any cash or stock dividends and we do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of any dividends. Because we do not intend to declare dividends, any gain on your investment will need to result from an appreciation in the price of our common shares. There will therefore be fewer ways in which you are able to make a gain on your investment.
 
 
Because the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment to decline.
 
 
Our shares are classified as penny stocks and are covered by section 15(g) of the Exchange Act, which imposes additional sales practice requirements on broker-dealers who sell our securities in this offering or in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written agreement from you prior to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices, it is possible that broker-dealers will not want to make a market in our shares. This could prevent you from reselling your shares and may cause the value of your investment to decline.
 
 
FINRA sales practice requirements may limit your ability to buy and sell our common shares, which could depress the price of our shares.
 
 
FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares and, thereby, depress our share price.
 
 
You may face significant restrictions on the resale of your shares due to state “blue sky” laws.
 
 
Each state has its own securities laws, often called “blue sky” laws, which: (1) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration; and (2) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker must also be registered in that state.
 
 
We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by the broker-dealers, if any, who agree to serve as market makers for our common shares. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common shares to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.
 
 
9
 
 
 
 
 
 
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This prospectus contains statements that constitute “forward-looking statements”. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. These statements appear in a number of different places in this prospectus and, in some cases, can be identified by words such as “anticipates”, “estimates”, “projects”, “expects”, “contemplates”, “intends”, “believes”, “plans”, “may”, “will”, or their negatives or other comparable words, although not all forward-looking statements contain these identifying words. Forward-looking statements in this prospectus may include, but are not limited to, statements and/or information related to: strategy, future operations, the size and value of the order book and the number of orders, the number and timing of building pre-production vehicles, the projection of timing and delivery of SOLOs, Super SOLOs or Tofinos in the future, projected costs, expected production capacity, expectations regarding demand and acceptance of our products, estimated costs of machinery to equip a new production facility, and trends in the market in which we operate, plans and objectives of management.
 
 
Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions made in light of our experience and our perception of trends, current conditions and expected developments, as well as other factors that we believe to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. Management believes that the assumption and expectations reflected in such forward-looking statements are reasonable. Assumptions have been made regarding, among other things: our ability to build pre-production vehicles and to begin production deliveries within certain timelines; our expected production capacity; prices for machinery to equip a new production facility, labor costs and material costs, remaining consistent with our current expectations; production of SOLOs, Super SOLOs and Tofinos meeting expectations and being consistent with estimates; equipment operating as anticipated; there being no material variations in the current regulatory environment; and our ability to obtain financing as and when required and on reasonable terms. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used.
 
 
The forward-looking statements, including the statements contained in the sections entitled Risk Factors, Description of Business and Operating and Financial Review and Prospects , are subject to known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors include but are not limited to:
 
 
general economic and business conditions, including changes in interest rates;
 
 
 
 
prices of other electric vehicles, costs associated with manufacturing electric vehicles and other economic conditions;
 
 
 
 
 
natural phenomena;
 
 
 
 
actions by government authorities, including changes in government regulation;
 
 
 
 
uncertainties associated with legal proceedings;
 
 
 
 
changes in the electric vehicle market;
 
 
 
 
future decisions by management in response to changing conditions;
 
 
 
 
our ability to execute prospective business plans;
 
 
 
 
misjudgments in the course of preparing forward-looking statements;
 
 
 
 
our ability to raise sufficient funds to carry out our proposed business plan;
 
 
 
 
consumers’ willingness to adopt three-wheeled single passenger electric vehicles;
 
 
declines in the range of our electric vehicles on a single charge over time may negatively influence potential customers’ decisions to purchase such vehicles;
 
 
 
 
developments in alternative technologies or improvements in the internal combustion engine;
 
 
 
 
inability to keep up with advances in electric vehicle technology;
 
 
 
 
inability to design, develop, market and sell new electric vehicles and services that address additional market opportunities;
 
 
 
 
 
dependency on certain key personnel and any inability to retain and attract qualified personnel;
 
 
 
 
inexperience in mass-producing electric vehicles;
 
 
 
 
inability to reduce and adequately control operating costs;
 
 
 
 
failure of our vehicles to perform as expected;
 
 
 
 
inexperience in servicing electric vehicles;
 
 
 
 
inability to succeed in establishing, maintaining and strengthening the Electrameccanica brand;
 
 
 
 
disruption of supply or shortage of raw materials;
 
 
 
 
the unavailability, reduction or elimination of government and economic incentives;
 
 
 
 
failure to manage future growth effectively; and
 
 
 
 
labor and employment risks.
 
Although management has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Forward-looking statements might not prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. We wish to advise you that these cautionary remarks expressly qualify, in their entirety, all forward-looking statements attributable to our company or persons acting on our company’s behalf. We do not undertake to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such statements, except as, and to the extent required by, applicable securities laws. You should carefully review the cautionary statements and risk factors contained in this prospectus and other documents that we may file from time to time with the securities regulators.
 
 
10
 
 
 
 
 
 
 
 
USE OF PROCEEDS
 
After deducting the estimated underwriting discounts and offering expenses payable by us and assuming no exercise of the underwriters’ over-allotment option, we expect to receive net proceeds of approximately US$ 22,732,326 from this offering.
 
Gross proceeds
 US
  $ 25,000,000  
Underwriting discounts and commissions (up to 7.0% of gross proceeds)
 US
  $ 1,750,000  
Underwriting non-accountable expenses (0.5% of gross proceeds)
 US
  $ 125,000  
Retainer Fee
 US
  $ 55,000  
Miscellaneous underwriting fees expenses
 US
  $ 100,000  
Other offering expenses (1)
 US
  $ 237,674  
Net proceeds
 US
  $ 22,732,326  
 
(1)
These consist of SEC filing fees of $3,424, legal fees and expenses of approximately $150,000, the NASDAQ Capital Markets listing fee of $50,000, accountant and auditing fees and expenses of approximately $20,000, FINRA filing fees of $4,250 and other fees of approximately $10,000.
 
 
We intend to use the net proceeds of this offering as follows, and we have ordered the specific uses of proceeds in order of priority.
 
Description of Use
 
 
EstimatedAmount of NetProceeds
 
Manufacturing Plant & Equipment
 US
  $ 2,404,730  
Production Molds
 US
  $ 4,018,535  
Furniture & Fixtures
 US
  $ 125,829  
Inventory
 US
  $ 4,026,524  
Research & Development
 US
  $ 3,643,045  
Sales & Marketing
 US
  $ 2,804,985  
Repayment of Promissory Note in purchase of Intermeccanica
 US
  $ 1,500,000  
Unallocated Working Capital
 US
  $ 4,208,678  
Total
 US
  $ 22,732,326  
 
       
DIVIDEND POLICY
 
To date, we have not paid any dividends on our outstanding common shares. The future payment of dividends will depend upon our financial requirements to fund further growth, our financial condition and other factors which our Board of Directors may consider in the circumstances. We do not contemplate paying any dividends in the immediate or foreseeable futures.
 
CAPITALIZATION
 
The following table sets forth our capitalization as of November 30 , 2017 on a pro forma as adjusted basis giving effect to the offering at a public offering price of US$ per share and to reflect the application of the proceeds after deducting the estimated offering expenses. You should read this table in conjunction with our financial statements and related notes appearing elsewhere in this prospectus and “Use of Proceeds.”
 
 
 
As ofNovember 30, 2017
 
 
 
 
 
 
 
Actual (Unaudited)
 
 
Pro forma (1)
 
 
Pro forma adjusted
 
Assets:
 
 
 
 
 
 
 
 
 
 
Current Assets
 
  $ 8,910,648  
  $    
  $    
Intangible assets
 
  $ 87,289  
       
       
Property
 
  $ 1,357,878  
       
       
Other Assets
 
  $ 2,500,000  
       
  $    
Total Assets
 
  $ 12,855,815  
  $    
  $    
 
       
       
       
Liabilities:
 
       
       
       
Current Liabilities
 
  $ 1,984,412  
       
  $    
Other Liabilities
 
  $ 500,000  
       
       
Total Liabilities
 
  $ 2,484,412  
       
  $    
 
       
       
       
Shareholder’s Equity:
 
       
       
       
Common share (47,743,249 shares issued and outstanding with no par value)
 
  $ 25,601,277  
       
  $    
Additional paid-in capital (2)
 
  $ 3,601,127  
  $    
  $    
Subscription receivable
 
       
       
       
Accumulated deficit
 
  $ (18,831,001 )
       
  $    
Accumulated other comprehensive income (loss)
 $
       
       
  $    
Total shareholders’ equity
 
  $ 10,371,403  
  $    
  $    
Total Liabilities and Shareholders’ Equity
 
  $ 12,855,815  
  $    
  $    
 
(1)  
Gives effect to the sale of common shares at an offering price of US$        per share and reflects the application of the proceeds after deducting the estimated underwriting discounts and our estimated offering expenses. Converted into Canadian dollars as set out in “Currency and Exchange Rates”.
(2)  
Pro forma adjusted for additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting discount, underwriter expense allowance and other expenses. We expect to receive net proceeds of approximately US$           (US$ offering, less underwriting discount of US$ , non-accountable expense allowance of US$ and other accountable expenses of US$ , and offering expenses of US$ ). Converted into Canadian dollars as set out in “Currency and Exchange Rates”.
 
11
 
 
 
 
 
 
DILUTION
 
If you invest in our common shares, your interest will be diluted to the extent of the difference between the offering price per common share and the pro forma net tangible book value per common share after the offering. Dilution results from the fact that the per common share offering price is substantially in excess of the book value per common share attributable to the existing shareholders for our presently outstanding common share. Our net tangible book value attributable to shareholders at                    , 2018 was $         or approximately $        per common share. Net tangible book value per common share as of                       , 2018 represents the amount of total assets less intangible assets and total liabilities, divided by the number of common share outstanding.
 
We will have common shares outstanding upon completion of the offering (and if the over-allotment option is exercised in full). Our post offering pro forma net tangible book value, which gives effect to receipt of the net proceeds from the offering and issuance of additional shares in the offering, but does not take into consideration any other changes in our net tangible book value after                      , 2018, will be approximately $           or $            per common share (or $           or $            per common share if the over-allotment option is exercised in full). This would result in dilution to investors in this offering of approximately $              per common share (or $              per common share if the over-allotment option is exercised in full) or approximately        % (or         % if the over-allotment option is exercised in full) from the offering price of US$          per common share. Net tangible book value per common share would increase to the benefit of present shareholders by $            per share attributable to the purchase of the common share by investors in this offering.
 
The following table sets forth the estimated net tangible book value per common share after the offering and the dilution to persons purchasing common share based on the foregoing offering assumptions.
 
 
 
Offering Without Over-Allotment (1)
Offering With Over-Allotment (1)
 
Assumed offering price per common share
 
$
 
 
 
Net tangible book value per common share before the offering
 
$
 
 
 
Increase per common share attributable to payments by new investors
 
$
 
 
 
Pro forma net tangible book value per common share after the offering
 
$
 
 
 
Dilution per common share to new investors
 
$
 
 
 
____________
(1)    
US dollar amounts converted into $ as set out in “Currency and Exchange Rates”.
 
CURRENCY AND EXCHANGE RATES
 
All dollar amounts in this prospectus are expressed in Canadian dollars unless otherwise indicated. Our accounts are maintained in Canadian dollars, and our financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. All reference to “U.S. dollars”, “USD”, or to “US$” are to United States dollars.
 
The following table sets forth, for each period indicated, the high and low exchange rate for U.S. dollars expressed in Canadian dollars, and the average exchange rate for the periods indicated. Averages for year-end periods are calculated by using the exchange rates on the last day of each full month during the relevant period and the last available exchange rate in March during the relevant fiscal year. These rates are based on the noon buying rate certified for custom purposes by the U.S. Federal Reserve Bank of New York set forth in the H.10 statistical release of the Federal Reserve Board. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our consolidated financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Canadian dollar or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Canadian dollars, as the case may be, at any particular rate or at all.  
 
Year Ended
 
Period End
 
 
Period Average Rate
 
 
High Rate
 
 
Low Rate
 
December 31, 2015
  $ 1.3839  
  $ 1.2791  
  $ 1.3989  
  $ 1.1725  
December 31, 2016
  $ 1.3426  
  $ 1. 3243  
  $ 1. 4592  
  $ 1.2544  
 
 
 
Last Six Months
       
       
       
       
June 2017
  $ 1.2982  
  $ 1.3295  
  $ 1.3514  
  $ 1.2982  
July 2017
  $ 1.2490  
  $ 1.2690  
  $ 1.3000  
  $ 1.2436  
August 2017
  $ 1.2515  
  $ 1.2608  
  $ 1.2745  
  $ 1.2492  
September 2017
  $ 1.2509  
  $ 1.2279  
  $ 1.2509  
  $ 1.2131  
October 2017
  $ 1.2894  
  $ 1.2607  
  $ 1.2894  
  $ 1.2470  
November 2017
  $ 1.2884  
  $ 1.2773  
  $ 1.2890  
  $ 1.2693  
December 2017
  $ 1.2517  
  $ 1.2769  
    1.2900  
    1.2517  
 
Certain Conversions from U.S. dollars into Canadian dollars have been made for your convenience at US$1.00 = $ 1.2517, the noon buying price on December 29, 2017.
 
