|TEV||63||TEV/EBIT||-6||TTM 2019-09-30, in MM, except price, ratios|
|8-K||2020-07-08||Enter Agreement, Regulation FD, Exhibits|
|8-K||2020-07-07||Sale of Shares|
|8-K||2020-06-30||Enter Agreement, Regulation FD, Exhibits|
|Part I - Financial Information|
|Item 1. Financial Statements (Unaudited)|
|Note 1: Nature of Operations|
|Note 2: Going Concern|
|Note 3: Summary of Significant Accounting Policies|
|Note 4: Concentrations|
|Note 5: Property and Equipment|
|Note 6: Capital Lease Obligations|
|Note 7: Notes Payable|
|Note 8: Stockholders' Equity|
|Note 9: Stock - Based Payments|
|Note 10: Customer Deposits|
|Note 11: Commitments and Contingencies|
|Note 12: Subsequent Events|
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.|
|Item 3. Quantitative and Qualitative Disclosures About Market Risk.|
|Item 4. Controls and Procedures.|
|Part II - Other Information|
|Item 1. Legal Proceedings.|
|Item 1A. Risk Factors.|
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.|
|Item 3. Defaults Upon Senior Securities|
|Item 4. Mine Safety Disclosures|
|Item 5. Other Information|
|Item 6. Exhibits.|
|Balance Sheet||Income Statement||Cash Flow|
Rev, G Profit, Net Income
Ops, Inv, Fin
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 001-38213
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of |
incorporation or organization)
|(IRS Employer |
2034 West 2nd Avenue, Eugene, OR 97402
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
|Title of Each Class||Trading Symbol(s)||Name of Each Exchange on Which Registered|
|Common stock, no par value||FUV||Nasdaq Capital Market|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
|Large accelerated filer ☐||Accelerated filer ☐|
|Non-accelerated filer ☒||Smaller reporting company ☒|
|Emerging growth company ☒|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 10, 2020, there were approximately 24,485,391 shares of the registrant’s common stock issued and outstanding.
For the Quarterly Period Ended March 31, 2020
TABLE OF CONTENTS
|PART I.||FINANCIAL INFORMATION||1|
|Item 1.||Financial Statements (Unaudited)||1|
|Condensed Balance Sheets as of March 31, 2020 and December 31, 2019||1|
|Condensed Statements of Operations for the Three Months ended March 31, 2020 and 2019||2|
|Condensed Statement of Stockholders’ Equity for the Three Months ended March 31, 2020 and 2019||3|
|Condensed Statements of Cash Flows for the Three Months ended March 31, 2020 and 2019||4|
|Condensed Notes to Financial Statements||5|
|Item 2.||Management’s Discussion and Analysis of Financial Condition and Results of Operations||18|
|Item 3.||Quantitative and Qualitative Disclosures about Market Risk||23|
|Item 4.||Controls and Procedures||23|
|PART II.||OTHER INFORMATION|
|Item 1.||Legal Proceedings||24|
|Item 1A.||Risk Factors||24|
|Item 2.||Unregistered Sales of Equity Securities and Use of Proceeds||24|
|Item 3.||Defaults Upon Senior Securities||24|
|Item 4.||Mine Safety Disclosures||24|
|Item 5.||Other Information||24|
CONDENSED BALANCE SHEETS
|Cash and cash equivalents||$||1,889,717||$||5,832,489|
|Accounts receivable, net||16,225||244,450|
|Other current assets||617,537||665,079|
|Total current assets||8,843,208||11,671,201|
|Property and equipment, net||4,723,986||4,732,544|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Current portion of capital lease obligations||454,711||433,967|
|Convertible notes payable, related parties||1,150,907||1,150,907|
|Convertible notes payable, net of discount||841,305||837,557|
|Notes payable, net of discount||3,014,591||3,032,438|
|Current portion of warranty reserve||84,344||90,000|
|Current portion of deferred revenue||19,500||31,174|
|Total current liabilities||8,005,638||7,525,415|
|Long-term capital lease obligations, net of current portion||1,120,596||1,179,700|
|Long-term deferred revenue||85,500||85,500|
|Total long-term liabilities||1,277,626||1,310,200|
|Commitments and contingencies (Note 11)|
|Series A-1 preferred stock, no par value, 1,500,000 authorized; none issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.||-||-|
|Class C Preferred Stock, no par value, 2,000,000 authorized; none issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.||-||-|
|Preferred Stock, no par value, 1,500,000 authorized; none issued and outstanding as of March 31, 2020 and December 31, 2019, respectively||-||-|
|Common stock, no par value, 60,000,000 authorized, 24,469,138 and 24,436,389 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.||43,626,238||43,573,529|
|Additional paid-in capital||2,649,716||2,344,751|
|Total stockholders’ equity||4,373,018||7,610,118|
|Total liabilities and stockholders’ equity||$||13,656,282||$||16,445,733|
See accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS
|Three Months Ended|
|Cost of goods sold||1,689,518||1,467|
|Gross profit (loss)||(1,072,723||)||1,178|
|Research and development||448,974||1,060,016|
|Sales and marketing||336,898||245,382|
|General and administrative||1,496,845||1,571,308|
|Total operating expenses||2,282,717||2,876,706|
|Loss from operations||(3,355,440||)||(2,875,528||)|
|Other expense (income)|
|Other income, net||(7,500||)||(408||)|
|Weighted-average common shares outstanding - basic and diluted||24,480,445||15,423,999|
|Net loss per common share - basic and diluted||$||(0.15||)||$||(0.20||)|
See accompanying notes to condensed financial statements.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
|Series A-1 |
|Class C |
|Number of |
|Amount||Number of |
|Amount||Number of |
|Accumulated Deficit||Stockholders’ |
|Balance at December 31, 2018||-||$||-||2,000,000||$||-||15,032,341||$||30,102,738||$||930,869||$||(22,966,473||)||$||8,067,134|
|Issuance of common stock for cash||-||-||-||-||1,088,333||4,264,999||-||-||4,264,999|
|Exercise of stock options||-||-||-||-||1,613||5,000||-||-||5,000|
|Stock options exercised - cashless||-||-||-||-||53,513||-||-||-||-|
|Warrants exercised – cashless||-||-||-||-||164,578||-||-||-||-|
|Balance at March 31, 2019||-||$||-||2,000,000||$||-||16,340,378||$||34,117,535||$||1,027,319||$||(26,034,866||)||$||9,109,988|
|Balance at December 31, 2019||-||$||-||-||$||-||24,436,389||$||43,573,529||$||2,344,751||$||(38,308,162||)||$||7,610,118|
|Issuance of common stock for accounts payable||-||-||-||-||32,749||56,328||-||-||56,328|
|Balance at March 31, 2020||-||$||-||-||$||-||24,469,138||$||43,626,238||$||2,649,716||(41,902,936||)||$||4,373,018|
CONDENSED STATEMENTS OF CASH FLOWS
|Three Months Ended|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Depreciation and amortization||207,551||171,387|
|Amortization of debt discount||153,748||80,731|
|Changes in operating assets and liabilities:|
|Other current assets||47,542||(492,056||)|
|Net cash used in operating activities||(3,486,853||)||(3,959,809||)|
|Purchases of property and equipment||(129,253||)||(23,828||)|
|Proceeds from sale of property and equipment||-||41,680|
|Net cash (used in) provided by investing activities||(176,353||)||17,852|
|Proceeds from sale of common stock||-||4,264,999|
|Proceeds from the exercise of stock options||-||5,000|
|Payment of offering costs||(3,619||)||(255,202||)|
|Payment of capital lease obligations||(108,100||)||(92,665||)|
|Repayment of notes payable||(167,847||)||-|
|Net cash (used in) provided by financing activities||(279,566||)||3,922,132|
|Net cash decrease for period||(3,942,772||)||(19,825||)|
|Cash at beginning of period||5,832,489||4,903,019|
|Cash at end of period||$||1,889,717||$||4,883,194|
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:|
|Cash paid during the period for interest||$||42,015||$||36,984|
|Cash paid during the period for income taxes||$||-||$||150|
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:|
|Portion of equipment acquired through capital leases||$||69,740||$||88,850|
|Stock issued for payment of accounts payable||$||56,328||$||-|
|Equipment purchases in accounts payable||$||-||$||4,200|
See accompanying notes to condensed financial statements.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS
Arcimoto, Inc. (the “Company”) was originally formed on November 21, 2007 as WTP Incorporated, an Oregon Corporation, and later changed its name to Arcimoto, Inc. The Company was founded in order to build products that catalyze the shift to a sustainable transportation system. The first step in this shift has been developing an affordable, daily utility, pure electric vehicle. Over the past 11 years, the Company has developed a revolutionary new vehicle platform designed around the needs of everyday drivers. Its main product is the Fun Utility Vehicle® (“FUV”), the first real, affordable, and fossil-free alternative for the vast majority of daily trips. Compared to the average car, the FUV has dropped 2/3 of the weight and 2/3 of the footprint, in order to bring the joy of ultra-efficient, pure electric driving to the masses.
