PART II AND III

An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission.  Information contained in this Preliminary Offering Circular is subject to completion or amendment.  These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified.  This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state.  We may elect to satisfy our obligation to deliver a Final Offering circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

Elio Motors, Inc.

2,090,000 Shares of Common Stock

Minimum purchase:  50 Shares ($600.00)

We are offering a minimum of 1,050,000 shares of common stock and a maximum of 2,090,000 shares of common stock on a “best efforts” basis.  If $12,600,000 in subscriptions for the shares (the “Minimum Offering”) is not deposited in escrow on or before ___________, 2015 (the “Minimum Offering Period”), all subscriptions will be refunded to subscribers without deduction or interest.  Subscribers have no right to a return of their funds during the Minimum Offering Period.  If this minimum offering amount has been deposited by __________, 2015, the offering may continue until the earlier of __________, 2016 (which date may be extended at our option) or the date when all shares have been sold.  We reserve the right to accept subscriptions for up to an additional 418,000 shares, for an additional $5,016,000 in gross proceeds.  See “Plan of Distribution” and “Securities Being Offered” for a description of our capital stock.

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth.  Different rules apply to accredited investors and non-natural persons.  Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A.  For general information on investing, we encourage you to refer to www.investor.gov.

There is currently no trading market for our common stock.  We intend to apply to have our shares of common stock approved for trading on the OTCQX marketplace and expect to trade under the symbol “____” upon the completion of this offering.

These are speculative securities.  Investing in our shares involves significant risks.  You should purchase these securities only if you can afford a complete loss of your investment.  See “Risk Factors” beginning on page 4.

	Number of Shares	Price to Public	Underwriting discounts and commissions (1)	Proceeds to issuer (2)
Per share:	1	$12.00	$0.00	$12.00
Total Minimum:	1,050,000	$12,600,000	$0.00	$12,600,000
Total Maximum:	2,090,000	$25,080,000	$0.00	$25,080,000

(1) We do not intend to use commissioned sales agents or underwriters.

(2) Does not include expenses of the offering, including costs of blue sky compliance, fees to be paid to FundAmerica Securities, LLC, and costs of posting offering information on StartEngine.com, estimated to be $1,250,000 and $2,340,000 for the minimum and maximum offering amounts, respectively.  See “Plan of Distribution”.

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials.  These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.

We are providing the disclosure in the format prescribed by Part II of Form 1-A.

2942 North 24th Street, Suite 114-700, Phoenix, Arizona 85016

(480) 500-6800 ext 5; www.eliomotors.com

The date of this Preliminary Offering Circular is October 21, 2015

TABLE OF CONTENTS

OFFERING SUMMARY	3
RISK FACTORS	4
DILUTION	9
USE OF PROCEEDS	10
BUSINESS	11
PROPERTIES	21
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	23
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES	28
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS	31
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS	32
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS	33
SECURITIES BEING OFFERED	35
PLAN OF DISTRIBUTION	38
FINANCIAL STATEMENTS	40

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OFFERING SUMMARY

The following summary highlights selected information contained in this offering circular.  This summary does not contain all the information that may be important to you.  You should read the more detailed information contained in this offering circular, including, but not limited to, the risk factors beginning on page 4.  References to “we,” “us,” “our,” or the “company” mean Elio Motors, Inc.

Our Company

Elio Motors, Inc. (“Elio” or the “Company”), is a designer, developer and manufacturer of highly efficient, low cost automobiles. Leveraging existing automotive technologies and partnerships with the world’s leading automotive engineering firms and component suppliers, the Company is engineering and building a high quality, safe, environmentally-friendly vehicle – the Elio – for sale initially in the United States market.

This Offering

Securities offered	Minimum of 1,050,000 shares of common stock ($12,600,000) Maximum of 2,090,000 shares of common stock ($25,080,000) We reserve the right to accept subscriptions for up to an additional 418,000 shares for up to an additional $5,016,000.
Common stock outstanding before the offering (1)	25,077,500 shares
Common stock outstanding after the offering (1)(2)	27,167,500 shares
Use of proceeds	The net proceeds of this offering will be used primarily to develop and validate additional prototypes of the Elio.
Risk factors	Investing in our shares involves a high degree of risk.  As an investor you should be able to bear a complete loss of your investment.  You should carefully consider the information set forth in the “Risk Factors” section of this offering circular.