12
 
 
 
 
 
COMPANY INFORMATION
 
History and development of the Company
 
Electrameccanica Vehicles Corp. is a development-stage electric vehicle (“EV”) production company incorporated on February 16, 2015 under the laws of British Columbia, Canada. The concept for our company was developed by Jerry Kroll after years of research and development on advanced EVs.
 
Upon returning to Vancouver in 2011, Mr. Kroll decided that new electric drive systems could revolutionize car assembly and the concept for our company’s flagship EV called the “SOLO” was born. With the help of long time automotive expert and friend, Henry Reisner, President of Intermeccanica International Inc. (“Intermeccanica”), and Intermeccanica’s vast experience in automotive craftsmanship, our company’s first prototype was finished in January 2015. To solidify our presence and branding in the EV market, we incorporated in February of 2015 under the name Electrameccanica Vehicles Corp. For the past 10 years, Mr. Kroll has been researching and developing superior technologies for autonomous drive systems and dynamic induction charging. We have plans for ongoing refinements to performance, style, value and efficiency as drive systems, computerization and materials are developed.
 
In 2015, we entered into an arrangement with Intermeccanica to leverage Intermeccanica’s over 50 years of experience. Pursuant to a Joint Operating Agreement entered into between us, Intermeccanica and Mr. Reisner, dated July 15, 2015, and as amended on September 19, 2016, we agreed on an arrangement dealing with leased premises, production assembly and an option to acquire Intermeccanica. We exercised this option in October 2017 to further enhance the combination of our proprietary SOLO design with Intermeccanica’s manufacturing expertise.
 
We currently have a modern furnished showroom near the downtown core of Vancouver, British Columbia where interested consumers may receive more information on the SOLO, review its specs and technical design, and even test-drive one of the existing prototypes.
 
As of January 25, 2018, we have a number of marketing efforts that have succeeded in helping us achieve a non-binding order book of approximately $2.4 billion, including 729 private and 59,831 corporate pre-sales. Interested individuals are able to place reservations for the SOLO and the Tofino with a refundable deposit of $250 and $1,000 respectively. We have private orders for 609 SOLOs, each with a refundable deposit of $250, 14 Super SOLOs; each with a refundable deposit of $1,000 and 106 Tofinos, each with a refundable deposit of $1,000. The 59,831 corporate orders are from entities that have provided non-binding letters of interest, and are comprised of 20,330 orders for the SOLO and 39,570 orders for the Tofino.
 
We have been funding operations to date through equity financings by our founders and through private placements of $ 25,165,436 from investors. Our management maintains a majority control of our company. As our January 25, 2018, our directors and executive officers owned 71.8% of our outstanding shares, including shares that our executive officers and directors have the right to acquire within the next 60 days pursuant to warrants and stock options which have vested.
 
Corporate Headquarters
 
Our principal executive offices are located at 102 East 1 st  Avenue, Vancouver, British Columbia, Canada, V5T 1A4. Our phone number is (604) 428-7656.
 
Subsidiaries
 
We have one subsidiary, Intermeccanica International Inc., a corporation subsisting under the laws of the Province of British Columbia, Canada.
 
13
 
 
 
 
 
 
 
BUSINESS OVERVIEW
 
General
 
We are a development-stage EV company focusing on the market demand for EVs that are efficient, cost-effective and environmentally friendly methods for urban residents to commute. We believe that our flagship EV called the SOLO is the answer to such market demand. In addition, we have two other EV candidates in an advanced stage of development, the Super SOLO and the Tofino.
 
SOLO
 
 
We created the SOLO’s first prototype in January of 2015. Since the completion of the prototype, our engineers and designers have devoted efforts to provide the SOLO with an appealing design, and have engaged in proprietary research and development leading to a high performance electric rear drive motor.
 
The SOLO features a lightweight aerospace composite chassis to allow for a top speed of 130km/h, an attainable cruise speed of 110km/h and is able to go from 0 km/h to 100 km/h in approximately eight seconds. Our SOLO features a lithium ion battery system that requires only three hours of charging time on a 220-volt charging station or six hours from a 110-volt outlet. The lithium battery system utilizes approximately 8.64 kW/h for up to 160 km in range. We also offer a comprehensive warranty package for two years of unlimited mileage which is included in the price of the SOLO. Standard equipment in the SOLO includes, but is not limited to the following:
 
 
LCD Digital Instrument Cluster;
 
 
 
 
Power Windows;
 
 
 
 
AM/FM stereo with Bluetooth/ CD/USB;
 
 
 
 
Remote keyless entry system;
 
 
 
 
Rear view backup camera;
 
 
 
 
285 liters of cargo space; and
 
 
 
 
Heater and defogger.
 
Optional equipment will include air conditioning at an additional cost.
 
The purchase price for our SOLO is $19,888.
 
Our production department has completed sixteen pre-production SOLOs as at December 31, 2017, and we intend to produce up to fourteen further pre-production SOLOs by the end of July 31, 2018. Producing the pre-production SOLOs allows us to determine and assess the entire production process. Currently, we have increased our production space, organized a production line, ordered components and are in the process of fine tuning the production process through the pre-production SOLOs. We have entered into a manufacturing agreement with Zongshen and expect to begin mass production of the SOLO in the third quarter of 2018. We anticipate our production costs to be $15,000 per SOLO, providing a gross margin of 25% based on a sale price of $19,888.
 
 
14
 
 
 
 
 
 
Super Solo
 
 
 
We also plan on launching the Super SOLO, which is a sports car model within our EV product line. The Super SOLO is intended to boast a longer range and a higher top speed, sleek, aerodynamic design and features that will rival existing super sports cars such as the Ferrari 488 and Lamborghini Gallardo.
 
Refundable deposits have been accepted for the planned Super SOLO and such deposits are able to be returned at any time. Mechanical development on the Super SOLO has begun and progress will determine when this and any other variants can be launched. No set date has been declared at this time. The Super SOLO is intended to be a high-performance version of the SOLO.
 
The Tofino
 
 
We announced on March 28, 2017, at the Vancouver International Auto Show that we intend to build the Tofino, an all-electric, two-seater roadster representing an evolution of the Intermeccanica Roadster. We are designing the Tofino to be equipped with a high-performance, all-electric motor with a top speed of 200 kph (125 mph) and a 0-100 kph (0-60 mph) in less than seven seconds. The chassis and body are expected to be made of a lightweight aerospace-grade composite with the car capable of up to 400 km (250 miles) of range on a full charge. We are accepting a refundable deposit of $1,000 to reserve the Tofino.
 
Future EV candidates
 
We have identified other vehicles that we would like to add to our candidate list such as the “Cargo” and the “Twinn”. We have plans in the future to release the “Cargo,” a larger vehicle than the SOLO that is designed for use as a fleet vehicle with ample storage space which would be best suited for delivery companies such as FedEx, the United States Postal Service and Canada Post. We expect that the Cargo will offer the appropriate compartment space for fleet vehicle uses such as delivery, while offering long range capability and cleaner technology. We envision the Twinn featuring two seats, suitable for urban families, young commuters, empty nesters, and environmentally-conscious consumers.
 
 
15
 
 
 
 
 
 
Sources and Availability of Raw Materials
 
We continue to source duplicate suppliers for all of our components, and in particular, we are currently sourcing our lithium batteries from Panasonic, Samsung and LT Chem. Lithium is subject to commodity price volatility which is not under our control and could have a significant impact on the price of lithium batteries.
 
At present, we are subject to the supply of our chassis from one supplier for the production of the SOLO, the Super SOLO and the Tofino. We are exploring adding additional suppliers of the chassis to mitigate the risk of depending on only one supplier.
 
Patents and Licenses
 
We have filed patents on items that our legal counsel deem necessary to protect our products. We do not rely on any licenses from third-party vendors at this time.
 
Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of patent and design applications, trade secrets, including know-how, employee and third party non-disclosure agreements, copyright laws, trademarks and other contractual rights to establish and protect our proprietary rights in our technology. As at January 25, 2018, we had one issued design registration, two allowed design application and six pending patent and design applications with various countries which we consider core to our business in a broad range of areas related to the design of the SOLO and its powertrain. We intend to continue to file additional patent applications with respect to our technology. We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims. Even if granted, these pending patent applications might not provide us with adequate protection.
 
Trademarks
 
We operate under the trademark “ELECTRA MECCANICA SOLO”, which is registered under applicable intellectual property laws. We have also registered the trademark for the name “Tofino” in Japan and applied to register the trademark in Canada, the United States, the European Union and China. This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the  ®  or  TM  symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
 
Market Overview
 
Investment in clean technology has been trending for several years as nations, governments, and society overall become more aware of the damaging effects pollution and greenhouse gas emissions (“GHG”) have on the environment. In an attempt to prevent and/or slow-down these damaging effects and create a more sustainable environment, nations and government agencies have announced their proposals to reduce GHGs, contribute funding into research and development in clean technology, and offer incentives/rebates for clean technology investments by businesses and consumers.
 
Electric vehicle (“EV”) is a broad term for vehicles that do not solely operate on gas or diesel. Within this alternative vehicle group, there are more categories that further segment into alternative vehicles that embrace different innovative technologies such as: (i) battery electric vehicles (“BEV”); (ii) fuel-cell electric vehicles (“FCV”); or (iii) plug-in hybrid electric vehicles (“PHEV”).
 
BEVs draw on power from battery management systems to power electric motors instead of from an internal combustion engine, a fuel cell, or a fuel tank. The Nissan Leaf, Tesla Model S, and our SOLO are BEVs.
 
FCVs typically utilize a hydrogen fuel cell that, along with oxygen from the air, converts chemical energy into electricity which powers the vehicle’s motor. Emissions from a FCV are water and heat, hence making FCVs true zero-emission vehicles.
 
PHEVs are the hybrid vehicles that have both an electric motor and an internal combustion engine. A PHEV can alternate between using electricity while in its all-electric range and relying on its gas-powered engine. The Chevrolet Volt and the Toyota Prius are examples of PHEVs.
 
16
 
 
 
 
 
 
The popularity of EVs have also been met with difficulties in charging convenience. There are far more gas stations available than public EV charging stations: a search on Yellow Pages reveals that there are 439 gas stations alone in the City of Vancouver whereas the entire Province of British Columbia has approximately 500 public EV charging stations. The convenience and availability of public EV charging stations may prove to be an obstacle of mass adoption of EVs.
 
Consumers may be afraid that their EVs may run out of charge while they are out on the road and this fear is recognized by the public and has been popularized with the term “range anxiety”. Despite this fear, the distance travelled by most urban commuters is a lot lower than the typical range of an EV. Data from Statistics Canada’s National Household Survey in 2011 reported the average Canadian takes 25 minutes to commute to work.
 
There currently exists different categories of charging stations depending on the voltage they provide. EV owners can often charge at home on a regular 110-volt outlet which may take between 10 hours to 20 hours depending on the model and make of the EV. This type of outlet and charging is termed level 1 charging. Level 2 charging means the voltage at the charging station is typically around 240 volts and this type of outlet is usually available at public charging stations, shopping malls and big box retailer parking lots, and even located in certain residential hi-rises. Charging at a level 2 station typically cuts down the level 1 charge time in half and may require a small fee for the service.
 
Electric Vehicles/Automotive – Global Market
 
EVs have been around for a number of years, but have only recently gained mass adoption and public interest due to open discussions of GHG emission levels, government and international policies on climate change and pollution, increased literature on EVs, fluctuating fuel costs, and improved battery management systems and EV range. According to Navigant Research, the global light duty EV market is estimated to grow from 2.6 million vehicle sales in 2015 to over 6.0 million vehicle sales in 2024. 1
 
EVs in the global market are gaining adoption by the general public and these efforts have also been aided by traditional automotive manufacturers’ entry into the market. The majority of growth in the EV industry has been led by the following top five EV models: (1) Nissan Leaf; (2) Chevrolet Volt (PHEV); (3) Toyota Prius (PHEV); (4) Tesla Model S; and, (5) Mitsubishi Outlander (PHEV). 2  There are few manufacturers that are solely devoted to the manufacturing of EVs, the most well-known and popular one being Tesla Motors.
 
On a global scale, EVs are gaining popularity, particularly in countries where there is high population density, narrow roads, and limited urban space. According to an April article from Pedestrian Observations 3 , an online website dedicated to transit-oriented developments, several European countries are formulating programs that ban cars fueled by petrol or diesel. This initiative was introduced by Norway’s Minister for the Environment and co-spokesperson for the Green Party, which expects to implement the ban completely by 2025. 4
 
In France, the Paris region has been calling for a phase-out of the internal combustion engine due to rising levels of particulate pollution from diesel vehicles and the local government is looking into implement more battery charging stations to help commuters refuel along the way. 5  The German government is expecting German automakers to spend more money on research and development for improved battery range and charging stations. 6
 
In Belgium, Switzerland, and the Netherlands, such governments would like a similar phase-out program akin to that of Norway’s. 7  These countries expect the phase-out to be complete by 2030. 8  In some of these countries, however, there remain opposing parties to the phase-out program and it is uncertain as to how it will ultimately play out.
 