Risks and Uncertainties
The Company currently has limited production and distribution capabilities. Facilities to manufacture vehicles at limited scale are substantially complete. We started retail production at one FUV per build day and ramped to two per build day in the first quarter of 2020, prior to the COVID-19 production shutdown. Arcimoto also does not have a history of higher-scale production and may encounter delays, flaws, inability to raise sufficient capital, or inefficiencies in the manufacturing process, which may prevent or delay achieving higher-scale production within the anticipated timeline.
Part of the Company’s strategy is to use vehicle rentals to generate a positive cash flow from customer test drive activities. As with any strategy, there is the risk that the rental business will not be successful.
As of March 31, 2020, the Company has $5,195,539 in inventory and another $1,124,190 in prepaid inventory not received yet. Certain inventory components are included in prepaid inventory that have long lead times requiring payment in advance.
The Company plans to incur substantial additional expenses marketing its current and future products and services. In addition, the Company will compete with companies that currently have extensive and well-funded marketing and sales operations. The Company’s marketing and sales efforts may be unable to compete successfully against these companies.
Further, the Company’s business and operations are sensitive to general governmental policy, business and economic conditions in the United States and worldwide. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Other developments, including but not limited to economic recessions, import tariffs, trends in vehicle manufacturing, consumer taste, availability of inventory, and changes in government policy related to cars and motorcycles, could have a material adverse effect on the Company’s financial condition and the results of its operations.
The Company’s industry is characterized by rapid changes in technology and customer demands. As a result, the Company’s products and services may quickly become obsolete and unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer demands, develop new products and services and enhance our current products and services on a timely and cost-effective basis. Further, the Company’s products and services must remain competitive with those of other companies with substantially greater resources. The Company may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of new products and services or enhanced versions of existing products and services. Also, the Company may not be able to adapt new or enhanced products and services to emerging industry standards, and the Company’s new products and services may not be favorably received. In addition, we may not have the capital resources to further the development of existing and/or new products.
On January 30, 2020, the World Health Organization declared the COVID-19 outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate it have had, and are expected to continue to have, an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the Company, to date, the Company announced on March 19, 2020, that it was temporarily suspending all production of the Fun Utility Vehicle at its U.S. factory located in Eugene, Oregon in response to the rapidly evolving COVID-19 pandemic. The date to restart production will evolve with the COVID-19 pandemic. The Company will maintain a work-from-home staff to push forward critical operations, including compliance and reporting, research and development, customer service, and deployment of the Company’s recently-launched Rapid Responder and Deliverator pilot vehicles to key potential fleet operators. As part of this suspension of production, the Company furloughed approximately 67% of its workforce with the remaining individuals continuing to work full or part time, which will result in meaningful cost reductions during the period of shutdown. We expect to retain the furloughed workers after production has resumed. As a result of the shut-down, the first quarter 2020 revenue activities were negatively impacted, and the second quarter 2020 may be negatively impacted based on the length and severity of the pandemic. With some suppliers not currently producing, once the temporary suspension of production is over, we anticipate minimal shortages depending on when suppliers restart production and how fast the Company can ramp up production. This makes it reasonably possible that we are vulnerable to the risk of a near-term severe impact.
Additionally, it is reasonably possible that estimates made in the financial statements have been, or will be, materially and adversely impacted in the near term as a result of these conditions, including the timing and need to raise additional working and operating capital, and the Company’s ability to repay debt coming due in June, August, and September 2020. We have applied for Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”) through the Small Business Administration (“SBA”) that were made available under the CARES Act passed by Congress in response to the COVID-19 pandemic at the end of March 2020. See Note 12, Subsequent Events, for an update on the receipt of the PPP Loan.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared on a basis that the Company is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced recurring operating losses and negative operating cash flows since inception.
The Company has not achieved positive earnings and operating cash flows to enable the Company to finance its operations internally. Funding for the business to date has come primarily through the issuance of debt and equity securities. The Company will require additional funding to continue to operate in the normal course of business. Accordingly, there is substantial doubt about the Company’s ability to continue as a going concern.
Although the Company’s objective is to increase its revenues from the sales of its products sufficient to generate positive operating and cash flow levels, there can be no assurance that the Company will be successful in this regard. The Company will need to raise additional capital in order to fund its operations, which it intends to obtain through debt and/or equity offerings. Funds on hand and any follow-on capital, will be used to invest in our business to expand sales and marketing efforts, including Company-owned and franchise-rental operations and the system to support them, enhance our current product lines by continuing research and development (“R&D”) to enhance and reduce the cost of the FUV and to bring future variants to retail production, continue to build out and optimize our production facility, debt repayment, and fund operations until positive cash flow is achieved. The need for additional capital may be adversely impacted by uncertain market conditions or approval by regulatory bodies.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information
The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q promulgated by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and disclosures required by GAAP for complete financial statement presentation. In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company’s financial position as of March 31, 2020, and the results of its operations for the three months ended March 31, 2020 and 2019 and its cash flows for the three months ended March 31, 2020 and 2019. Results for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020.
Basis of Presentation
The accounting and reporting policies of the Company conform with GAAP.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include those related to the warranty reserve, the net realizable value of inventory, and reserves on inventory.
CONDENSED NOTES TO FINANCIAL STATEMENTS
Fair Value Measurements
The Company’s financial instruments consist primarily of cash, convertible notes, debt, and capital lease obligations. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. The Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.
The three-level hierarchy for fair value measurements is defined as follows:
|●||Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;|
|●||Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability other than quoted prices, either directly or indirectly, including inputs in markets that are not considered to be active; and|
|●||Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.|
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying amounts reported in the accompanying financial statements for current assets and current liabilities approximate the fair value because of the immediate or short-term maturities of the financial instruments. As of March 31, 2020 and December 31, 2019, the Company did not have any level 2 or level 3 instruments.
Inventory is stated at the lower of cost (using the first-in, first-out method (“FIFO”)) or market value. Inventories consist of purchased electric motors, electrical storage and transmission equipment, and component parts.
|March 31,||December 31,|
|Raw materials and component parts||$||4,968,045||$||3,650,466|
The Company is required to remit prepayments for purchases of its inventories acquired from overseas vendors. The Company has suffered losses as a result of vendor breaches.
CONDENSED NOTES TO FINANCIAL STATEMENTS
Non-refundable customer deposits are comingled with operating funds. Refundable customer deposits are generally held in a separate deposit account. Revenue is not recognized on customer deposits until the deposit is applied to a non-refundable vehicle order, the vehicle manufacturing process is completed, the vehicle is picked up by or delivered to the customer and the appropriate revenue recognition criteria have been met per our policy below.