(1) Does not include the following currently exercisable or convertible outstanding securities:  shares of common stock issuable upon an option to purchase a 7% ownership interest in the Company; [56,323] shares of common stock issuable upon exercise of a warrant; and [563,234] shares of common stock issuable upon conversion of [$3,368,960] in aggregate principal amount of our convertible notes.

(2) Assumes the sale of 2,090,000 shares.  If we accept subscriptions for an additional 418,000 shares, the number of shares outstanding after the offering will be 27,858,500.

We effected a 500-for-1 forward stock split on our issued and outstanding shares of common stock as of July 14, 2015.  Unless the context indicates otherwise, all share and per-share common stock information in this offering circular gives effect to the 500-for-1 stock split.

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RISK FACTORS

An investment in our shares involves a high degree of risk and many uncertainties.  You should carefully consider the specific factors listed below, together with the cautionary statement that follows this section and the other information included in this offering circular, before purchasing our shares in this offering.  If one or more of the possibilities described as risks below actually occur, our operating results and financial condition would likely suffer and the trading price, if any, of our shares could fall, causing you to lose some or all of your investment.  The following is a description of what we consider the key challenges and material risks to our business and an investment in our securities.

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 the business and future prospects difficult, and may increase the risk of your investment.  Elio Motors was formed in October 2009 and we have not yet begun producing or delivering our first vehicle. To date, we have no revenues. We intend in the longer term to derive substantial revenues from the sales of Elio vehicles. The Elio is in development, and we do not expect to start delivering to customers until the fourth quarter of 2016 at the earliest. The Elio vehicle requires significant investment prior to commercial introduction, and may never be successfully developed or commercially successful.

It is anticipated that we will experience an increase in losses prior to the launch of the Elio.

For the fiscal year ended December 31, 2014, Elio Motors generated a loss of over $24 million, bringing the accumulated deficit to $44,956,239 at December 31, 2014.  For the six months ended June 30, 2015, we generated a loss of $8.8 million (unaudited), bringing our accumulated deficit to $53,793,387 (unaudited).  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 revenues for the foreseeable future. Even if we are able to successfully develop the Elio, there can be no assurance that we will be commercially successful. If we are to ever achieve profitability, we must have a successful commercial introduction and acceptance of the Elio, 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 the Elio and its components;

· develop and equip our manufacturing facility;

· build up inventories of parts and components for the Elio;

· open Elio Motors 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 increases in our revenues, which would further increase our losses.

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We have a significant amount of debt, which is secured by all of our assets, including manufacturing equipment.

As of December 31, 2014, we had outstanding secured loans totaling $30,696,259, of which $1,600,000 is classified as short-term.  Our manufacturing equipment located in the Shreveport, Louisiana, facility has been pledged as collateral to secure the repayment of these loans. If we are unable to repay any of our secured loans, a decision by the lender to foreclose on its security interest would materially and adversely affect our future.

We have a significant working capital deficiency.

At December 31, 2014, our working capital deficit was $8,446,483.  This deficit increased to $10,631,640 (unaudited) at June 30, 2015.  We have been raising funds through reservations of the Elio, a private placement of our securities, and the sale of excess equipment to meet our cash needs.  Our current liabilities include a note due December 31, 2015, which was in the principal amount of $1,600,000 at December 31, 2014.

We may not be able to obtain adequate financing to continue our operations.

The design, manufacture, sale and servicing of vehicles is a capital-intensive business.  Even if we successfully raise $25 million from this offering, we estimate that we will need to raise an additional estimated $240 million to reach the vehicle production stage.  We will need to raise additional funds through the issuance of equity, equity-related, or debt securities or through obtaining credit from government or financial institutions.  This capital will be necessary to fund ongoing operations, continue research, development and design efforts, establish sales centers, improve infrastructure, and make the investments in tooling and manufacturing equipment required to launch the Elio.  We cannot assure anyone that we will be able to raise additional funds when needed.