We believe that the aforementioned initiatives show that there is significant demand for EVs and with government support, adoption of EVs and changes to the industry can be made more rapidly. Our management believes that these initiatives will materialize and are optimistic at the prospects of an overall cleaner environment and bigger market for EVs.
 
Electric Vehicles/Automotive – Canadian Market
 
Data from FleetCarma.com (“FleetCarma”), a clean technology information and communications technology website, reported 2015 EV sales in Canada to be 6,933. 9  Although this number pales in comparison to the total 1.898 million internal combustion vehicles sold in Canada in 2015, the 2015 EV sales numbers represent an approximate 32% increase in sales over 2014. The graph below from FleetCarma further breaks down the number of vehicles sold by each EV automaker in Canada in 2014 and 2015.
 
 
17
 
 
1 Navigant Research Report, Global Forecasts for Light Duty Hybrid, Plug-in Hybrid, and Battery Electric Vehicle Sales and Vehicles in Use: 2015-2024, online: < https://www.navigantresearch.com/research/electric-vehicle-market-forecasts >.
2 “Electric Car Demand Growing, Global Market Hits 240,000 Units”, Cleantechnica (28 March 2015), online: < https://cleantechnica.com/2015/03/28/ev-demand-growing-global-market-hits-740000-units/ >.
3 “Several European Countries to Follow Norway’s Lead, Ban Fuel-Powered Cars”, Pedestrian Observations (1 April 2016), online: < https://pedestrianobservations.wordpress.com/2016/04/01/several-european-countries-to-follow-norways-lead-ban-fuel-powered-cars/ >. 
4  Ibid. 
5  Ibid. 
6  Ibid. 
7  Ibid. 
8  Ibid. 
9 Electric Vehicle Sales in Canada: 2015 Final Numbers, online: < http://www.fleetcarma.com/ev-sales-canada-2015/ >.
 
 
 
 
 
 
 
 
 
As can be seen from the graph above, Tesla Motor’s Model S made huge strides in sales, recording a 137% increase in 2015 over 2014. Nissan Leaf sales also increased by 23% in 2015 while Chevrolet Volt sales were down 8% in 2015 as compared to the previous year.
 
FleetCarma also states the total number of EVs on the road in Canada at 18,451. 10  54% of Canada’s total EVs are BEVs with the rest being PHEVs. FleetCarma’s data also highlights that the Province of Quebec currently leads the rest of Canada with the most registered EVs at 8,500 vehicles, representing 46% of the entire Canadian EV population. The bar chart below from FleetCarma indicates the provinces and their respective number of registered EVs as at December 31, 2015.
 
 
Data from British Columbia Air Quality 11 , a government division focused on transportation emissions, indicates that pollutant emissions from conventional gasoline vehicles produce almost five times as much volatile organic compounds (“VOCs”) than gasoline/electric hybrid vehicles.
 
 
18
 
 
10 Ibid.
11 British Columbia Government Website, B C Air Action Plan, Air Care, Diesel Bus Retrofit Program, online: < http://www.env.gov.bc.ca/epd/bcairquality/topics/government-vehicle-programs.html >.
 
 
 
 
 
 
 
 
 
* NO refers to Nitrogen Oxides | PM2.5refers to particles in air pollutants that are 2.5 micrometers or less in size
 
 
Data from Environment and Climate Change Canada 12   indicates that Canada is one of the top countries with large ratios of emissions to GDP. Canada has been working towards reducing its air pollutant emissions alongside other member countries of the Organisation for Economic Co-operation and Development (“OECD”). As can be seen in the bar chart and table below, Canada’s nitrogen levels in 2014 were reduced by 23.3% from 2004 levels. 13
 
 
 
Countries
2004 nitrogen oxide emissions
(kilotonnes)
2014 nitrogen oxide emissions
(kilotonnes)
2004 nitrogen oxide emissions intensity (tonnes per million US dollars of gross domestic product)
2014 nitrogen oxide emissions intensity (tonnes per million US dollars of gross domestic product)
United States
19,248
11,092
1.38
0.69
Canada
2,506
1,923
2.01
1.28
 
 
The below bar chart and table also illustrates the 23.6% decrease in VOC emissions in 2014 from 2004 levels. 14  The table compares Canada’s VOC emission levels with that of the United States.
 
 
19
 
 
12 Environment Canada Government Website, International Comparison of Air Pollutant Emissions, Canada’s Emission Trends, online: < https://www.ec.gc.ca/indicateurs-indicators/default.asp?lang=en&n=0B0E77F5-1 >.
13 Environment Canada Government Website, International Comparison of Air Pollutant Emissions, online: https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/international-comparison-pollutant-emissions.html.
14 Environment Canada Government Website, International Comparison of Air Pollutant Emissions, online: https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/international-comparison-pollutant-emissions.html.
 
 
 
 
 
 
 
 
Countries
2004 VOC emissions 
(kilotonnes)
2014 VOC emissions 
(kilotonnes)
2004 VOC emissions intensity (tonnes per million US dollars of gross domestic product)
2014 VOC emissions intensity (tonnes per million US dollars of gross domestic product)
United States
14,787
12,917
1.06
0.80
Canada
2,823
2,157
2.26
1.44
 
 
The above presented data also points out opportunities for EV markets in countries that have difficulties reducing the air pollution. From the bar charts above, it appears that Australia, Turkey, Poland and the United Kingdom will also be ideal markets for EVs which allow for substantial reduction in VOC and NO X emissions.
 
A February 2016 article from the Globe and Mail provides more insights on the expected levels of emissions in the coming years. According to the article, in 2020, emissions will hit 768 megatons of carbon dioxide – way above Canada’s target of 622 megatons. By 2030, they will have jumped to 815 megatons, compared with a target for that year of 524 megatons. As a result, provincial governments in Canada are carefully monitoring GHG emissions and providing funding and incentives to help reduce these emission levels. 15
 
Another reason EVs have become popular is due to variable fuel costs and vehicle maintenance costs that have become a burden for conventional gasoline automobile owners. According to the American Automobile Association, the owner of an average sedan would incur US$8,876 a year in driving costs and an average cost per mile of US$0.592 cents (US$0.367 cents per km). 16   In comparison to the above statistic, an October 2015 Globe and Mail article reports electric vehicles typically cost owners $0.016 per km to drive. 17
 
Canada is seen as a leader in many industries, but clean-tech and EVs seems not to be one of them. However, research and data reveals significant interest in EVs from Canadians. According to a recent study completed by Ipsos 18 , a market research firm, 80% of Canadians believe electric cars are the way of the future and 75% would like to drive a car not powered by gasoline. Converting that interest to likelihood to purchase, approximately 64% of respondents in the Ipsos survey expressed they would consider buying or leasing a hydrogen fuel cell vehicle. 19
 
Normally, it is difficult for innovative breakthrough technology to be rapidly adopted by the mass public unless they are well-educated on the technology and the technology is affordable and sufficiently promoted via incentives from the government. In the case of Canada, government incentives and initiatives allow for affordable EVs and convenient free or low-cost charging stations, further promoting the benefits of clean-tech to the general public. 20   Below is an overview of current and prospective provincial government incentives that encourage consumers to embrace EVs. As Ontario, Quebec and British Columbia are the top three most populous provinces in Canada, the overview will focus on these provinces.
 
In Ontario, 35% of GHGs are created from transportation emissions. 21   In an effort to reduce GHGS, the Province of Ontario has established government rebates for consumers purchasing EVs. The government of Ontario has plans to allocate $325 million for investments in green technology, a portion of it will be devoted to EV programs. 22
 
The Province of British Columbia has allotted $7.5 million funding for the Clean Energy Vehicle Program (the “CEVforBC Program”) which provides a $5,000 rebate to consumers of a qualifying battery electric, fuel-cell electric, or plug-in hybrid electric vehicle. 23   A further $1.59 million in funding will be invested by the Province of British Columbia into charging infrastructure and hydrogen fueling infrastructure. 24
 
20
 
 
15 “Canada’s Greenhouse Gas Emissions Can’t Be Cut Without a Little Pain”,  Globe and Mail  (4 February 2016), online: < http://www.theglobeandmail.com/opinion/editorials/canadas-greenhouse-gas-emissions-cant-be-cut-without-a-little-pain/article28560158/ >.
16 American Automobile Association (Electric Car Fuel Costs Savings). online: < http://exchangeev.aaa.com/benefits-of-driving-electric/fuel-cost-savings/ >. 
17 “How much does it cost in fuel to run an electric vehicle?”,  Globe and Mail  (28 October 2015), online: < http://www.theglobeandmail.com/globe-drive/culture/commuting/how-much-does-it-cost-in-fuel-to-run-an-electric-vehicle/article26999091/ >.
18 “Eight in Ten (80%) Canadians believe Electric Cars are the Way of the Future”,  Iposos  (Tuesday, August 11, 2015), online: < http://www.ipsos-na.com/news-polls/pressrelease.aspx?id=6941 >. 
19 Ibid.
20 Government of Ontario, Ministry of Transportation Website, online: < http://www.mto.gov.on.ca/english/vehicles/electric/index.shtml?utm_source=hootsuite >.
21 “Ontario Spends $20M to Build Electric Vehicle Charging Stations”,  The Canadian Press  (8 December 2015), online: < http://www.cbc.ca/news/canada/toronto/ontario-electric-vehicle-charging-stations-1.3355595 >.
22 Ibid.
23 CEV for BC Dealer Manual, online: < https://www.cevforbc.ca/sites/default/files/dealer_manual_may13_2016_update_0.pdf >.
24 Ibid.
 
 
 
 
In British Columbia alone, there are over 500 public electric vehicle charging stations to allow for convenient charging. The City of Vancouver alone boasts over 90 public electric charging stations. According to the City of Vancouver website, the municipality now has the biggest municipal EV fleet in Canada, consisting of 26 Mitsubishi iMiEVS and one Nissan Leaf. 25
 
British Columbia is not the only province in Canada offering incentives for EVs. According to a February 2016 article from CBC News, the Province of Ontario has announced, effective as of February 10, 2016, a boost to its incentives from the current range of $5,000 to $8,500 per vehicle up to $6,000 to $10,000 for the purchase or lease of eligible plug-in EVs. 26   Additional incentives are available for EVs with larger battery capacity or a five-seater vehicle. CBC News reports there are currently 5,800 EVs in Ontario alone. 27
 
According to CBC News 28 , the Ontario government is expected to allot $20 million in grants to encourage public and private sector partners to construct a network of public EV charging stations which will be available in cities, offices, residential high-rises, and along commuter highways. The EV rebates, along with the EV charging station network, are expected to help reduce Ontario GHGs by 80% of 1990 levels by the year 2050. 29
 
The Province of Quebec will be allocating $420 million to promote EVs over the five years between 2015 to 2020. As reported by CBC News 30 , Montreal and the Province of Quebec expects to add 106 curbside charging stations by Spring 2016. Curbside charging stations will allow EV owners easier access compared to current charging stations that are often located in underground parking lots. The proposed charging stations will primarily be level 2 chargers, with approximately six stations being level 3 chargers. Costs of utilizing the stations are very affordable: $1 per hour for the level 2 stations (parking costs extra) and $10 per hour for level 3 stations. Denis Coderre, the Mayor of Montreal expects the city to have a total of 1,000 charging stations by 2020. 31
 
Manufacturing Plan
 
As of January 15, 2018, we have built 16 pre-production vehicles. We have used some of these pre-production vehicles as prototypes, have delivered four to customers upon payment of the purchase price, and have used others as test drive models in our two showrooms. At our facilities located in British Colombia, we can manufacture approximately two to four vehicles per month. Our ability to build EVs at our own facilities has been enhanced by our recent acquisition of Intermeccanica which has over 50 years of custom car manufacturing expertise. Intermeccanica commenced operations during 1959 in Turin, Italy selling speed equipment kits. This led to the production of a Formula Junior racer and eventually to the first unique bodied, hand assembled road car called the InterMeccanica Puch or IMP (21). The car competed at the Nurburgring, a 13.75 mile race circuit in Germany, where it won its 500 cc class. The success of the IMP led Intermeccanica to build the Apollo (101), Griffith (14), Italia (500) and Indra (125) during the period 1959 to 1975. Thereafter, Intermeccanica moved to North America where it started to construct the Porsche 356 Speedster replica and later Intermeccanica moved to Vancouver, Canada, where it developed the tooling to produce the Roadster RS based on the 1959 Porsche 356 D, Intermeccanica incorporated its own tubular chassis in 1986 and offered various powertrains from the original VW air-cooled engine to a six cylinder engine from a Porsche 911. Intermeccanica, throughout its operating history, has built approximately 2,500 vehicles.
 