Deferred revenues represent cash collected in advance of the revenues being earned for deliverables to FUV customers, distributor licensing arrangements and franchise fees.
The Company recognizes revenue when the earnings process is complete. This generally occurs when products are picked up by the customer or a common carrier or, when the FUV is shipped in a Company owned vehicle, when delivery is completed, in accordance with the sales agreement or purchase order, which is when control of the vehicle passes to the customer. The Company’s shipping terms are generally F.O.B. shipping point, where title is transferred, and revenue is recognized when the products are shipped to or picked up by customers. Revenues related to distributor licensing arrangements are generally recognized over the term of the agreement, except for specific products and services specified as part of the agreement, for which revenue may be accelerated based on when the earnings process is complete.
Distributor and Franchise fee revenue is recognized over the term of the agreements which is generally 10 years for franchises and four years for distributors. We have determined that any services provided to our franchise partners are not distinct from the franchise rights granted in the franchise agreement and they are combined into a single performance obligation.
Research and Development
Costs relating to research and development (“R&D”) are expensed as incurred.
Net Earnings or Loss per Share
The Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., common stock warrants and common stock options) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
Loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the respective periods. Basic and diluted loss per common share is the same for all periods presented because all common stock warrants and common stock options outstanding were anti-dilutive.
At March 31, 2020 and 2019, the Company excluded the outstanding Employee Equity Plans (“EEP”) and other securities summarized below, which entitled the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
|Class C preferred stock||-||2,000,000|
|Options and other instruments under the 2012, 2015 and 2018 Plans to purchase common stock||431,746||847,378|
|Underwriters and investors warrants issued outside of an EEP||-||103,162|
CONDENSED NOTES TO FINANCIAL STATEMENTS
Recent Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes ASC Topic 840, Leases. ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance sheets for all the leases with terms greater than 12 months. Based on certain criteria, leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. In November 2019, the FASB delayed the effective date for Topic 842 to fiscal years beginning after December 15, 2020 for private companies and emerging growth companies, and interim periods within those years, with early adoption permitted. In June 2020, the FASB issued ASU No 2020-05 that further delayed the effective date of Topic 842 to fiscal years beginning after December 15, 2021. We will adopt this new standard on January 1, 2022. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements” that allows entities to apply the provisions of the new standard at the effective date, as opposed to the earliest period presented under the modified retrospective transition approach and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The modified retrospective approach includes a number of optional practical expedients primarily focused on leases that commenced before the effective date of Topic 842, including continuing to account for leases that commence before the effective date in accordance with previous guidance, unless the lease is modified. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon its adoption of Topic 842, which will increase the total assets and total liabilities that the Company reports relative to such amounts prior to adoption.
Adoption of Recent Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted the new standard on January 1, 2020. The adoption did not have a material impact on the Company’s financial statements.
In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. ASU 2018-13 removes certain disclosures, modifies others and introduces additional disclosure requirements for entities. The amendments in ASU 2018-13 for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted the new standard on January 1, 2020. The adoption did not have a material impact on the Company’s financial statements.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 4: Concentrations
As of March 31, 2020, and December 31, 2019, the Company had one significant vendor that accounted for more than 10% of the Company’s payables balances. As of March 31, 2020, this vendor accounted for 13% of payable balances. The loss of this vendor would not have a significant impact on the Company’s operations.
As of March 31, 2020, and December 31, 2019, the Company had two significant vendors that accounted for more than 10% of the Company’s inventory balances. As of March 31, 2020 these vendors accounted for 19% and 32% of inventory balances. As of December 31, 2019, these vendors accounted for 17% and 23% of inventory balances. The loss of these vendors would not have a significant impact on the Company’s operations.
NOTE 5: PROPERTY AND EQUIPMENT
As of March 31, 2020 and December 31, 2019, our property and equipment consisted of the following:
|Computer equipment and software||$||77,583||$||77,583|
|Furniture and fixtures||46,839||46,839|
|Machinery and equipment||4,955,167||4,699,383|
|Fixed assets in process||208,208||264,999|
|Less: accumulated depreciation||(1,337,857||)||(1,130,306||)|
Fixed assets in process is comprised primarily of leasehold improvements, tooling and equipment related to the manufacturing of our vehicles. Completed assets are transferred to their respective asset class and depreciation begins when the asset is ready for its intended use.
Depreciation expense was approximately $207,500 and $171,000 during the three months ended March 31, 2020 and 2019, respectively.
NOTE 6: CAPITAL LEASE OBLIGATIONS
As of March 31, 2020, the Company has financed a total of approximately $2,321,000 of its capital equipment purchases with monthly payments ranging from $362 to $8,582, repayment terms ranging from 48 to 60 months, and effective interest rates ranging from 4.52% to 9.90%. Total monthly capital lease payments as of March 31, 2020 are $47,267. These lease obligations mature ranging from December 2021 through December 2024 and are secured by approximately $2,903,000 in underlying assets which have approximately $516,000 in accumulated depreciation as of March 31, 2020. The balance of capital lease obligations was approximately $1,575,000 and $1,614,000 as of March 31, 2020 and December 31, 2019, respectively.
NOTE 7: NOTES PAYABLE
On December 27, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with FOD Capital, LLC, a Florida limited liability company (the “Investor”), pursuant to which the Company issued to the Investor (i) 500,000 shares of its common stock, no par value per share at a purchase price of $3.00 per share (the “Shares”), (ii) a warrant to purchase up to 942,857 shares of common stock at $3.50 per share (the “Warrant”), and (iii) a senior secured note in the principal amount of $3,000,000 (the “Note”). See Note 8 for additional details. On September 12, 2019, the Company issued an additional $500,000 note (“additional Note”) to the Investor, net of $15,000 discount. The additional Note principal plus accrued interest is convertible into the Company’s common stock at a conversion price per share of $4.25. The unamortized discount as of March 31, 2020 was $6,760. Accrued interest expense excluding the discount amortization for the three-month period ended March 31, 2020 was $12,953. The discount amortized for the three-month period ended March 31, 2020 was $3,750. There was no such interest expense for the three-month period ended March 31, 2019.
During July 2019, the Company financed $182,430 in insurance payments after a $45,608 down payment at an annual interest rate of 6.25% and monthly payments of $20,802 for nine months. Interest expense for the three-month period ended March 31, 2020 was $962.
During October 2019, the Company financed $320,467 in insurance payments after a $80,117 down payment at an annual interest rate of 4.95% and monthly payments of $36,346 for nine months. Interest expense for the three-month period ended March 31, 2020 was $2,664.
CONDENSED NOTES TO FINANCIAL STATEMENTS
Between July 11, 2019 and July 15, 2019, the Company entered into subscription agreements (each a “Subscription Agreement” and, collectively, the “Subscription Agreements”), pursuant to which the Company issued notes in original principal amount of $600,000 (U.S.) (each a “Note” and, collectively, the “Notes”). Of the $600,000 Notes issued $325,000 were to related parties. The principal amount due under each Note was due and payable on the two-month anniversary of the date of each Note (the “Maturity Date”): in (a) cash, (b) the Company’s common stock (valued at a price of $4.25 per share) or (c) in the event the Company issues convertible promissory notes to third parties before the Maturity Date, in a convertible promissory note on the same terms as purchased by such third parties; in each case at the election of the holder of the Note. Each Note also bore interest, payable at the Maturity Date, equal to $100,000 multiplied by the remainder of (i) the amount of the Note divided by (ii) $600,000. Interest was payable on each Note in: (a) the Company’s common stock (valued at $4.25 per share) or (b) in the event the Company issued convertible promissory notes to third parties before the Maturity Date, in a convertible promissory note on the same terms as purchased by the third parties; in each case at the election of the holder. On August 14, 2019, the $600,000 in principal and accrued interest of $48,972 on the Notes were exchanged into $648,972 in principal amount of convertible promissory notes (“New Notes”). The principal amount of the New Notes is due and payable on the one- year anniversary of the date of the New Notes in (a) cash or (b) the Company’s common stock at a price of $4.25 per share, at the election of the holder of the New Notes. Interest on the New Notes accrues at an annual rate of 10%, compounded monthly. Between August 14, 2019 and September 27, 2019, the Company issued additional notes with the New Notes terms in the original principal amount of $1,350,000, which includes the previously mentioned convertible note, of which $800,000 was to related parties. The Company may prepay the indebtedness at any time. The unamortized discount as of March 31, 2020 was $6,760. Accrued interest expense excluding the discount amortization for the three-month period ended March 31, 2020 was $51,978.