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 the common stock 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 stock.  In addition, if we need to raise more equity capital from the sale of common stock, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of your investment.  Shares of common stock which we sell could be sold into any market which develops, which could adversely affect the market price.

We face significant barriers in our attempt to produce the Elio, and if we cannot successfully overcome those barriers the business will be negatively impacted.

We face significant barriers as we attempt to produce our first mass produced vehicle. We currently have a few drivable early prototypes of the Elio, but do not have a full production intent prototype, a final design, a built-out manufacturing facility or manufacturing processes. The automobile industry has traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing and manufacturing vehicles, long lead times to bring vehicles to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements and establishing a brand name and image and the need to establish sales and service locations. As a manufacturer and seller of only three-wheeled vehicles, we face a variety of added challenges to entry that a traditional automobile manufacturer would not encounter including additional costs of developing and producing a power train, suspension, chassis and other systems with comparable performance to a traditional, four-wheeled gasoline powered or hybrid vehicle in terms of range and power, inexperience with servicing vehicles, and unproven high-volume customer demand for three-wheeled vehicles. We must successfully overcome these barriers to be successful.

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Our success is dependent upon consumers’ willingness to adopt three-wheeled, front and back seated two-passenger vehicles.

If we cannot develop sufficient market demand for three-wheeled vehicles, we will not be successful.  Factors that may influence the acceptance of three-wheeled vehicles include:

· perceptions about three-wheeled vehicle comfort, quality, safety, design, performance and cost;

· the availability of alternative fuel vehicles, including plug-in hybrid electric and all-electric vehicles;

· improvements in the fuel economy of the internal combustion engine;

· the environmental consciousness of consumers;

· volatility in the cost of oil and gasoline; and

· government regulations and economic incentives promoting fuel efficiency and alternate forms of transportation.

Developments and improvements in alternative technologies such as hybrid engine or full electric vehicles or in the internal combustion engine, or continued low retail gasoline prices may materially and adversely affect the demand for our three-wheeled vehicles.

Significant developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways that we do not currently anticipate.  If alternative energy engines or low gasoline prices make existing four-wheeled vehicles with greater passenger and cargo capacities less expensive to operate, we may not be able to compete with manufacturers of such vehicles.

We face several regulatory hurdles.

As described in the “Business” section of this offering circular, the Elio will need to comply with many governmental standards and regulations relating to vehicle safety, fuel economy, emissions control, noise control, and vehicle recycling, among others.  In addition, manufacturing facilities such as ours will be subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances.  Compliance with all of these requirements may delay our production launch, thereby adversely affecting our business and financial condition.

Our proposed distribution model is different from the distribution model currently used by most automobile manufacturers.

Our proposed distribution model is not common in the automobile industry today, particularly in the United States.  We plan to sell our vehicles in company-owned stores.  This model is relatively new and unproven, especially in the United States.  It also subjects us to substantial risk as it requires a significant expenditure to establish company-owned stores and provides for slower expansion of our distribution and sales systems than may be possible by utilizing a more traditional dealer franchise system.  State laws regulate the manufacture, distribution, and sale of motor vehicles, and generally require motor vehicle manufacturers and dealers to be licensed in order to sell vehicles directly to consumers in the state.  Therefore, we will need to secure dealer licenses to sell directly to consumers.  This effort may be time-consuming and costly.  Moreover, we will be competing with companies with well-established distribution channels.  We do not know whether our company-owned store strategy will be successful.

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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.  For example, according to automotive industry sources, sales of passenger vehicles in North America during the fourth quarter of 2008 were over 30% lower than those during the same period in the prior year.  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.

Our success is highly dependent on Paul Elio, our founder and Chief Executive Officer.

Paul Elio has been the driving force behind the development of the Elioand the company.  The loss of his services would have a material adverse effect on our business.  We have not obtained any “key man” insurance for Mr. Elio.

Risks Related to the Investment in our Common Stock

The ownership of our common stock is concentrated among existing executive officers and directors.