To enable us to mass produce our EVs, we have entered into a manufacturing agreement with Chongqing Zongshen Automobile Co., Ltd (“Zongshen”) located in Chongqing, China. Under the agreement, Zongshen has begun the process of establishing tooling and has contracted to produce 75,000 SOLO vehicles. Zongshen, through its subsidiary, Chongqing Zongshen Engine Manufacturing Co., Ltd. is a subsidiary of Zongshen Power. Since its establishment in 1992, Zongshen Power has grown into a large-scale scientific and technical enterprise capable of researching, developing, manufacturing and selling a diverse range of motorcycles and motorcycle engines in China. Its products include over 130 models of two-wheeled motorcycles, electric motorcycles, three-wheeled motorcycles, cross-country vehicles and ATVs with motors ranging from 35CC to 500CC. Zongshen Power has been the industry leader for many successive years. Zongshen beneficially owns approximately 11.1% of our common stock and has subscribed for common shares and warrants for a total investment of $1,017,532. If we complete this offering, we expect to begin placing orders with Zongshen in the first or second quarter of 2018 and to begin sales of SOLOs in August 2018. We anticipate that Zongshen will produce up to 5,000 of our cars in 2018, 20,000 of our cars in 2019 and 50,000 of our cars in 2020.
 
 
21
 
 
25 West Coast Electric Car Fleets, Partner Fleet Profile: City of Vancouver – EV Fleet Management, online: < http://www.westcoastelectricfleets.com/portfolio-items/vancouverbc_fleet_profile/ >.
26 “Ontario boosts incentives for electric vehicles”,  CBC News, Business Section  (10 February 2016), online: < http://www.cbc.ca/news/business/ontario-electric-vehicle-incentives-1.3442203 >. 
27 Ibid.
28 “Ontario Spends $20M to Build Electric Vehicle Charging Stations”,  The Canadian Press  (8 December 2015), online: < http://www.cbc.ca/news/canada/toronto/ontario-electric-vehicle-charging-stations-1.3355595 >. 
29 Ibid.
30 “Montreal to Get 106 Electric Car Charging Stations by Next Spring”,  CBC News  (25 October 2015), online: < http://www.cbc.ca/news/canada/montreal/montreal-electric-car-stations-1.3287858 >.
31 Ibid.
 
 
 
 
Marketing Plan
 
We recognize that marketing efforts must be focused on customer education and establishing brand presence and visibility which is expected to allow our vehicles to gain traction and subsequently gain increases in orders. Marketing and promotional efforts must emphasize the SOLO’s image as an efficient, clean, and affordable EV for the masses to commute on a daily basis. If we can successfully promote the SOLO on these points, we expect growth in sales and customer base to occur rapidly.
 
A key point to the marketing plan is to target metropolitan cities with high population density, expensive real estate, high commuter traffic load, and pollution levels which are becoming an enormous concern. Accordingly, our management has identified cities in Canada and the United States that fit the aforementioned criteria and have plans to seek out suitable locations in the following cities for additional showrooms: Toronto; Seattle; Los Angeles; San Francisco; and Manhattan.
 
Key aspects of our marketing plan are highlighted below. We plan to develop a marketing strategy that will generate interest and media buzz based on the SOLO’s selling points.
 
 
Organic engagement on social media with engaging posts aimed to educate the public about EVs and develop interest in our SOLO, which to date has had amazing traction.
 
 
 
 
Earned media – we have already received press coverage from several traditional media sources and expect these features and news stories to continue as we embark on our commercial launch.
 
 
 
 
Investor Relations/ Press Releases – our in-house investor relations team will provide media releases/kits for updates and news on our progress.
 
 
 
 
Industry shows and events – we displayed the SOLO at the Vancouver International Autoshow in March 2017 and at the Consumer Electronics Show in Las Vegas in January 2018. Promotional merchandise giveaways will enhance and further solidify our branding in consumer minds. Computer stations and payment processing software will be readily on hand at to accept SOLO reservations.
 
 
 
 
First-hand experience - Test-drives and public viewings are available at our existing showrooms in and near the Vancouver downtown core.
 
We anticipate that our marketing strategy and tactics will evolve over time as our SOLO gains momentum and we identify appropriate channels and media that align with our long-term objectives. In all of our efforts, we plan to focus on the features that differentiate our SOLO from the existing EVs on the market.
 
Reservation System
 
We have an online reservation system which allows a potential customer to reserve a SOLO by paying a refundable $250 deposit, a Super SOLO by paying a refundable $1,000 deposit and a Tofino by paying a refundable $1,000 deposit. Once reserved, the potential customer is allocated a reservation number and the reservation will be fulfilled as the respective vehicles are produced. As of January 25, 2018, we have received deposits for 609 SOLOs, 14 Super SOLOs and 106 Tofinos. In addition, we have received non-binding letters of intent for 59,831 vehicles from corporate entities that are not required to make a deposit.
 
We will earn revenue once a vehicle has been delivered to the customer who has pre-ordered their vehicle. Each order is placed in line as received and fulfilled once the vehicle becomes available. The customer may, at any time, for any reason, cancel their order and have their deposit returned. We do not consider any order as being secured until the vehicle has been delivered and full receipt of the remaining balance of the vehicle purchase price has been received.
 
Sales and Service Model
 
Sales Model
 
We sell our vehicles online via our website (www.electrameccanica.com), while we develop our planned corporate owned dealerships in key markets and franchise dealer network in other market areas. As each franchise dealer is established, any vehicles sold within such dealers designated territory will be delivered to such dealer to fulfill online orders as well as such franchise dealer’s orders.
 
We are unable to identify where we hope to establish franchise dealers as opposed to corporate owned dealerships. The establishment of franchise dealers will depend on regional demand, available candidates and local regulations. We are currently accepting expressions of interest and applications for franchised dealerships from individuals, and do not have any franchise or dealer agreements. Our vehicles will initially be available directly from Electrameccanica.
 
We plan to only establish and operate corporate owned dealerships in those states in the U.S. that do not restrict or prohibit certain retail sales models by vehicle manufacturers. In all other instances, we plan to establish franchise dealerships to comply with local regulations.
 
Service Model
 
We plan to have our vehicles serviced through our corporate and franchised dealerships.
 
 
22
 
 
 
 
 
 
Government Regulation
 
As a vehicle manufacturer established in Canada, we are required to ensure that all vehicle production meets applicable safety and environmental standards. Issuance of the National Safety Mark (the “NSM”) by the Minister of Transport for Canada will be our authorization to manufacture vehicles in Canada. Receipt of the NSM is contingent on us demonstrating that our vehicles are designed and manufactured to meet or exceed the applicable sections of the Canadian Motor Vehicle Safety Act (C.R.C. Chapter 1038) and that appropriate records are maintained. Unique to Canada, the SOLO and the Super SOLO are under the three-wheeled vehicle category and are subject to the safety standards listed in Schedule III of the Canadian Motor Vehicle Safety Regulations (“CMVSR”), which can be found at ( http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._1038/section-sched3.html ). For sale into the United States, we and our vehicles must meet the applicable parts of the U.S. Code of Federal Regulations (“CFR”) Title 49 - Transportation. This includes providing Manufacture Identification information (49 CFR Part 566), VIN-deciphering information (49 CFR Part 565), and certifying that our vehicles meet or exceeds the applicable sections of the Federal Motor Vehicle Safety Standards (40 CFR Part 571) and Environmental Protection Agency noise emission standards (40 CFR 205). Since the U.S. regulations do not have a specific class for three-wheeled ‘autocycles’, the SOLO and the Super SOLO fall under the definition of a motorcycle pursuant to Sec. 571.3 of 49 CFR Part 571.
 
We have submitted a SOLO for U.S. compliance certification at a testing facility in Quebec, Canada. The completion of certification depends on the cooperation of winter weather for testing of braking capabilities of SOLO, which is required for the testing. If there is no snow or sub-zero temperatures which would adversely affect these outdoor braking tests, completion is estimated to be by the end of January 2018. Compliance certification of the SOLO for Canada, and for any other EMV models, will not begin until U.S. compliance certification has been achieved. Canadian compliance of the SOLO is estimated to take 77 days, which again is weather dependent.
 
Within the three wheel vehicle classification in Canada, CMVSR Standard 305 sets out the regulation for prevention of injury to the occupant during and after a crash as related to the vehicle’s batteries. Under this standard, the security and integrity of electric drive system components and their isolation from the occupant are evaluated in the course of a frontal barrier crash test in accordance with Technical Standard Document No. 305. There is no such regulation applicable to the motorcycle category under the U.S. regulations.
 
Although the SOLO and the Super SOLO fall under the definition of a motorcycle under U.S. regulations, a motorcycle license is not required to drive them in all but two U.S. states.
 
Competition
 
The worldwide automotive market, particularly for alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future as we move towards production of the SOLO, the Super SOLO and the Tofino and the introduction of other models such as the anticipated “Twinn” and the “Cargo.” Other manufacturers have entered the electric vehicle market and we expect additional competitors to enter this market within the next several years. As they do, we expect that we will experience significant competition. With respect to the SOLO, we also face strong competition from established automobile manufacturers, including manufacturers of EVs, such as the Tesla Model S, the Chevrolet Volt and the Nissan Leaf.
 
A matrix of our SOLO compared to the top three selling EVs in Canada is presented below (note: in the below matrix, each vehicle may be available in different models, and only the lowest model’s specs and prices are quoted in the matrix), which information is readily available from each manufacturer’s website. Information in the below matrix analyzes key considerations of a potential purchaser of an EV.
 
 
 
23
 
 
 
 
 
 
We believe the primary competitive factors in our market include but are not limited to:
 
 
technological innovation;
 
 
 
 
product quality and safety;
 
 
service options;
 
 
 
 
product performance;
 
 
 
 
design and styling;
 
 
 
 
brand perception;
 
 
 
 
product price; and
 
 
 
 
manufacturing efficiency.
 
Most of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products. Virtually all of our competitors have more extensive customer bases and broader customer and industry relationships than we do. In addition, almost all of these companies have longer operating histories and greater name recognition than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market and sell their products more effectively.
 
Furthermore, certain large manufacturers offer financing and leasing options on their vehicles and also have the ability to market vehicles at a substantial discount, provided that the vehicles are financed through their affiliated financing company. We do not currently offer any form of direct financing on our vehicles. The lack of our direct financing options and the absence of customary vehicle discounts could put us at a competitive disadvantage.
 
We expect competition in our industry to intensify in the future in light of increased demand for alternative fuel vehicles, continuing globalization and consolidation in the worldwide automotive industry. Our ability to successfully compete in our industry will be fundamental to our future success in the EV market and our market share. We might not be able to compete successfully in our market. If our competitors introduce new cars or services that compete with or surpass the quality, price or performance of our vehicles or services, we may be unable to satisfy existing customers or attract new customers at the prices and levels that would allow us to generate attractive rates of return on our investment. Increased competition could result in price reductions and revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition and operating results.
 
Research and Development
 
We have allocated substantial resources in developing our first vehicles. We expended $2,725,094 during the nine months ended September 30, 2017, $2,778,295 during the fiscal year ended December 31, 2016 and $486,809 during the period from February 16, 2015 (date of inception) to December 31, 2015 on research and development costs which include labor and materials.
 
Employees
 
As of January 25, 2018, we employed a total of 42 full-time and no part-time people at our principal executive offices in Vancouver, British Columbia. None of our employees are covered by a collective bargaining agreement.
 
The breakdown of employees by main category of activity is as follows:
 
Activity
 
Number of Employees
 
Engineering/R&D
    28  
Sales & Marketing
    3  
General & Administration
    6  
Executives
    5  
 
24
 
 
 
 
 
 
Property, Plants and Equipment
 
Our principal office is located at 102 East 1 st  Avenue, Vancouver, British Columbia, Canada, V5T 1A4. On July 25, 2015, we together with Intermeccanica as tenants entered into a light industrial lease agreement with Cressey (Quebec Street) Development LLP (the “Landlord”) for the premises located at 102 East 1 st  Avenue, Vancouver, British Columbia. The lease agreement is for a term of five years which commenced on November 1, 2015, with a monthly minimum rent of $3,918.86 plus additional rent, which includes operating costs, property taxes, utilities and a management fee of 4% of the minimum rent for the particular lease year. The leased premises is 7,235 sq. ft. in size and we are not allowed to assign the lease or grant a sublease of the whole or any part of the leased premises without the written consent of the Landlord.
 
Currently, our development and manufacturing facility is located at 47 Braid Street, New Westminster, British Columbia, Canada and is capable of producing four to ten SOLOs per month. Our existing production facilities are being used to build four pre-production SOLOS and for the development of the Super SOLO, and they are adequate for production of the low volume required for the Super SOLO. We together with Intermeccanica as tenants entered into a lease agreement with Astron Realty Group Inc. for Unit 47, which commenced on August 1, 2016 and expires on July 31, 2020. Unit 47 is approximately 7,270 sq. ft. and the minimum rent per month is $3,938 until July 31, 2017 and $4,089 from August 1, 2017 to July 31, 2020, and we are responsible for all associated lease costs such as strata fees, property taxes, utility fees and other charges associated with the occupancy of such premises. Our management has met with several groups to discuss the possibility of a production facility located in Canada and internationally.
 