NOTE 8: STOCKHOLDERS’ EQUITY
The Company is authorized to issue 5,000,000 shares of preferred stock, no par value, of which 1,500,000 shares were designated as Series A-1 Preferred Stock and 2,000,000 are designated as Class C Preferred Stock.
The Series A-1 Preferred Stock is convertible at any time after issuance at the option of the holder into shares of common stock at the original issue price of the Series A-1 Preferred Stock. The Series A-1 Preferred Stock was also subject to mandatory conversion provisions upon an initial public offering raising $15 million or more and is not redeemable. To prevent dilution, the conversion price of the Series A-1 Preferred Stock is to be adjusted for any issuance of securities, excluding exempt securities, which change the number of shares of common stock outstanding. The Series A-1 Preferred Stockholders are entitled to equal voting rights to common stockholders on an as-converted basis and receive preference to the common stockholders upon liquidation. The Series A-1 Preferred Stock was converted to common stock in July 2017, prior to the Regulation A offering and listing.
As a result of the share exchange agreement described below, the Company issued 2,000,000 shares of Class C Preferred Stock on November 15, 2018 in the exchange noted below. These 2,000,000 shares of Class C Preferred Stock were exchanged back to an equal number of shares of common stock on May 13, 2019, upon the filing of an amendment to the Company’s Second Amended and Restated Articles of Incorporation that increased the number of authorized shares of common stock.
Except as otherwise required by law or expressly provided in the Company’s Second Amended and Restated Articles of Incorporation, as amended, each share of Class C Preferred Stock has one vote for the election of directors and on all matters submitted to a vote of shareholders of the Company. The Company is not obligated to redeem or repurchase any shares of Class C Preferred Stock. Shares of Class C Preferred Stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.
At the May 11, 2019 annual meeting of shareholders (the “2019 Annual Meeting”), the shareholders approved an increase in the number of authorized common shares from 20,000,000 to 60,000,000, which also triggered the automatic conversion of the 2,000,000 shares of Class C Preferred Stock to common stock described above.
The Company has reserved a total of 3,379,335 shares of its common stock pursuant to the equity incentive plans (see Note 9). The Company has 3,305,520 and 3,293,135 stock units, options and warrants outstanding under these plans as of March 31, 2020 and December 31, 2019, respectively.
As of March 31, 2020, the Company has reserved an additional 2,608,261 shares of its common stock for warrants and convertible notes pursuant to the Subscription Agreement discussed above.
Common Stock Issued for Compensation
During the three months ended March 31, 2020, the Company issued 32,749 common shares for services with a fair value of $56,328. The shares were valued based on the stock price at the time of the grant when the performance commitment was complete.
CONDENSED NOTES TO FINANCIAL STATEMENTS
Exercise of Stock Options and Warrants
On March 28, 2019, 1,613 employee options were exercised at a price per share of $3.10 for total proceeds to the Company of $5,000. No employee options were exercised for cash during the three months ended March 31, 2020.
During the three months ended March 31, 2019, a total of 117,192 employee options, with exercise prices ranging from $2.0605 to $3.10 per share were exercised in cashless transactions at market prices ranging from $2.864 to $5.212 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction dates amounting to the issuance of a total of 53,513 shares of the Company’s common stock. No employee options were exercised in cashless transactions during the three months ended March 31, 2020.
During the three months ended March 31, 2019, a total of 200,000 employee warrants, 30,000 with an exercise price of $0.50 per share and 170,000 with an exercise price of $0.9375 per share were exercised in cashless transactions at a market price of $5.212 per share, which was based on the average of the Company’s daily closing prices surrounding the transaction dates amounting to the issuance of a total of 164,578 shares of the Company’s common stock. No employee warrants were exercised during the three months ended March 31, 2020.
Private Offering of Common Stock
During January and February 2019, the Company entered into Subscription Agreements with four independent investors, pursuant to which the Company issued to the investors a total of 288,333 shares of its common stock, no par value per share, at a purchase price of $3.00 per share, pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).
CONDENSED NOTES TO FINANCIAL STATEMENTS
Private Offering of Common Stock, Warrant and Note
On December 27, 2018, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with FOD Capital, LLC, a Florida limited liability company (the “Investor”), pursuant to which the Company issued to the Investor (i) 500,000 shares of its common stock, no par value per share, at a purchase price of $3.00 per share (the “Shares”), (ii) a warrant to purchase up to 942,857 shares of common stock at $3.50 per share (the “Warrant”), and (iii) a senior secured note in the principal amount of $3,000,000 (the “Note”). The Shares, Warrant and Note were purchased together by the Investor for an aggregate amount of $4.5 million but were issued separately (collectively, the “Transaction”).
The Shares were issued for an aggregate purchase price of $1,500,000. In connection with the Share issuance, the Company granted the Investor with franchise rights for the lower Florida Keys, subject to the terms contained in the Company’s standard franchise agreement.
The Warrant has a three-year term. The Company reserved 942,857 shares of common stock for issuance pursuant to the potential exercise of the Warrant and, so long as the Warrant remains outstanding, the Company will keep reserved for issuance under the Warrant that number of shares of Common Stock at least equal to the maximum number of shares of common stock as shall be necessary to satisfy the Company’s obligation to issue shares of common stock under the Warrant then outstanding (without regard to any limitations on exercise). The warrant was valued based on the Black-Scholes option pricing model using similar inputs to those described in Note 9, other than the contractual life which was based on the term of the warrant. The relative fair value of the warrant in relation to the debt and equity component of the Transaction was $111,374.
The Note is secured by a perfected first secured lien on all of the Company’s assets except for equipment assets securing existing or future leases. Interest will accrue at 10% per annum and will be paid at maturity or payoff of the Note, with a minimum of one year of interest paid at such time. The original maturity date of the Note was December 27, 2019 and, on this date, was extended for an additional six months upon payment of $300,000 to the Investor by the Company. In connection with the Note, the Company entered into a Security Agreement, an Intellectual Property Security Agreement and a Collateral Assignment of Lease Agreement, each dated as of December 27, 2018 (collectively, the “Collateral Documents”). The short-term note was recorded with a discount of $322,942 which was amortized as interest expense over the Note’s original twelve-month term. The discount was recognized in its entirety in 2019. The discount was based on the allocation of costs and warrants associated with the Transaction. The $300,000 extension fee was recorded as a discount to the note and is being amortized over the six-month extension period. $150,000 was amortized during the three-month period ended March 31, 2020, and $150,000 is remaining to be amortized at March 31, 2020.
On September 12, 2019, the Company entered into an Amended and Restated Subscription Agreement (the “Restated Subscription Agreement”) with the Investor, which amended and restated the Subscription Agreement.
Pursuant to the Restated Subscription Agreement and in addition to the issuances under the Subscription Agreement, the Company issued to the Investor a convertible note in the principal amount of $500,000 (the “Convertible Note”) for an additional purchase price of $500,000. The Convertible Note matures on September 12, 2020, provided, that the Convertible Note may convert into the Company’s common stock at any time at the option of the Investor at a rate of $4.25 per share. In connection with the Restated Subscription Agreement, the Company also granted the Investor franchise rights for the Florida Keys, subject to certain modifications to the terms of the Company’s standard franchise agreement including, but not limited to, a right of first refusal for any Company rental franchise in the South Beach Region of Miami Beach, Florida.