Ideally, the new production facility will be 50,000 to 200,000 square feet, which will allow our company to produce 25,000 to 50,000 SOLOs per year. We have also consulted a process design company, which will form a suitable manufacturing flow production process and facility layout for our anticipated 10 production lines that will maximize labor and equipment usage and minimize manufacturing and assembly time. Our management estimates the full assembly of a SOLO in the new production facility will take approximately four hours. An example of the layout of the new production facility is presented below. We estimate that the cost of the machinery to equip a new production facility will range from $10 million to $15 million for the assembly of vehicles. Experts in the field of designing and equipping a manufacturing facility presented to us that a facility of 50,000 to 200,000 square feet will be able to produce between 25,000 to 50,000 vehicles per year. The level of automation will determine if the equipment cost will be on the lower-end of the range ($10 million) for a semi-automated facility, to the upper-end of the range ($15 million) for a fully automated facility. While it is difficult to forecast any sales, we believe that there are enough expressions of interest to satisfy the production capabilities of the above mentioned facility. However, we do not anticipate building a new production facility until sometime in 2018 or later if the demand for the SOLO materializes.
 
 
 
 
25
 
 
 
 
 
EXEMPTIONS UNDER THE JUMPSTART OUR BUSINESS STARTUPS ACT
 
The United States Congress passed the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), which provides for certain exemptions from various reporting requirements applicable to reporting companies under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that qualify as “emerging growth companies.” We are an “emerging growth company” as defined in section 3(a) of the Exchange Act (as amended by the JOBS Act, enacted on April 5, 2012), and we will continue to qualify as an “emerging growth company” until the earliest to occur of: (a) the last day of the fiscal year during which we have total annual gross revenues of US$1,000,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (c) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Exchange Act Rule 12b–2. Therefore, we expect to continue to be an emerging growth company for the foreseeable future.
 
Generally, a registrant that registers any class of its securities under section 12 of the Exchange Act is required to include in the second and all subsequent annual reports filed by it under the Exchange Act, a management report on internal control over financial reporting and, subject to an exemption available to registrants that meet the definition of a “smaller reporting company” in Exchange Act Rule 12b-2, an auditor attestation report on management’s assessment of internal control over financial reporting. However, for so long as we continue to qualify as an emerging growth company, we will be exempt from the requirement to include an auditor attestation report in our annual reports filed under the Exchange Act, even if we do not qualify as a “smaller reporting company”. In addition, section 103(a)(3) of the Sarbanes-Oxley Act of 2002 has been amended by the JOBS Act to provide that, among other things, auditors of an emerging growth company are exempt from the rules of the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the registrant (auditor discussion and analysis).
 
Additionally, we have irrevocably elected to comply with new or revised accounting standards even though we are an emerging growth company.
 
CAUTIONARY NOTE REGARDING FINANCIAL DISCLOSURE IN THIS PROSPECTUS
 
This prospectus should be read in conjunction with the accompanying financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the International Accounting Standards Board (IASB).
 
The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis, we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations.
 
Critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments, are outlined below under the heading  Critical Accounting Policies , and have not changed significantly.
 
26
 
 
 
 
 
DIRECTORS AND SENIOR MANAGEMENT
 
Our directors and executive officers, their positions and state or province of residence are as follows:
 
 
Jerry Kroll, British Columbia, Canada
President, Chief Executive Officer, Secretary and Director
 
Iain Ball, British Columbia, Canada
Vice-President, Finance
 
Henry Reisner, British Columbia, Canada
Chief Operating Officer
 
Kulwant Sandher, British Columbia, Canada
Chief Financial Officer
 
Ed Theobald, British Columbia, Canada
General Manager
 
Shaun Greffard, British Columbia, Canada
Director
 
Rob Tarzwell, British Columbia, Canada
Director
 
Mark West, British Columbia, Canada
Vice-President, Sales & Dealerships
 
For additional information concerning our directors and senior management, please see the discussion under the heading, “Directors And Senior Management And Employees”.
 
We have a full Advisory Board in place, complete with individuals who have various backgrounds and experience to complement our operations, mission, and business strategy. The Advisory Board provides suggestions to our management on an as-needed basis. It is comprised of the following individuals:
 
 
Name
State/province of residence
Position
 
John Douglas Reynolds
British Columbia, Canada
Chairperson of Advisory Board
 
Myron Trenne
Michigan, USA
Advisory Board member
 
Anthony Luzi
Nevada, USA
Advisory Board member
 
Bill Calsbeck, British Columbia, Canada
British Columbia, Canada
Advisory Board member
 
Mike Volker, British Columbia, Canada
British Columbia, Canada
Advisory Board member
 
Jim Fletcher, British Columbia, Canada
British Columbia, Canada
Advisory Board member
 
Ted Wilkinson, British Columbia, Canada
British Columbia, Canada
Advisory Board member
 
John Douglas Reynolds, Chairperson of Advisory Board
 
Starting in 1983, Mr. Reynolds was heavily involved in the Social Credit Party of British Columbia and served as Speaker of the BC Legislative Assembly. He also served as a cabinet minister. Mr. Reynolds was a Member of Parliament for the West Vancouver – Sunshine Coast – Sea to Sky riding from 1997 to 2006 and was a coordinator of the Conservative campaign in British Columbia during that time. In 2001, Mr. Reynolds was chosen as interim party leader and leader of the opposition and served in this capacity for one year. Mr. Reynolds remained active in politics until his retirement in 2006. Currently, Mr. Reynolds is a senior strategic advisor at McMillan LLP.
 
Myron Trenne, Advisory Board
 
Mr. Trenne’s background in the automotive industry includes research and development roles at the General Motors Technical Center before becoming a founding member and Vice President of Engineering at TRW Transportation Electronics.
 
Mr. Trenne further developed his management skills through his role of General Manager of Eaton’s automotive research and development center and Yazaki North America, Inc. During his time at Yazaki North America, Inc., Mr. Trenne was the Vice President of research and development and marketing and was the General Manager responsible for overseeing a US$100 million business unit.
 
As a pioneer of automotive digital technology, Mr. Trenne led the first team to apply a programmable microcomputer to a car, which integrated anti-lock braking system, traction, cruise control, ignition and digital instruments with a single digital processor. Subsequent system developments included gas and diesel electronic fuel injection, EVs, vehicle electrical architectures, vehicle fiber optics, high voltage EV components, and Intelligent Transportation Systems. Furthermore, Mr. Trenne has authored over a dozen vehicle system and control patents.
 
Mr. Trenne had previously served as Treasurer for the Convergence Transportation Electronics Association which merged with the Society of Automotive Engineers in 2009. Mr. Trenne has served many roles in the SAE including Committee Chair and Board positions.
 
Mr. Trenne received a Bachelor of Science in electrical engineering from Kettering University, formerly known as the General Motors Institute. He also received his Master of Science in electrical engineering from the University of Colorado and is a licensed Professional Engineer.
 
 
27
 
 
 
 
 
 
Anthony Luzi, Advisory Board
 
Mr. Luzi has been involved in the EV industry for over 18 years. As a key member of the Corbin Motor Company’s Sparrow team, Anthony played an integral part in the development of the Sparrow electric vehicle. He was also the founder of Ecar Motors and served as President of Corbin Motors Daytona Beach from 2000 to 2004 and worked closely with Mike Corbin on the development of the EV Sparrow 2 in 2010. Mr. Luzi’s knowledge of sustainability and alternative resource implementation has proven invaluable in the research and development of EVs.
 
Bill Calsbeck, Advisory Board
 
Mr. Calsbeck is the founder of Ubequity Capital Partners Inc. and has been actively involved in the business of raising capital since January of 2005.
 
Mike Volker, Advisory Board
 
Mr. Volker is an entrepreneur and angel investor active in the development of new high technology ventures. Shortly after completing his education at the University of Waterloo, Mr. Volker founded Volker-Craig Ltd, a video terminal manufacturer, in 1973. After the sale of Volker-Craig Ltd. in 1981, Mr. Volker focused on supporting entrepreneurs in building their business and investing in start-ups. Mr. Volker’s dedication in helping entrepreneurs has led him to expand his reach into public education and leading entrepreneurship-centric organizations.
 
As an instructor, Mr. Volker teaches a business course and an intellectual property management course at Simon Fraser University where he is also the Director of the SFU’s Innovation Office, which facilitates the creation of new university-industry research and development partnerships and commercializes the university’s research results.
 
His recent projects include: GreenAngel Energy Corp, a public company that invests in green technologies and the Western Universities Technology Innovation Fund, an angel fund for start-ups. Mr. Volker runs the Vancouver Angel Technology Network and is actively involved with New Ventures BC, an annual business competition.
 
Mr. Volker holds a Bachelor’s degree in engineering and a Masters in Applied Science from the University of Waterloo.
 
Jim Fletcher, Advisory Board
 
Mr. Fletcher is an angel investor who has been active in the Canadian venture capital industry for over 30 years. Currently, Mr. Fletcher is an advisor/director for several venture firms including: Inbound Retargeting, TenX Ventures Inc., BitLit Media, ChangeHeroes, BDC ICE Fund, Accelerating Social Impact CCC, Enterra Feed Corporation, Cross Pacific Capital Partners, OMERS Ventures, and Recombo Inc. Mr. Fletcher is also the founder of Northwest Venture Developments.
 
Mr. Fletcher holds a Master’s in Business Administration from Harvard Business School and a Bachelor’s Degree in Engineering Physics from Queen’s University.
 
Ted Wilkinson, Advisory Board
 
Mr. Wilkinson has operated North America’s premiere Automobile Collectible Registry (Wilkinson Automobilia) for 20 years.
 
 
28
 
 
 
 
 
 
KEY INFORMATION
 
Selected Financial Data
 
 
The selected financial information set forth below has been derived from our financial statements for the fiscal year ended December 31, 2016, for the period from February 16, 2015 (date of inception) to December 31, 2015, and for the nine months ended September 30, 2017. You should read the following selected financial data together with our financial statements and the notes thereto included elsewhere in this prospectus and with the information set forth in the section titled “ Operating and Financial Review and Prospects ”.
 
 
Statement of Operations
 
 
 
Nine Months ended September 30, 2017
 
 
Year ended
December 31, 2016
 
 
Period ended
December 31, 2015
 
Revenues
    -  
    -  
    -  
Gross Margin
    -  
    -  
    -  
Net Loss
  $ 6,749,268  
  $ 8,973,347  
  $ 995,833  
Basic and Diluted Earnings (Loss) per Share
    (0.16 )
  $ (0.27 )
  $ (0.22 )
Basic and Diluted Earnings (Loss) per Share after 1 for 5 share split
    N/A  
    N/A  
  $ (0.04 ) (1)
 
 
Balance Sheet
 
 
 
September 30, 2017
 
 
December 31, 2016
 
 
December 31, 2015
 
Cash
  $ 3,464,108  
  $ 3,916,283  
  $ 106,357  
Current Assets
  $ 4,208,556  
  $ 4,437,152  
  $ 197,309  
Total Assets
  $ 4,876,118  
  $ 4,787,766  
  $ 213,118  
Current Liabilities
  $ 2,309,337  
  $ 881,176  
  $ 346,416  
Total Liabilities
  $ 2,309,337  
  $ 881,176  
  $ 346,416  
Shareholders’ Equity (Deficiency)
  $ 2,566,781  
  $ 3,906,590  
  $ (133,298 )
 
 
  (1)
After taking into account the 1 for 5 share split effective June 22, 2016.
 
Capitalization and Indebtedness
 
The following table sets forth our capitalization as of November 30, 2017, on a historical basis and as adjusted to reflect the sale of the shares:
 
 
As of November 30, 2017 (pro-forma adjusted) (1)(2)
Stockholder’s Equity (Unaudited)
 
Preferred Stock: Unlimited shares authorized with no par value
 
  Nil shares issued and outstanding
 
Common Share: Unlimited shares authorized with no par value
 
                shares issued and outstanding
 
Contributed surplus
 
Share-based payment reserve
 
Equity component of convertible loan
 
Deficit
 
Accumulated other comprehensive income
 
   Total Stockholder’s Equity
 
 
(1)  
Gives effect to the sale of common shares at an offering price of US$ per share and reflects the application of the proceeds after deducting the estimated underwriting discounts and our estimated offering expenses. Converted into Canadian dollars as set out in “Currency and Exchange Rates”.
(2)  
Pro forma adjusted for additional paid in capital reflects the net proceeds we expect to receive, after deducting underwriting discount, underwriter expense allowance and other expenses. We expect to receive net proceeds of approximately US$ (US$   offering, less underwriting discount of US$ , non-accountable expense allowance of US$ and other accountable expenses of US$ , and offering expenses of US$ ). Converted into Canadian dollars as set out in “Currency and Exchange Rates”.
 
29
 
 
 
 
 
Outstanding Share Data
 
Our authorized share capital consists of an unlimited number of common shares and preferred shares without nominal or par value. As at January 25, 2018, our outstanding equity and convertible securities were as follows:
 
Securities
Outstanding
Voting equity securities issued and outstanding
47,994,209 common shares
Preferred shares
None
Securities convertible or exercisable into voting equity securities – stock options
Vested Stock options to acquire up to 35,244,271 common shares
Securities convertible or exercisable into voting equity securities – warrants
Warrants to acquire up to 23,713,716 common shares
 

Common Shares
 
The holders of shares of our common share are entitled to vote at all meetings of shareholders, to receive dividends if, as and when declared by the directors and to participate pro rata in any distribution of property or assets upon our liquidation, winding-up or other dissolution. Our common share carries no pre-emptive rights, conversion or exchange rights, redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring the holder of our common share to contribute additional capital and no restrictions on the issuance of additional securities by us. There are no restrictions on the repurchase or redemption of common share by us except to the extent that any such repurchase or redemption would render us insolvent pursuant to the  Business Corporations Act .
 
For additional information regarding our common shares, please see the discussion under the heading entitled “Notice of Articles and Articles of Our Company - Rights, Preferences and Restrictions Attaching to Our Shares”.
 
Non-cumulative voting
 
Holders of shares of our common share do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in that event, the holders of the remaining shares will not be able to elect any of our directors.
 
Preferred Shares
 
We do not have any preferred shares outstanding as of the date of this prospectus. However, preferred shares may be issued from time to time in one or more series, each consisting of a number of preferred shares as determined by our Board of Directors, who also may fix the designations, rights, privileges, restrictions and conditions attached to the shares of each series of preferred shares. The preferred shares of each series shall, with respect to payment of dividends and distributions of assets in the event of liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, or any other distribution of our assets among our shareholders for the purpose of winding-up our affairs, rank on a preference over shares of our common share and the shares of any other class ranking junior to the preferred shares.
 
For additional information regarding our shares of preferred stock, please see the discussion under the heading entitled “Notice of Articles And Articles Of Our Company - Rights, Preferences and Restrictions Attaching to Our Shares”.
 
Stock transfer agent
 
Our stock transfer agent for our securities is Computershare Investor Services Inc. located at 510 Burrard Street, 2 nd  Floor, Vancouver, British Columbia, Canada V6C 3B9, and its telephone number is (604) 661-9400.
 
Indebtedness as of November 30, 2017:
 
Contractual obligations
 
Payments due by period
 
Total
Less than   1 year
2-3 years
4-5 years
More than   5 years
Operating Lease Obligations
$836,248 (1)
$309,046
$527,202
Nil
Nil
Other Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under IFRS
Nil
Nil
Nil
Nil
Nil
Total
$836,248
$309,046
$527,202
Nil
Nil
 
 
 
(1)
Office and warehouse rent, based on $17,410.68 per month October through December 2016; $18,422.62 per month January through December 2017. Amounts are estimated due to fluctuations in common area maintenance charges.
 
30
 
 
 
 
 
Financings
 
During the nine months ended September 30, 2017, we issued the following shares;
 
Issuance of Shares
Number of Shares Issued
Cash Proceeds
Private Placements
1,964,970
$ 2,497,415
Finder’s Fee
105,001
$ Nil
Shares issued for convertible loan
1,300,034
$ 1,300,034
Shares issued for Services
50,000
$ nil
Share issued costs
Nil
$ 131,159
 
On February 8, 2017, we completed a private placement of 320,000 units at a price of $1.00 per unit for gross proceeds of $320,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until February 8, 2022. We incurred share issue costs of $42,655 relating to this private placement.
 
On March 29, 2017, we completed a private placement of 108,000 units at a price of $1.00 per unit for gross proceeds of $108,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until March 29, 2022. On March 29, 2017, we issued 5,000 units at a price of $1.00 per unit with a fair value of $8,223 for third party finder’s fees relating to this private placement. We incurred share issue costs of $10,417 relating to this private placement.
 
On March 30, 2017, we completed a private placement of 100,000 units at a price of $1.00 per unit for gross proceeds of $100,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until March 30, 2022. We incurred share issue costs of $12,194 relating to this private placement.
 
On April 17, 2017, we completed a private placement of 200,000 units at a price of $1.00 per unit for gross proceeds of $200,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until April 17, 2022. We incurred share issue costs of $24,820 relating to this private placement.
 
On April 26, 2017, we completed a private placement of 200,000 units at a price of $1.00 per unit for gross proceeds of $200,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until April 26, 2022. We incurred share issue costs of $24,820 relating to this private placement.
 
On May 30, 2017, we completed a private placement of 75,000 units at a price of $1.00 per unit for gross proceeds of $75,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until May 30, 2022. We incurred share issue costs of $13,159 relating to this private placement.
 
On June 29, 2017, we completed a private placement of 25,000 units at a price of $1.00 per unit for gross proceeds of $25,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until June 29, 2022. We incurred share issue costs of $3,095 relating to this private placement.
 
On July 13, 2017, we completed a private placement of 300,000 units at a price of $1.00 per unit for gross proceeds of $300,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until July 13, 2022. We has agreed to pay cash third party finder’s fees of $30,000 relating to this private placement.
 
On July 27, 2017, we completed a private placement of 1,500 units at a price of $1.00 per unit for gross proceeds of $1,500. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until July 27, 2022.
 
On July 31, 2017, a previously issued unsecured convertible loan for $300,000 (note 10) was converted by the holder into units at a price of $1.00 per unit. Each unit consisted of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share for a period of five years from date of issue.
 
 
31
 
 
 
 
 
 
On July 31, 2017, we issued an unsecured convertible loan for $1,000,034. The loan, which is non-interest bearing, matures on July 31, 2018. The loan is convertible, at the holder’s option at any time before maturity into units at a price of $1.00 per unit or will automatically convert into units of the Company at a price of $1.00 per unit, if, prior to maturity the Company’s common shares trade on the over-the-counter OTCQB market (or on such other stock exchange or market on which such common shares are listed at the time and as may be selected for such purposes by the Board of Directors of the Company in its sole discretion) at either a volume weighted average trading price or with a final closing bid price of $2.00 or greater per common share for a period of 10 consecutive trading days. Each unit consisted of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share for a period of five years from date of issue. We agreed to pay a third party finder’s fee of $100,003 cash relating to this convertible loan.
 
On August 9, 2017, we completed a private placement of 200,000 units at a price of $1.00 per unit for gross proceeds of $200,000. Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of $2 per warrant share until Aug 9, 2022. We agreed to pay a third party finder’s fee of $20,000 cash relating to this private placement.
 
On October 13, 2017, we issued 12,500 common shares pursuant the exercise of stock options of $0.15 per share for proceeds of $1,875.
 
On October 16, 2017, we completed a private placement of 50,000 units at a price of USD $6.00 per unit for gross proceeds of USD $300,000 (CAD $373,350). Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of USD $12.00 per warrant share until October 16, 2019. On October 16, 2017, we issued 2,000 common shares at a price of USD $6.00 per share with a fair value of USD $12,000 (CAD $14,934) for third party finder’s fees relating to this private placement. Additionally, we agreed to pay a third party finder’s fee of USD $18,000 (CAD $23,642) cash relating to this private placement.
 
On October 17, 2017, we issued an unsecured convertible loan for USD $1,152,289 (CAD $1,437,277). The loan, which is non-interest bearing, matures on October 17, 2018. The loan is convertible, at the holder’s option at any time before maturity into units at a price of USD $3.60 per unit or will automatically convert into units at a price of USD $3.60 per unit, if prior to maturity our common shares trades on the OTCQB (or such other stock exchange on which the common shares are listed) at either a volume weighted average trading price or final closing bid price of USD $8.00 or greater per common share for a period of 10 consecutive trading days. Each unit consisted of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of USD 7.20 per warrant share for a period of five years from date of issue. We agreed to pay a third party finder’s fee of USD $115,229 (CAD $143,728) cash relating to the convertible loan upon conversion of the loan to common shares.
 
On October 23, 2017, we completed a private placement of 45,045 common shares at a price of USD $5.55 per share for gross proceeds of USD $250,000 (CAD $315,790).
 
On October 31, 2017, we completed a private placement of 250,000 units at a price of USD $3.75 per unit for gross proceeds of USD $937,500 (CAD $1,192,545). Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of USD $7.50 per warrant share until October 31, 2024. On October 31, 2017, we issued 12,500 common shares at a price of USD $3.75 per share with a fair value of USD $46,875 (CAD $59,625) for third party finder’s fees relating to this private placement. Additionally, we agreed to pay a third party finder’s fee of USD $65,625 (CAD $83,475) cash relating to this private placement.
 
On November 6, 2017, we entered into a private placement and option subscription agreement. Pursuant to the agreement, we issued 352,941 shares at a price of $0.85 for gross proceeds of $300,000. We agreed to pay a third party finder’s fee of $30,000 cash relating to this private placement.
 
On November 9, 2017, we completed a private placement of 250,000 units at a price of USD $3.75 per unit for gross proceeds of USD $937,500 (CAD $1,187,906). Each unit consists of one common share and one non-transferable common share purchase warrant with each warrant entitling the subscriber to acquire one additional share at a price of USD $7.50 per warrant share until November 9, 2019. On November 9, 2017, we issued 12,500 common shares at a price of USD $3.75 per share with a fair value of USD $46,875 (CAD $59,395) for third party finder’s fees relating to this private placement. Additionally, we agreed to pay a third party finder’s fee of USD $65,625 (CAD $83,153) cash relating to this private placement.
 
Incentive Stock Options
 
During the nine months ended September 30, 2017, we granted 1,120,000 additional stock options with an exercise price of $1.00 per share, which options will expire on February 17, 2023. The following table represents the number of stock options that are outstanding as at September 30, 2017.
 
Date of Grant
 
Number of Options
 
 
Price Per Option
 
Expiry Date
June 11, 2015
    45,000,000  
  $ 0.15  
June 11, 2022
August 13, 2015
    2,675,000  
  $ 0.15  
August 13, 2022
December 9, 2015
    8,400,000  
  $ 0.40  
December 9, 2022
March 7, 2016
    25,000  
  $ 0.40  
March 7, 2023
June 21, 2016
    75,000  
  $ 1.00  
June 21, 2023
February 17, 2017
    935,000  
  $ 1.00  
February 17, 2023
August 8, 2017
    100,000  
  $ 1.00  
August 8, 2023
 
32
 
 
 
 
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
The following discussion and analysis should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our management’s current expectations, estimates and projections for our business, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under the headings entitled “ Forward-Looking Statements ” and “ Risk Factors ”.
 
Overview
 
ElectraMeccanica Vehicles Corp., (the “Company”) was incorporated on February 16, 2015, under the laws of the province of British Columbia, Canada, and our principal activity is the development and manufacturing of single occupancy electric vehicles. Our head office and principal address is located at 102 East 1 st Avenue, Vancouver, British Columbia, Canada, V5T 1A4.
 
Results of Operations
 
The period ended September 30, 2017 as compared to the period ended September 30, 2016
 
Three months ended September 30, 2017
 
During the quarter ended September 30, 2017, we incurred a comprehensive loss of $2,984,732 compared to $1,453,885 loss for the corresponding period in 2016. The largest expense items that resulted in an increase in net comprehensive loss for the quarter ended September 30, 2017 were;
 
General and administrative expenses for quarter ended September 30, 2017 were $589,707 compared to $363,345 for the quarter ended September 30, 2016. The following items are included in office and general expenses;
 
Rent increased to $65,698 for the quarter ended September 30, 2017 from $36,794 for the corresponding quarter ended September 30, 2016. The increase was caused by the increase in our production premises as it expands its production capabilities to produce the SOLO and an increase in its retail presence.
Office expenses increased to $29,637 for the quarter ended September 30, 2017 from $19,440 for the corresponding quarter ended September 30, 2016. As we increase our staffing levels, office expenses will increase as well.
Legal & Professional increased to $269,296 for the quarter ended September 30, 2017 from $196,001 for the corresponding quarter ended September 30, 2016. The increase in legal and professional expenses relate to the purchase of Intermeccanica, and fees related to our filing and receiving of its Scientific, Research and Experimental Development (SRED) claim.
Consulting fees were $67,148 for the quarter September 30, 2017 compared to $67,484 for the corresponding quarter ended September 30, 2016. Consulting fees relate to services provided for accounting, finance and corporate advisory services.
Investor relations expenses increased to $76,004 for the quarter ended September 30, 2017 from $nil for the corresponding period ended September 30, 2016. We increased our investor relations activities as we transition to a public company.
Salaries increased to $81,924 for the quarter ended September 2017 compared to $43,626 for the corresponding period ended September 30, 2016. The increase is related to performance increases to certain salaried employees.
 
Research and development expenses were $820,044 for the quarter ended September 30, 2017 from $850,295 for the corresponding quarter ended September 30, 2016. We continue to develop our first electric vehicles, and all of our research and development costs are attributable to the build of our prototypes. All costs related to pre-production vehicles are being expensed to research and development. During the quarter ended September 30, 2017, we received $111,380 (2016: $50,319) in government grants.
 
Sales and marketing expenses increased to $441,253 for the quarter ended September 30, 2017, from $53,938 for the corresponding quarter ended September 30, 2016. We have increased our sales and marketing efforts by opening retail stores, increasing our social media presence and increasing our staff as our first electric vehicle, the SOLO, nears production. During the three months ended September 2017, we issued 45,045 warrants to a consultant to provide marketing services which were fair valued at $288,000.
 
Stock-based compensation charges for the quarter ended September 30, 2017 were $282,167 as compared to $175,180 for the quarter ended September 30, 2016. We issued 1,020,000 stock options at an exercise price of $1.00 per share during the quarter ended March 31, 2017 and 100,000 stock options at an exercise price of $1.00 per share during the three months ended September 30, 2017. In addition, the stock-based compensation charges relate to stock options issued during previous quarters where charges are recognized over the stock option vesting period. We use the Black-Scholes method of calculating the stock-based compensation expense under the graded method.
 