The Convertible Note is secured by a perfected first secured lien on all of our assets except those in capital leases described above. In connection with the Subscription Agreement, the Company entered into the Collateral Documents, each of which apply to the Convertible Note pursuant to the Restated Subscription Agreement.
The Convertible Note is included in the New Convertible Notes discussed in Note 7.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 9: STOCK-BASED PAYMENTS
The Company grants common stock, common stock units, and common stock purchase options and warrants pursuant to the 2018 Omnibus Stock Incentive Plan (“2018 Plan”), Amended and Restated 2015 Stock Incentive Plan (“2015 Plan”) and the Second Amended and Restated 2012 Employee Stock Benefit Plan (“2012 Plan”).
The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Grants to non-employees are expensed at the earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached and (ii) the date at which the counterparty’s performance is complete. The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates.
Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.
The Company uses the following inputs when valuing stock-based awards. The expected life of employee stock options was estimated using the “simplified method,” as the Company has insufficient historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses public company comparables as a basis for its expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date.
Stock-based compensation, including stock-options, warrants and stock issued for compensation and services is included in the statements of operations as follows:
|Three Months Ended|
|Research and development||$||53,700||$||21,008|
|Cost of goods sold||66,224||-|
|Sales and marketing||21,157||13,744|
|General and administrative||163,884||61,698|
2018 Omnibus Stock Incentive Plan
The 2018 Plan authorizing 1,000,000 shares was approved by the Board of Directors and then the Company’s shareholders at the Company’s 2018 annual meeting of shareholders held on June 9, 2018. At the 2019 Annual Meeting, the shareholders approved an additional 1,000,000 shares of common stock to be issued under the 2018 Plan. The 2018 Plan provides the Company the ability to grant to employees, directors, consultants or advisors shares of common stock of the Company through the grant of equity awards, including, but not limited to, options that are incentive stock options or NQSOs and restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. As of March 31, 2020, the Company had a remaining reserve of 60,437 shares of common stock under the 2018 Plan. Awards that are forfeited generally become available for grant under the 2018 Plan. On April 20, 2020, the board of directors approved an increase from 2,000,000 to 4,000,000 shares, subject to shareholder approval.
CONDENSED NOTES TO FINANCIAL STATEMENTS
Employee stock-based compensation expense under the 2018 Plan included in operating expenses for the three months ended March 31, 2020 and 2019 was $167,905 and $69,304, respectively.
Total compensation cost related to non-vested awards issued under the 2018 Plan not yet recognized as of March 31, 2020 was approximately $1,416,697 and will be recognized on a straight-line basis through December 2022 based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or forfeitures.
On January 6, 2020, the board of directors approved a director deferred compensation plan under the 2018 Plan. The deferred compensation plan calls for stock units to be held on account for each director and issued 90 days after separation from service as a director. For the three months ended March 31, 2020, a total of 75,257 stock units with a value of $99,735, based on the closing price on the last day of the quarter, were reserved and expensed. 28,673 of the stock units were valued with a price per share of $1.61 based on the closing stock price on the last trading day of the fourth quarter of 2019, and were recorded as a $46,163 expense on January 6, 2020 because the plan was adopted by the Board of Directors retroactively to the fourth quarter 2019. 46,584 of the stock units were valued with a price per share of $1.15 based on the closing stock price on the last trading day of the first quarter of 2020, and were recorded as a $53,572 expense on March 31, 2020. See Note 12, Subsequent Events, for the exchange of these stock units for common shares.
On February 12, 2020, 32,749 shares with a total value of $56,328 were issued from the 2018 Plan at the closing price on that day of $1.72 per share in payment of services provided.
2015 Stock Incentive Plan
The 2015 Plan provides the Company the ability to grant to employees, directors, consultants or advisors shares of common stock of the Company through the grant of options that are incentive stock options or NQSOs and/or the grant of restricted stock, provided that only employees are entitled to receive incentive stock options in accordance with IRS guidelines. One million shares of common stock were authorized for issuance under the 2015 Plan. Awards that are forfeited generally become available for grant under the 2015 Plan. As of March 31, 2020, 801,342 shares of common stock were reserved for issuance pursuant to stock options that are outstanding and 13,377 shares remain available for issuance pursuant to future awards that might be made under the 2015 Plan.
There were no grants made under the 2015 Plan during the three months ended March 31, 2020 or 2019.
Employee stock-based compensation expense included in operating expenses for the three months ended March 31, 2020 and 2019 related to the 2015 Plan was $37,325 and $27,146, respectively.
Total compensation cost related to non-vested awards not yet recognized as of March 31, 2020 was $184,838 and will be recognized on a straight-line basis through April 2022 based on the respective vesting periods. The amount of future stock option compensation expense could be affected by any future option grants or forfeitures.
2012 Employee Stock Benefit Plan
The 2012 Plan provides the Company the ability to grant to directors, employees, consultants, advisors or independent contractors shares of common stock of the Company through the grant of warrants and/or the grant of common stock. The Company originally reserved 1,000,000 shares of common stock for issuance under the 2012 Plan. Awards that are forfeited generally become available for grant under the 2012 Plan. As of March 31, 2020, 658,317 shares of common stock were reserved for issuance pursuant to warrants that are issued and outstanding under the 2012 Plan and 1 share remains available for issuance pursuant to future awards that might be made under the 2012 Plan. Warrants expire 10 to 15 years from the grant date and were vested when issued.
NOTE 10: CUSTOMER DEPOSITS
The Company has received customer deposits ranging from $100 to $10,100 per vehicle for Retail Series production vehicles and $42,000 per vehicle for Signature Series vehicles for purposes of securing a vehicle production slot. As of March 31, 2020 and December 31, 2019, the Company’s balance of deposits received was approximately $648,000 and $794,000, respectively. As of March 31, 2020 and December 31, 2019, $376,424 and $374,524, respectively, of these deposits were refundable upon demand. Deposits are included in current liabilities in the accompanying balance sheets. When a customer’s order is ready to enter the production process, the customer is notified that if they would like to proceed with the purchase of a vehicle, their deposit will no longer be refundable and any additional deposit required must be paid prior to the start of the manufacturing process. Customer deposits from related parties total $5,700 and $11,200 as of March 31, 2020 and December 31, 2019, respectively.
CONDENSED NOTES TO FINANCIAL STATEMENTS
NOTE 11: COMMITMENTS AND CONTINGENCIES
On March 11, 2018, the Company was served with a lawsuit entitled John R Switzer vs W.R. Hambrecht & Co. LLC et al., Case Number: CGC-18-564904, filed in San Francisco County Superior Court in the State of California. In this action, the Company was named as a defendant along with five individuals who were directors and/or executive officers at the time of the completion of the Company’s Regulation A offering on September 21, 2017. The action was styled as a putative class action, alleged on behalf of all those who purchased the Company’s common stock in its Regulation A offering. The plaintiff alleged violations of Section 12(a)(2) and Section 15 of the Securities Act, and is seeking damages in an unspecified amount to be proven at trial. In addition, on March 28, 2018, the Company was served with another lawsuit entitled Jay Mendelson v. Arcimoto, Inc. et al., Case Number CGC-18-565324, filed in San Francisco County Superior Court in the State of California. In that action, which was styled as a putative class action, the Company was also named as a defendant along with the same individuals who were directors and/or executive officers at the time of the completion of our Regulation A offering on September 21, 2017. The allegations and claims made in the Mendelson action were substantially similar to those of the Switzer action and the plaintiff was also seeking damages in an unspecified amount to be proven at trial. The two actions were consolidated into a single lawsuit on May 28, 2018. The Company believes that the consolidated lawsuit was without merit and vigorously defended itself against these claims in court. On July 30, 2018, counsel for the Company filed a demurrer to the consolidated complaint, seeking its dismissal. By Order dated September 19, 2018, the San Francisco Court sustained in part and denied in part the demurrer. On September 28, 2018, plaintiffs in that case filed a First Amended Consolidated Complaint. The Company denied the substantive claims and allegations made in that amended pleading and continued to assert a vigorous defense. On January 25, 2019, the parties reached a settlement agreement in the consolidated cases, subject to court approval. The parties to the lawsuit have filed a motion with the court seeking approval of the settlement agreement. On June 5, 2020, the Court signed the Order Granting Final Approval of Class Action Settlement. By its terms, the settlement agreement resolves this litigation in its entirety.
On March 6, 2020, the Company filed a complaint (“the Complaint”) against Ayro, Inc. (“Ayro”), accusing Ayro of patent infringement in Federal District Court for the Western District of Texas, Waco Division (Case No. 6:20-cv-00176-ADA) (“the Ayro Litigation”). In the Complaint, Arcimoto alleges that Ayro’s 311 two-seater electric vehicles infringe U.S. Patent 8,985,255 (the “255 Patent”). The Complaint asks for monetary damages and enhanced damages due to willful infringement of the 255 Patent by Ayro. On March 27, 2020, Ayro answered the Complaint, denying liability and asserting counterclaims of noninfringement and patent invalidity. The Court had a telephonic Scheduling Conference on April 29, 2020 and set the Markman Hearing for October 15, 2020. The Court has yet to set a trial date.
NOTE 12: SUBSEQUENT EVENTS
On April 24, 2020, the Company issued 5,546 shares to a former director previously reserved as director deferred compensation under the 2018 Plan.
On April 27, 2020, the Company granted 29,666 non-qualified stock options under the 2018 Plan. These options had an exercise price of $2.54 per share based on that day’s closing price of Arcimoto common stock and were vested on issuance. The total grant date fair value of these options was $44,956.
See below for the range of variables used in assessing the fair value at the grant date for the options issued under the 2018 Plan:
|April 27, |
|Annual dividend yield||-|
|Expected life (years)||6.0|
|Risk-free interest rate||0.49||%|
On April 28, 2020, the Company was told that it was approved for a PPP loan in the amount of $1,068,686. The loan was funded on May 6, 2020.
On April 29, 2020, the Company issued 10,707 unregistered restricted common shares at a price of $2.335 based on the previous day’s closing price of the Company’s common stock in payment for materials by a vendor.
On May 5, 2020, the Company granted 13,000 qualified employee stock options under the 2015 Plan and 32,000 qualified employee stock options under the 2018 Plan. These options had an exercise price of $2.19 based on the previous day’s closing price of Arcimoto common stock. The options vest on the Company’s standard three-year vesting schedule. The total grant date fair value of these options was $17,358 and $42,728 for the 2015 Plan and 2018 Plan, respectively.
See below for the range of variables used in assessing the fair value at the grant date for the options issued under the 2015 and 2018 Plan:
|May 5, |
|Annual dividend yield||-|
|Expected life (years)||6.0|
|Risk-free interest rate||0.45||%|
On June 5, 2020, the Court signed the Order Granting Final Approval of Class Action Settlement. See “Litigation” under Note 11.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this report and in other documents which we file with the SEC. In addition, such statements could be affected by risks and uncertainties related to:
|●||our ability to identify financing sources to fund our capital expenditure requirements and continue operations until sufficient cash flow can be generated from operations;|
|●||our ability to effectively execute our business plan and growth strategy;|
|●||unforeseen or recurring operational problems at our facility, or a catastrophic loss of our manufacturing facility, including the current temporary closure of our facility due to COVID-19;|
|●||our dependence on our suppliers, whose ability to supply us may be negatively impacted by the measures being implemented to address COVID-19;|
|●||the volatility of our stock price;|
|●||changes in consumer demand for, and acceptance of, our products;|
|●||overall strength and stability of general economic conditions and of the automotive industry more specifically, both in the United States and globally;|
|●||changes in U.S. and foreign trade policy, including the imposition of tariffs and the resulting consequences;|
|●||changes in the competitive environment, including adoption of technologies and products that compete with our products;|
|●||our ability to generate consistent revenues;|
|●||our ability to design, produce and market our vehicles within projected timeframes given that a vehicle consists of several thousand unique items and we can only go as fast as the slowest item;|
|●||our inexperience to date in manufacturing vehicles at the high volumes that we anticipate;|
|●||our reliance on key personnel;|
|●||changes in the price of oil and electricity;|
|●||changes in laws or regulations governing our business and operations;|
|●||our ability to maintain adequate liquidity and financing sources and an appropriate level of debt, if any, on terms favorable to our company;|
|●||the number of reservations and cancellations for our vehicles and our ability to deliver on those reservations;|
|●||our ability to maintain quality control over our vehicles and avoid material vehicle recalls;|
|●||our ability to manage the distribution channels for our products, including our ability to successfully implement our direct to consumer distribution strategy and any additional distribution strategies we may deem appropriate;|
|●||our ability to obtain and protect our existing intellectual property protections including patents;|
|●||changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could have an effect on earnings or losses;|
|●||interest rates and the credit markets;|
|●||our ability to maintain our NASDAQ Capital Market listing;|
|●||costs and risks associated with litigation; and|
|●||other risks described from time to time in periodic and current reports that we file with the SEC.|
The foregoing list does not contain all potential risks and uncertainties. Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws; we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing date of this report.
The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2020 and 2019 should be read together with our unaudited condensed financial statements and related notes included elsewhere in this report and in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those set forth above. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Cautionary Note Regarding Forward-Looking Statements.”
Arcimoto’s mission is to catalyze the shift to a sustainable transportation system. Since our incorporation, we have been engaged primarily in the design, development and manufacture of ultra-efficient three-wheeled electric vehicles. Arcimoto was formed on November 21, 2007 as WTP Incorporated, an Oregon corporation, and later changed its name to Arcimoto, Inc. We design, develop, manufacture, sell, and rent through franchised locations ultra-efficient fully electric vehicles.
2019 was a watershed year for the Company, which saw us complete compliance testing required to produce and sell retail vehicles, outfit the scalable, automated, vertically-integrated Arcimoto Manufacturing Plant for retail production; begin retail production of the Fun Utility Vehicle (FUV); develop our post-production programs including service, support, recall and supplier quality management; and sign, open, and deliver first vehicles to our first rental franchisee in Key West, Florida. We also expanded our product portfolio offering with the announcement of the Rapid Responder and Deliverator platform concepts targeted at fleet verticals.
Retail production began on September 19, 2019. In total, Arcimoto produced 57 model year 2019 FUVs, 46 of which were delivered to customers by December 31, 2019. To date, Arcimoto has built more than 100 production vehicles.
In mid-March 2020, the Company suspended production operations in response to the COVID-19 pandemic, following the launch of production pilots of the Rapid Responder and Deliverator product lines. The Company’s focus is now squarely on volume production planning, in order to push to sustainable profitability and meet the demands posed by the thousands of preorders still in our queue, as well as those we generate by the pilots of our fleet offerings in the field. The Company has applied for Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”) through the Small Business Administration (“SBA”) that were made available under the CARES Act passed by Congress in response to the COVID-19 pandemic at the end of March 2020, and is currently preparing an application for the Advanced Technology Vehicle Manufacturing Loan Program to execute our growth strategy.
To execute our growth strategy, we will require significant additional funds.