Our operating expenses for the quarter ended September 30, 2017 increased to $2,163,168 as compared to $1,447,366 for the quarter ended September 30, 2017. The increase in operating loss was caused by the aforementioned expenses for the year.
 
We incurred an interest accretion expense of $145,985 for the quarter ended September 30, 2017 (2016: $(5,181)), relating to a convertible loan (see note 11 in the financial statements for the nine months ended September 30, 2017). We valued our finder’s fee related to the convertible loan of $675,007 (2016: $nil). We also had a foreign exchange loss of $572 (2016: $(1,338)).
 
Our net loss and comprehensive loss for the quarter ended September 30, 2017 was $2,984,732 (2016: $1,453,885).
 
33
 
 
 
 
 
Nine months ended September 30, 2017
 
During the nine months ended September 30, 2017, we incurred a comprehensive loss of $6,749,268 compared to $3,536,039 loss for the corresponding period. The largest expense items that resulted in an increase in net comprehensive loss for the nine months ended September 30, 2017 were;
 
General and administrative expenses for the nine months ended September 30, 2017 were $1,517,662 compared to $751,216 for the nine months ended September 30, 2016. The following items are included in general and administrative expenses;
 
Rent increased to $186,392 for the nine months ended September 30, 2017 from $94,129 for the corresponding period ended September 30, 2016. The increase was caused by the increase in our production premises as we expand our production capabilities to produce the SOLO and an increase in its retail presence
Office expenses increased to $90,335 for the nine months ended September 30, 2017 from $53,747 for the corresponding quarter ended September 30, 2016. As we increase our staffing levels, office expenses will increase as well.
Legal & Professional increased to $622,700 for the nine months ended September 30, 2017 from $375,332 for the corresponding period ended September 30, 2016. The majority of the legal expenses was due to our filing of its application for a ticker symbol to FINRA in the United States of America; other legal costs associated with contracts, together with professional fees associated with the filing of our amended F1 resale registration statement; the purchase of Intermeccanica, and fees related to our filing and receiving of its Scientific, Research and Experimental Development (SRED) claim.
Consulting fees increased to $254,056 for the nine months September 30, 2017 from $127,187 for the corresponding period ended September 30, 2016. Consulting fees relate to services provided for accounting, finance and corporate advisory services.
 
Research and development expenses increased to $2,725,094 for the nine months ended September 30, 2017, from $1,977,205 for the corresponding period ended September 30, 2016. We continue to develop our first electric vehicles, and all of our research and development costs are attributable to the build of our prototypes. All costs related to pre-production vehicles are being expensed to research and development. During the nine months ended September 30, 2017, we received $304,914 (2016: $145,780) in government grants.
 
Sales and marketing expenses increased to $731,491 for the nine months ended September 30, 2017, from $129,998 for the corresponding period ended September 30, 2016. We have increased our sales and marketing efforts in the period by opening two retail stores, increasing our social media presence and increasing our staff as our first electric vehicle, the SOLO, nears full production. During the nine months ended September 2017, we issued 45,045 warrants to a consultant to provide marketing services which were fair valued at $288,000.
 
Stock-based compensation charges for the nine months ended September 30, 2017 were $819,546 (2016: $659,802). We issued 1,120,000 stock options at an exercise price of $1.00 per share during the nine months ended September 30, 2017. In addition, the stock-based compensation charges relate to stock options issued during previous quarters where charges are recognized over the stock option vesting period. We use the Black-Scholes method of calculating the stock-based compensation expense under the graded method.
 
Our operating expenses for the nine months ended September 30, 2017 increased to $5,878,994 (2016: $3,526,478). The increase in operating loss was caused by the aforementioned expenses for the year.
 
We incurred an interest accretion expense of $186,764 for the nine months ended September 30, 2017 (2016: $(5,181)), relating to a convertible loan (note 11 in the financial statements for the nine months ended September 30, 2017). We valued our finder’s fee related to the convertible loan of $675,007 (2016: $nil). We also had a foreign exchange loss of $8,503 (2016: $(4,380)).
 
Our net loss and comprehensive loss of the nine months ended September 30, 2017 was $6,749,268 (2016: $3,536,039).
34
 
 
 
 
 
 
Year ended December 31, 2016 as compared to the period from February 16, 2015 (date of inception) to December 31, 2015
 
Revenues
 
We did not generate any revenue during the fiscal year ended December 31, 2016 (2015: $nil).
 
Operating Expenses
 
We incurred costs and expenses in the amount of $8,942,022 for the fiscal year ended December 31, 2016, an increase from costs and expenses of $994,014 for the period ended December 31, 2015.
 
This increase in incurred costs and expenses is primarily attributable to the collective results of the following factors:
 
 
General and administrative expenses for year ended December 31, 2016 were $1,205,835 compared to $132,870 for the period ended December 31, 2015. The following items are included in office and general expenses:
 
 
o
Rent increased to $141,957 for the year ended December 2016 from $17,936 for the period ended December 31, 2015. The increase was caused by the increase in our premises as we expand our production capabilities;
 
 
 
 
o
Office expenses increased to $113,158 for the year ended December 31, 2016 from $18,013 for the period ended December 31, 2015. As we increase our staffing levels, office expenses will increase as well;
 
 
 
 
o
Legal & Professional increased to $643,725 for the year ended December 31, 2016 from $78,660 for the period ended December 31, 2015. The majority of the legal expenses were due to our filing of our Form F-1 registration statement with the United States Securities and Exchange Commission and negotiation and preparation of contractual arrangements; and
 
 
 
 
o
Consulting fees increased to $186,437 for the year ended December 31, 2016 from $11,985 for the period ended December 31, 2015. Consulting fees relate to services provided for accounting, finance and investor relations.
 
 
Research and development expenses increased to $2,778,295 for the year ended December 31, 2016, from $486,809 for the period ended December 31, 2015. We continue to develop our first electric vehicles. All costs related to pre-production vehicles are being expensed to research and development. During the year ended December 31, 2016, we received $203,997 (2015: $12,775) in government grants.
 
 
 
 
Sales and marketing expenses increased to $209,455 for the year ended December 31, 2016 from $19,691 for the period ended December 31, 2015. We have increased our sales and marketing efforts as our first electric vehicle, the SOLO, nears production.
 
 
 
 
Stock-based compensation charges for the year ended December 31, 2016 were $1,461,189 (2015: $354,015). We granted 25,000 stock options with an exercise price of $0.40 per share, and 75,000 additional stock options with an exercise price of $1.00 per share during the year ended December 31, 2016. In addition, the stock-based compensation charges relate to stock options issued during previous quarters where charges are recognized over the stock option vesting period. We use the Black-Scholes method of calculating the stock-based compensation expense under the graded method.
 
 
 
 
Share-based payment expense for the year ended December 31, 2016 was $3,264,681 (2015: $nil), was caused by private placement shares being issued at a price less than the estimated fair value of the shares to certain individuals and organizations.
 
Other Items
 
We incurred an interest accretion expense of $25,908 for the year ended December 31, 2016 (2015: $92) relating to a convertible loan (note 10 in the financial statements for the year ended December 31, 2016).
 
In addition, other items include a foreign exchange loss of $5,417 for the year ended December 31, 2016 (2015: $1,727). Some of our expenses are paid to suppliers based in the United States who invoice us in US dollars.
 
Net and Comprehensive Income (Loss)
 
As a result of the above factors, we reported a net loss and comprehensive loss for the year ended December 31, 2016 of $8,973,347 (2015: $995,833).
 
 
35
 
 
 
 
 
 
Liquidity and Capital Resources
 
Our operations consist of the designing, developing and manufacturing of electric vehicles. Our financial success depends upon our ability to market and sell our electric vehicles; and to raise sufficient working capital to enable us to execute our business plan. Our historical capital needs have been met by the sale of common shares. Equity funding might not be possible at the times required by us. If no funds are can be raised and sales of our electric vehicles do not produce sufficient net cash flow, then we may require a significant curtailing of operations to ensure our survival.
 
The financial statements have been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in the normal course of business for the foreseeable future. We incurred a net loss and comprehensive loss of $6,749,268 during the nine months ended September 30, 2017 and had a cash balance and a working capital surplus of $3,464,108 and $1,899,219, respectively, as at September 30, 2017. Our ability to meet our obligations as they fall due and to continue to operate as a going concern depends on the continued financial support of the creditors and the shareholders. In the past, we have relied on sales of our equity securities to meet our cash requirements. Funding from this or other sources might not be sufficient in the future to continue our operations. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to us. Failure to obtain such financing on a timely basis could cause us to reduce or terminate our operations. The above indicates the existence of a material uncertainty that may cast significant doubt on our ability to continue as a going concern.
 
We had $1,899,219 of working capital surplus as at September 30, 2017 compared to $3,555,976 working capital surplus as at December 31, 2016. The decrease in working capital surplus resulted from the cash used in operations of $4,405,321, (2016: $2,651,682); cash used in investing activities of $402,149 (2016: $77,162); which was offset by financing activities generating cash of $4,355,295, (2016: $2,856,700), due to the issuance of 1,964,970 common shares for net cash proceeds of $2,146,000 (2016: $2,585,200) and net proceeds from the issuance of a convertible loan of $2,209,295 (2016: $300,000).
 
As at September 30, 2017, we had cash and cash equivalents of $3,464,108 (2016: $234,213). As at December 31, 2016, we had cash and cash equivalents of $3,916,283 (2015: $106,357). We are pursuing equity financing, but we might not successful in our endeavors.
 
As of November 19, 2017, we had no outstanding commitments, other than rent and lease commitments and $7.8 million payable to our manufacturing partner for the production of the SOLO. We have not pledged any of our assets as security for loans, or otherwise and are not subject to any debt covenants.
 
As of December 31, 2016, we had total current assets of $4,437,152 and total current liabilities in the amount of $881,176. As a result, we had working capital surplus of $3,555,976 as of December 31, 2016 (2015: $(149,107)).
Subsequent to December 31, 2016, we issued 528,000 common shares for proceeds of $491,000, net of share issue costs.
 
Our monthly burn rate is currently $310,000 per month.
 
Cash Used in Operating Activities
 
Operating activities used $4,405,321 in cash for the nine months ended September 30, 2017 compared to $2,651,682 in cash for the nine months ending September 30, 2016. Operating activities used $4,162,835 in cash for the fiscal year ended December 31, 2016, compared to $570,725 in cash used in operating activities for the period from February 16, 2015 (date of inception) to December 31, 2015. Our negative cash flow from operating activities for the nine month periods and the fiscal year ended December 31, 2016 was caused by our being in development phase of our overall business plan, and we do not expect to realize any revenues until the second quarter of 2018.
 
Cash Used in Investing Activities
 
Cash flows used in investing activities for the nine months ending September 30, 2017 was $402,149 compared to $77,162 cash flows used in investing activities for the nine months ending September 30, 2016.
 
Cash flows used in investing activities for the fiscal year ended December 31, 2016 was $357,372 compared to $16,438 cash flows used in investing activities for the period from February 16, 2015 (date of inception) to December 31, 2015. The cash flows used in investing activities for the fiscal year ended December 31, 2016, was caused by expenditures in equipment of $232,027 (2015: $16,438), investment of $100,000 (2015: $nil) and expenditures on patents and trademarks of $25,345 (2015: $nil).
 
Cash flows from Financing Activities
 
Cash flows generated from financing activities for the nine months ended September 30, 2017 were $4,355,295, compared to $2,856,700 for the nine months ended September 30, 2016, due to the issuance of 1,964,970 common shares for net cash proceeds of $2,146,000 (2016: $2,585,200) and net proceeds from the issuance of a convertible loan of $2,209,295 (2016: $300,000).
 
Cash flows generated from financing activities for the fiscal year ended December 31, 2016 were $8,330,133, compared to $693,520 for the period from February 16, 2015 (date of inception) to December 31, 2015. During the fiscal year ended December 31, 2016, we repaid a shareholder loan of $135,000, from proceeds generated from the issuance of Common Shares net of share issue costs of $8,063,633 (2015: $458,520) and also received $300,000 from a convertible loan which converted to equity at $1.00 per share when received a ticker symbol and our Common Shares posted for trading on the OTCQB.
 
 
36
 
 
 
 
 
 
Off-Balance Sheet Arrangements
 
As of September 30, 2017, we did not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations) or other relationships with any unconsolidated entities or other persons that may have material current or future effect on financial conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.
 
Research and Development, Patents and Licenses, etc.
 
Research costs are expensed when incurred. Development costs including direct material, direct labor and contract service costs are capitalized as intangible assets when we can demonstrate that the technical feasibility of a project has been established; that we intend to complete the asset for use or sale and have the ability to do so; that the asset can generate probable future economic benefits; that the technical and financial resources are available to complete the development; and that we 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, we have not met the criteria to capitalize development costs.
 
The following table specifies the amounts spent on research and development for the fiscal year ended December 31, 2016 as well as for the period from inception to December 31, 2015:
 
 
 
Nine Months ended September 30, 2017
 
 
 
Fiscal year ended December 31,   2016
 
 
 
February 16 to December 31, 2015
 
 
Labor
 
  $ 1,359,508  
  $ 1,715,562  
  $ 382,047  
Materials
 
    1,670,500  
    1,266,730  
    117,537  
Government grants
 
    (304,914 )
    (203,997 )
    (12,775 )
Total
 
  $ 2,725,094  
  $ 2,778,295  
  $ 486,809  
 
Trend Information
 
Due to our short operating history, we are not aware of any trends that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. However, as of January 25, 2018, we had an order backlog of 609 SOLOs, 14 Super SOLOs and 106 Tofinos.
 