Arcimoto develops and manufactures products tuned for the utility needs of everyday driving. By doing so, we aim to deliver meaningfully more efficient solutions to the market, at a fraction of the total cost of ownership of today’s cars. Current automotive platforms are inefficient by design. Cars can weigh upwards of 4,000 lbs., take up an average of almost 100 square feet of space on the road and when parked, and are way overcapacity for the vast majority of daily transportation tasks – those involving one or two people, traveling a relatively short distance, with a relatively small volume of items.
Platform and Technologies
Arcimoto spent its first decade developing and refining eight generations of a new three-wheeled electric vehicle platform, a light-footprint, nimble reverse-trike architecture that features a low center of gravity for stability on the road, dual-motor front wheel drive for enhanced traction, can park three to a space while carrying two large adults comfortably, and is more efficient, by an order of magnitude, than today’s gas-powered cars.
Arcimoto is currently developing three vehicle products based on the Arcimoto Platform. While intended to serve very different market segments, an estimated 90% of the constituent parts are the same between our three initial products.
Fun Utility Vehicle® (FUV®)
Arcimoto’s flagship product is the Fun Utility Vehicle. The FUV delivers a thrilling ride experience, exceptional maneuverability, comfort for two passengers with cargo, highly-efficient parking (three FUVs to a single parking space), and ultra-efficient operation, all at an affordable price. Over time, we anticipate offering the FUV with several option packages to meet the needs of a variety of customers. As of March 31, 2020, we had 4,285 FUV pre-orders with small refundable deposits, representing an increase of 402, or 10%, from the 3,883 pre-orders as of March 31, 2019.
Arcimoto’s first entry into the market is the Evergreen Edition FUV. We are leading with a consumer product, because we are a consumer-first brand. We believe individuals should be able to choose more efficient, more affordable, and lighter-footprint mobility solutions, so that more of us can participate in the transition to a sustainable transportation future. As of March 31, 2020, we delivered 73 Evergreen Edition FUVs to retail customers.
The Rapid Responder was announced on February 15, 2019. The pure-electric Rapid Responder is developed on the Arcimoto platform, and designed for specialized emergency, security and law enforcement services at a fraction of the cost and environmental impact of traditional combustion vehicles. The Rapid Responder aims to deliver first responders to incidents more quickly and affordably than traditional emergency response vehicles.
Initially targeting the more than 50,000 fire stations across the United States that use traditional fire engines and large automobiles to respond to calls, Arcimoto plans to market the Rapid Responder as a solution for campus security and law enforcement applications as well.
Arcimoto’s test of the Rapid Responder in a pilot program with the City of Eugene, the Eugene-Springfield Fire Department, is ongoing and the second vehicle is expected to be delivered soon with a single seat for more cargo capacity. We are targeting delivery of the first production Rapid Responders in 2020.
Development of the Deliverator was officially announced on March 19, 2019 with the reveal of the first Deliverator prototype.
The Deliverator is a pure electric, last-mile delivery solution designed to more quickly, efficiently, and affordably get goods where they need to go. We plan for the Deliverator to be customizable to carry a wide array of products, from pizza, groceries and cold goods to the 65 billion parcels delivered worldwide annually.
A 60-day pilot program with a major national retail grocer is anticipated to start in the second quarter of 2020. We are targeting delivery of the first production Deliverators in 2020.
Management Opportunities, Challenges and Risks
Demand, Production and Capital
Demand for the Retail Series Arcimoto FUV has continued to increase. As of March 31, 2020, we had 4,285 FUV pre-orders with small refundable deposits, representing an increase of 88, or approximately 2%, from the 4,197 pre-orders as of December 31, 2019.
We began taking $5,000 non-refundable reservations for the Fun Utility Vehicle in the first quarter of 2019. We had a single trim option, starting at a price point of $19,900. We secured non-refundable reservations for the first 100 FUVs in anticipation of initial retail production and delivery. In the last week of September 2019, we delivered the first two (2) Evergreen Edition FUVs. In total, Arcimoto produced 57 model year 2019 FUVs, 46 of which were delivered to customers by December 31, 2019. An additional 27 model year 2019 and 2020 FUVs were delivered to customers during the three months ended March 31, 2020.
In the third quarter of 2019, we completed vehicle testing. Arcimoto tested to verify robustness of its vehicle design, to demonstrate compliance with all Federal Motor Vehicle Safety Standards required for motorcycles, and to demonstrate proper function of voluntarily-added equipment such as the FUV’s 3+3 seat belts. Following completion of compliance testing we initiated the sales process with our first customers. As sales are completed pre-order and reservation fees are applied to the purchase price and balances due are collected on delivery.
With FUV production currently suspended, we are focusing on pilot programs for the Rapid Responder and Deliverator, performing value engineering and planning for volume manufacture to achieve sustainable profitability, applying to the Federal Department of Energy’s Advanced Technology Vehicle Manufacturing Loan Program (“ATVMLP”) to finance high volume production (10,000+ units/year), engaging sales efforts focused on fleet deployments, and expanding our service network.
Trends in Cash Flow, Capital Expenditures and Operating Expenses
In 2019, Arcimoto generated cash flow from retail production vehicle sales for the first time. Cash inflow from vehicle sales has been substantially reduced following the suspension of production due to the COVID-19 pandemic.
Our capital expenditures for low volume production are substantially complete, with minimal (approximately $1,200,000) capital costs in our 2020 plan for tooling, quality test equipment, leasehold improvements, service and delivery vehicles. Capital expenditures have been put on hold until the COVID-19 pandemic has mitigated and production has resumed. The Company is preparing an approximate $40,000,000 ATVMLP application to finance high volume production.
Operating expenses decreased by approximately 21%, or $594,000, for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019. This decrease was due to transferring approximately $1,218,000 in overhead to Cost of Goods Sold now that the Company is in production and these functions are no longer performing R&D. The overall decrease was driven by employment growth associated with the transformation of Arcimoto from a private research and development (“R&D”) operation into a public manufacturing company. The number of employees increased by approximately 24%, from 89 as of March 31, 2019 to 110 employees as of March 31, 2020. In December 2017, we moved into an approximately 32,000 square foot facility from our previous 5,000 square foot facility. In June 2018, we added 5,291 square feet of manufacturing and office space, and in October 2018, re-negotiated the lease for this space. From December 2019 to March 2020 we added another approximately 21,600 square feet of manufacturing and office space. As a result, we incurred costs associated with equipping the employees, implementing systems, and running the larger facilities. R&D costs decreased by approximately 58%, or $611,000, during the three months ended March 31, 2020, as this was the majority of the overhead moved to Cost of Goods Sold. Work was focused on developing hard doors for the FUV, the Deliverator, and Emergency Responder. Sales and marketing costs increased by approximately 37%, or $92,000. Approximately 61%, or $56,000, of the increase was for developing the franchise rental business, the reminder of the increase was due to increased marketing activities and salaries associated with retail sales. General and administrative cost increased mainly due to growth in headcount.
New Accounting Pronouncements
For a description of our critical accounting policies and estimates, please refer to the “Summary of Significant Accounting Policies” in Note 3 to our Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K filed with the SEC on April 14, 2020.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe are reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. See Note 3 to our Financial Statements under Part I, Item I of this Quarterly Report on Form 10-Q.
Results of Operations
Three months ended March 31, 2020 versus three months ended March 31, 2019
We had approximately $617,000 in revenue, comprising of approximately $598,000 in revenue from the sales of our vehicles, and approximately $19,000 in revenue from merchandise and outside metal fabrication during the three months ended March 31, 2020. We had approximately $2,600 in revenue from merchandise, and outside metal fabrication during the three months ended March 31, 2019.
Cost of Goods Sold
We had approximately $1,690,000 in Cost of Goods Sold (“COGS”), comprising approximately $1,218,000 in overhead and underutilized factory capacity, $650,000 in FUV parts from the sale of our vehicles, approximately $29,000 in warranty reserves and approximately $17,000 in COGS from merchandise and outside metal fabrication during the three months ended March 31, 2020. This was offset by an approximately $225,000 reduction in COGS due to an adjustment to inventory for loss, obsolescence, purchase price variance and scrap. We had $1,467 in COGS from merchandise, and outside metal fabrication during the three months ended March 31, 2019.
Research and Development Expenses
Research and development (“R&D”) expenses consist primarily of personnel costs for our pre-production manufacturing, engineering and research teams, external lab testing costs, and prototyping materials expense, as discussed above. R&D expenses for the three months ended March 31, 2020 and 2019 were approximately $449,000 and $1,060,000, respectively. The primary reason for the decrease in R&D expenses of $611,000, or -58%, resulted from a decrease in engineering salaries and benefits, as direct and indirect labor allocated to COGS, of approximately $588,000, which consisted of a $620,000 decrease in cash compensation offset by an increase of $33,000 in non-cash compensation, a decrease in materials and testing of approximately $22,000, and an increase in tools and equipment expense of approximately $34,000. There was an approximately $36,000 decrease in computer, licenses and subscriptions expense. The major R&D projects during the three months ended March 31, 2020 were the development of hard doors for the FUV, the Deliverator and Emergency Responder.
Sales and Marketing Expenses
Sales and marketing (“S&M”) expenses for the three months ended March 31, 2020 and 2019 were approximately $337,000 and $245,000, respectively. The primary reasons for the increase in sales and marketing expenses during the three months ended March 31, 2020 of approximately $92,000, or 37%, as compared to the prior period was a $56,000 increase in rental franchise development expenses, a $20,000 increase in public relations and marketing expense, a $9,000 increase in cash compensation and a $7,000 increase in non-cash compensation.
General and Administrative Expenses
General and administrative (“G&A”) expenses consist primarily of personnel and facilities costs related to executives, finance, human resources, information technology, as well as legal fees for professional and contract services. G&A expenses for the three months ended March 31, 2020 were approximately $1,497,000 as compared to approximately $1,571,000 for the same period last year, representing a decrease of approximately $74,000, or -5%. The primary reasons for the decrease in the current period was due to an approximately $9,000 decrease in employee and facilities related expense, $102,000 of which was an increase in non-cash compensation which was offset by an approximate $212,000 overhead allocation to COGS, and an approximately $36,000 increase in depreciation expense. These increases were offset by an approximately $36,000 decrease in expenses associated with being a publicly traded corporation (investor relations, insurance, and professional fees), an approximately $63,000 decrease in lobbying expense, and a $4,000 decrease in bank fees.
Interest expense for the three months ended March 31, 2020 was approximately $247,000, as compared to $193,000 during the three months ended March 31, 2019. Approximately $53,000 of the increase in interest expense was for our convertible notes.
Liquidity and Capital Resources
As of March 31, 2020, we had approximately $1,890,000 in cash and cash equivalents, representing a decrease in cash and cash equivalents of approximately $3,943,000 from December 31, 2019. We anticipate that our current sources of liquidity, including cash and cash equivalents, together with our current projections of cash flow from operating activities, will provide us with liquidity into the second quarter of 2020. We need to successfully raise funds in the short-term, however, this is subject to market conditions and recognizing that we cannot be certain that additional funds would be available to us on favorable terms or at all. The amount and timing of funds that we may raise is undetermined and could vary based on a number of factors, including our ongoing liquidity needs, our current capitalization, as well as access to current and future sources of liquidity.
Cash Flows from Operating Activities
Our cash flows from operating activities are significantly affected by our cash outflows to support the growth of our business in areas such as R&D, sales and marketing and G&A expenses. Our operating cash flows are also affected by our working capital needs to support personnel related expenditures, accounts payable, inventory purchases and other current assets and liabilities.
During the three months ended March 31, 2020, cash used in operating activities was approximately $3,487,000, which was primarily the result of our net loss incurred of approximately $3,595,000, a decrease in accrued liabilities of approximately $50,000, a decrease in customer deposits of approximately $145,000, and an increase in inventories of approximately $1,461,000 related to materials for our electric vehicles. These increases in cash outflows were partially offset by stock-based compensation of approximately $305,000, depreciation expense of approximately $208,000, amortization of capital debt of approximately $154,000, decrease in accounts receivable of approximately $228,000, decrease of prepaid inventory of approximately $71,000, increase in accounts payable of approximately $743,000, increase in warranty accrual of approximately $21,000, and decrease in other current assets of approximately $48,000.
Cash Flows from Investing Activities
Cash flows from investing activities primarily relates to the capital expenditures to support our growth in operations, including investments in manufacturing equipment and tooling. During the three months ended March 31, 2020, the Company paid approximately $70,000 for manufacturing equipment and fixed asset purchases, $59,000 for FUVs placed into service for sales and marketing, and approximately $47,000 for security deposits.
During the three months ended March 31, 2019, the Company received approximately $18,000, net of financing in a sale lease back, for manufacturing equipment and tooling. No FUVs were placed into company service or included in our rental fleet.
Cash Flows from Financing Activities
During the three months ended March 31, 2020, net cash used in financing activities was approximately $280,000, compared to net cash provided of $3,922,000 during the three months ended March 31, 2019. Cash flows used in financing activities during the three months ended March 31, 2020 comprised of payments on capital lease obligations amounting to approximately $108,000, offering costs of approximately $3,600, and repayments of notes payable of approximately $168,000.
During the three months ended March 31, 2019, net cash provided by financing activities was approximately $3,922,000. Cash flows used in financing activities during the three months ended March 31, 2019 mainly comprised of payments on capital lease obligations amounting to approximately $93,000, offering costs of approximately $271,000 offset by a $16,000 credit to legal fees previously recorded in offering cost, and proceeds from the issuance of our common stock in a registered public offering of $3,400,000 and in a private offering of approximately $865,000.
Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Quarterly Report on Form 10-Q, we are not required to provide the information required by this Item.
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Management uses the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013) to evaluate internal disclosure controls and procedures.
Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
(b) Changes in Internal Control Over Financial Reporting
There has not been any material change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) or Rule 15d-15(f)) during the period ended March 31, 2020, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we might become involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters arising in the ordinary course of our business. For information on our litigation matters, see “Litigation” under Note 11 of the Notes to Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated by reference herein.
There have been no material changes to the disclosures relating to this item from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
Incorporated by Reference
|Number||Exhibit Description||Form||File No.||Exhibit||Filing Date|
|3.1(a)||Second Amended and Restated Articles of Incorporation||10-K||001-38213||3.1(a)||March 29, 2019|
|3.1(b)||Articles of Amendment to Second Amended and Restated Articles of Incorporation of Arcimoto, Inc||10-K||001-38213||3.1(b)||March 29, 2019|
|3.2||Second Amended and Restated Bylaws of Arcimoto, Inc||1-A||024-10710||2.2||August 8, 2017|
February 6, 2020
|31.1||Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.||—||—||—||Filed herewith|
|31.2||Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.||—||—||—||Filed herewith|
|32.1||Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.||—||—||—||Filed herewith|
|101.INS||XBRL Instance Document.||—||—||—||Filed herewith|
|101.SCH||XBRL Taxonomy Extension Schema Document.||—||—||—||Filed herewith|
|101.CAL||XBRL Taxonomy Extension Calculation Linkbase Document.||—||—||—||Filed herewith|
|101.DEF||XBRL Taxonomy Extension Definition Linkbase Document.||—||—||—||Filed herewith|
|101.LAB||XBRL Taxonomy Extension Label Linkbase Document.||—||—||—||Filed herewith|
|101.PRE||XBRL Taxonomy Extension Presentation Linkbase Document.||—||—||—||Filed herewith|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|Date: June 11, 2020||By:||/s/ Douglas M. Campoli|
|Douglas M. Campoli|
|Principal Financial and Chief Accounting Officer|