Going Concern
 
The accompanying financial statements have been prepared under the assumption that our company will continue as a going concern. We are a development stage company and have incurred losses since our inception. As shown in the accompanying financial statements, we have had no revenues and have incurred a net loss and comprehensive loss of $8,973,347 during the year ended December 31, 2016 and have a cash balance and a working capital surplus of $3,916,283 and $3,555,976, respectively, as at December 31, 2016. We raised $491,000 subsequent to December 31, 2016, which may not be sufficient to enable us to operate for the next 12 months and execute our business plan.
 
Our ability to meet our obligations as they fall due and to continue to operate as a going concern depends on the continued financial support of our creditors and our shareholders. In the past, we have relied on sales of our equity securities to meet our cash requirements. Funding from this or other sources might not be sufficient in the future to continue our operations. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or terms that are acceptable to us. Failure to obtain such financing on a timely basis could cause us to reduce or terminate our operations. The above indicates the existence of a material uncertainty that may cast significant doubt on our ability to continue as a going concern.
 
The financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
 
As at September 30, 2017, we had not commenced commercial production and we are currently unable to finance day to day activities through operations. Our continuation as a going concern depends upon the successful results from our electric vehicles manufacturing activities and our ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations. These factors indicate the existence of a material uncertainty that may cast significant doubt about our ability to continue as a going concern. Management intends to finance its operations over the next twelve months through the proceeds derived from this offering. Should we be unable to continue as a going concern, the net realizable value of our assets may be materially less than the amounts on our statement of financial position.
 
 
37
 
 
 
 
 
Internal control over financial reporting and disclosure controls and procedures
 
Management is responsible for the design and maintenance of both internal control systems over financial reporting and disclosure controls and procedures. Disclosure controls and procedures are designed to provide reasonable assurance that relevant information is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure.
 
Current disclosure controls include meetings with the Chief Executive Officer, Chief Financial Officer and members of our Board of Directors and Audit Committee through e-mails, on telephone conferences and informal meetings to review public disclosure. All public disclosures are reviewed by certain members of senior management and our board of directors and audit committee. Our Board of Directors has delegated the duties to the Chief Executive Officer who is primarily responsible for financial and disclosure controls.
 
Management and the board of directors continue to work to mitigate the risk of material misstatement.
 
Critical Accounting Estimates.
 
The preparation of our financial statements requires management to use estimates and assumptions that affect the reported amounts of assets and liabilities as well as revenue and expenses.
 
Research costs are expensed when incurred and are stated net of government grants. Development costs including direct material, direct labor and contract service costs are capitalized as intangible assets when we can demonstrate that the technical feasibility of a project has been established; that we intend to complete the asset for use or sale and have the ability to do so; that the asset can generate probable future economic benefits; the technical and financial resources are available to complete the development; and that we can reliably measure the expenditure attributable to the intangible asset during its development.
 
We account for all stock-based payments and awards using the fair value based method. Under the fair value based method, stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity estimates issued, or liabilities incurred, whichever is more reliably measurable.
 
From time to time, we must make accounting estimates. These are based on the best information available at the time, utilizing generally accepted industry standards.
 
Financial Instruments
 
We classify our financial instruments in the following categories:
 
 
at fair value through profit or loss;
 
 
loans and receivables;
 
 
 
 
held-to-maturity investments; and
 
 
 
 
available-for-sale and financial liabilities.
 
The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition. We have no financial instruments classified as fair value through profit or loss, held-to-maturity, or available for sale.
 
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. Cash and accounts receivable are classified as loans and receivables.
 
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost. Our non-derivative financial liabilities consist of trade payables, advance payable, refundable deposits for shares, sales deposits and shareholder loans.
 
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and we have transferred substantially all risks and rewards of ownership.
 
At each reporting date, we assess whether there is objective evidence that a financial instrument has been impaired. Any impairment is recorded in profit or loss. No impairment was required on our financial instruments.
 
We do not have any derivative financial assets and liabilities.
 
 
38
 
 
 
 
 
 
Financial Instruments and Financial Risk Management
 
We are exposed in varying degrees to a variety of financial instrument related risks. Our 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. Our primary exposure to credit risk is on our cash held in bank accounts. The majority of cash is deposited in bank accounts held with major banks in Canada. As most of our cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. Our secondary exposure to risk is on its other receivables. This risk is minimal as receivables consist primarily of government grant and refundable government value added taxes.
 
Liquidity Risk
 
Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We have a planning and budgeting process in place to help determine the funds required to support our normal operating requirements on an ongoing basis. We ensure that there are sufficient funds to meet our short-term business requirements, taking into account our anticipated cash flows from operations and our holdings of cash and cash equivalents.
 
Historically, our source of funding has been shareholder loans and the issuance of convertible debt and equity securities for cash, primarily through private placements. Our access to financing is always uncertain. There can be no assurance of continued access to significant debt and equity funding.
 
The following is an analysis of the contractual maturities of our non-derivative financial liabilities as at September 30, 2017:
 
At September 30, 2017
 
Within one year
 
 
Between one and five years
 
 
More than
five years
 
Trade payables
  $ 318,054  
  $ -  
  $ -  
Customer deposits
    205,000  
    -  
    -  
Deposit on financing
    1,209,261  
    -  
    -  
Total
  $ 1,732,315  
  $ -  
  $ -  
 
 
At December 31, 2016
 
Within one year
 
 
Between one and five years
 
 
More than
five years
 
Trade payables
  $ 150,305  
  $ -  
  $ -  
Customer deposits
    169,500  
    -  
    -  
Convertible loan
    243,676  
    -  
    -  
Total
  $ 563,481  
  $ -  
  $ -  
 
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. We are exposed to currency risk as we incur expenditures that are denominated in US dollars while our functional currency is the Canadian dollar. We do not hedge our 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:
 
 
 
September 30,
2017
 
 
December 31,
2016
 
 
December 31,
2015
 
Cash and cash equivalents
  $ 1,874,044  
  $ 98,762  
  $ 43,638  
Trade payables
    (124,479 )
    (4,804 )
    (18,804 )
Total
  $ 1,749,565  
  $ 93,958  
  $ 25,554  
 
Based on the above net exposures, as at September 30, 2017, a 10% change in the US dollars to Canadian dollar exchange rate would impact our net loss by $140,339 (December 31, 2016 - $6,992).
 
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. We are 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 our net loss of $9,338 for the period ended September 30, 2017 (December 31, 2016 - $39,163)
 
39
 
 
 
 
 
Classification of Financial Instruments
 
Financial assets included in the statement of financial position are as follows:
 
 
 
September 30,
2017
 
 
December 31,
2016
 
 
December 31,
2015
 
Loans and receivables:
 
 
 
 
 
 
 
 
 
  Cash and cash equivalents
  $ 3,464,108  
  $ 3,916,283  
  $ 106,357  
  Other receivables
    143,717  
    271,284  
    28,639  
Total
  $ 3,607,825  
  $ 4,187,567  
  $ 134,996  
 
 
Financial liabilities included in the statement of financial position are as follows:
 
 
 
September 30,
2017
 
 
December 31,
2016
 
 
December 31,
2015
 
Non-derivative financial liabilities:
 
 
 
 
 
 
 
 
 
  Trade payable
  $ 318,054  
  $ 150,305  
  $ 67,718  
Advance payable
    -  
    -  
    50,000  
Customer deposits
    205,000  
    169,500  
    28,506  
  Shareholder loan
    -  
    -  
    185,000  
  Convertible loan
    1,209,261  
    243,676  
    -  
 
  $ 1,732,315  
  $ 563,481  
  $ 331,224  
 
Fair Value
 
The fair value of our 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:
 
 
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
 
 
 
 
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and
 
 
 
 
Level 3 – Inputs that are not based on observable market data.
 
The following is an analysis of our financial assets measured at fair value as at December 31, 2015:
 
 
 
As at December 31, 2015
 
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Cash and cash equivalents
  $ 106,357  
    -  
    -  
 
The following is an analysis of our financial assets measured at fair value as at December 31, 2016:
 
 
 
As at December 31, 2016
 
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Cash and cash equivalents
  $ 3,916,283  
    -  
    -  
 
The following is an analysis of our financial assets measured at fair value as at September 30, 2017:
 
 
 
As at September 30, 2017
 
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
Cash and cash equivalents
  $ 3,464,108  
    -  
    -  
 
40
 
 
 
 
 
 
Critical Accounting Policies and Estimates
 
The preparation of financial statements in accordance with IFRS requires us to make estimates and assumptions concerning the future. Our 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 useful lives of property, plant and equipment, fair value measurements for financial instruments and share-based payments, and the recoverability and measurement of deferred tax assets.
 
The preparation of financial statements in accordance with IFRS requires us to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying our financial statements include:
 
 
the assessment of our ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty;
 
 
 
 
the classification of financial instruments; and
 
 
 
 
the calculation of income taxes requires judgment in interpreting tax rules and regulations.
 
Our financial statements for the fiscal year ended December 31, 2016 and for the period ended December 31, 2015 have been prepared by management in accordance with IFRS, as adopted by the International Accounting Standards Board.
 
The critical accounting policies used in the preparation of these consolidated financial statements are described below.
 
Our accounting policies are disclosed in Note 2 of the Notes to our financial statements. During the fiscal year ended December 31, 2016 there were no material changes to these policies. Our more critical accounting policies are noted below:
 
Research and Development Costs
 
Research costs are expensed when incurred. Development costs including direct material, direct labor and contract service costs are capitalized as intangible assets when we can demonstrate that the technical feasibility of a project has been established; that we intend to complete the asset for use or sale and have the ability to do so; that the asset can generate probable future economic benefits; that the technical and financial resources are available to complete the development; and that we 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, we have not met the criteria to capitalize development costs.
 
Accounting standards issued but not yet applied
 
New standard IFRS 9 “Financial Instruments”
 
This new standard is a partial replacement of IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets.
 
The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. We are currently assessing the impact this new 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 our financial statements.
 
New standard IFRS 15 “Revenue from Contracts with Customers”
 
This new standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. IFRS 15 is effective for annual periods beginning on or after January 1, 2018 with early adoption permitted.
 
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.
 
We have not early adopted these new standards and are currently assessing the impact that these standards will have on our 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 our financial statements.
 
 
41
 
 
 
 
 
 
 
DIRECTORS AND SENIOR MANAGEMENT AND EMPLOYEES
 
Our Notice of Articles and Articles are attached to this registration statement as exhibits. The Articles of the Company provide that the number of directors is set at:
 
 
(a)
subject to paragraphs (b) and (c), the number of directors that is equal to the number of our first directors;
 
 
 
 
 
(b)
if we are a public company, the greater of three and the number most recently elected by ordinary resolution (whether or not previous notice of the resolution was given); and
 
 
 
(c)
if we are not a public company, the number most recently elected by ordinary resolution (whether or not previous notice of the resolution was given).
 
 
Our Board of Directors (the “Board”) currently consists of three directors. Our directors are elected annually at each annual meeting of our company’s shareholders.
 
Our Board of Directors currently has one committee, the Audit Committee. The Board has not appointed a compensation committee or a nominating committee because the Board fulfills these functions. The Board assesses potential Board candidates to fill perceived needs on the Board for required skills, expertise, independence and other factors.
 
Our Board of Directors is responsible for appointing our company’s officers.
 
The following table sets forth the names and ages of all of our directors, executive officers and key employees.
 
Name, Province/State   and Country of   Residence
 
Age
 
Position
Director/Officer Since
 
 
 
Jerry Kroll  (1)(2)(3)(4)  British Columbia, Canada
    57  
President, CEO and director
February 16, 2015
 
 
 

 
 
 
Iain Ball  British Columbia, Canada
    63  
Vice-President, Finance
February 16, 2015
 
 
 

 
 
 
Henry Reisner  British Columbia, Canada
    53  
Chief Operating Officer
February 16, 2015
 
 
 

 
 
 
Kulwant Sandher (5)  British Columbia, Canada
    56  
Chief Financial Officer and Secretary
June 15, 2016
 
 
 

 
 
 
Ed Theobald  British Columbia, Canada
    65  
General Manager
February 16, 2015
 
 
 

 
 
 
Shaun Greffard  (2)(3)(4)  British Columbia, Canada
    43  
Director
August 8, 2016
 
 
 

 
 
 
Robert Tarzwell  (2)(3)(4) British Columbia, Canada
    47  
Director
August 8, 2016
 
 
 

 
 
 
Mark West  British Columbia, Canada
    50  
Vice-President, Sales & Dealerships
November 1, 2016
 
 
 

 
 
 
 
 
 
 
(1)
Mr. Kroll was appointed President, CEO and a director of the Company effective February 16, 2015.
 
 
(2)
Member of the Audit Committee.
 
 
(3)
Member of the Compensation Committee.
 
 
(4)
Member of the Nominating and Corporate Governance Committee.
 
 
(5)