Upon the sale of all of the shares offered in this offering, our executive officers and directors will continue to own beneficially, in the aggregate, a vast majority of the outstanding shares.  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 of Incorporation, and approval of significant corporate transactions.  This control could have the effect of delaying or preventing a change of control of Elio Motors or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholders.

Investors in this offering will experience immediate and substantial dilution.

Due to our significant accumulated deficit, investors in this offering will suffer immediate and substantial dilution of $12.26 per share or approximately 102% of the offering price of the shares if the maximum offering is sold or $12.70 per share or approximately 106% of the offering price if only the minimum offering is sold.  Further, if all of the shares offered hereby are sold, investors in this offering will own less than 8% of the then outstanding shares of common stock, but will have paid over 60% of the total consideration for our outstanding shares. See “Dilution.”

There currently is no public trading market for our securities and an active market may not develop or, if developed, be sustained.  If a public trading market does not develop, you may not be able to sell any of your securities.

There is currently no public trading market for our common stock, and an active market may not develop or be sustained.  If an active public trading market for our securities does not develop or is not sustained, it may be difficult or impossible for you to resell your shares at any price.  Even if a public market does develop, the market price could decline below the amount you paid for your shares.

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Our issuance of convertible notes and warrants could substantially dilute the interests of shareholders and depress the market price for our common stock.

The $[3,368,960] in convertible notes we issued through September 2015 are convertible by the holders into shares of our common stock at any time prior to their maturity in 2022 at a conversion price equal to $5.98 per share.  In addition, we issued to Network 1 Financial Securities, Inc., the placement agent for our convertible note offering, a warrant to purchase up to [56,323] shares of common stock at $7.18 per share.  This warrant is exercisable until [October] 2020.  Lastly, we entered into option agreements with Stuart Lichter that allow him to purchase a 7% ownership interest in Elio Motors for a total of $10,500,000.  These option agreements expire in 2024 and 2025.  Accordingly, these future issuances of common stock could substantially dilute the interests of our existing shareholders and investors in this offering.

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DILUTION

If you invest in our shares, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our capital stock after this offering.  Our net tangible book value as of December 31, 2014 was $(29,880,806), or $(1.19) per share of outstanding common stock.  Without giving effect to any changes in the net tangible book value after December 31, 2014 other than the sale of 2,090,000 shares in this offering at the initial public offering price of $12.00 per share, our pro forma net tangible book value as of December 31, 2014 was $(7,140,806) or $(0.26) per share of outstanding capital stock.  Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of our shares in this offering and the net tangible book value per share of our capital stock immediately afterwards.  This represents an immediate increase of $0.93 per share of capital stock to existing shareholders and an immediate dilution of $12.26 per share of common stock to the new investors, or approximately 102% of the assumed initial public offering price of $12.00 per share.  The following table illustrates this per share dilution:

	Minimum Offering						Maximum Offering
Initial price to public				$	12.00					$	12.00
Net tangible book value as of December 31, 2014	$	(1.19	)				$	(1.19	)
Increase in net tangible book value per share attributable to new    investors		0.49						0.93
As adjusted net tangible book value per share after this offering					(0.70	)					(0.26	)
Dilution in net tangible book value per share to new investors				$	12.70					$	12.26

The following table summarizes the differences between the existing shareholders and the new investors with respect to the number of shares of common stock purchased, the total consideration paid, and the average price per share paid, on both a minimum and maximum offering basis:

Minimum Offering:

	Shares Purchased				Total Consideration				Average Price Per
	Number		Percent		Amount		Percent		Share
Founders		18,995,000		72.7%	$	5,000,000		19.8%	$	0.26
Private placement investors		6,082,500		23.3%		8,974,344		35.4%	$	1.48
New investors		1,050,000		4.0%		11,350,000		44.8%	$	10.81
Total		26,127,500		100.0%	$	25,324,344		100.0%	$	0.97

Maximum Offering:

	Shares Purchased				Total Consideration				Average Price Per
	Number		Percent		Amount		Percent		Share
Founders		18,995,000		69.9%	$	5,000,000		13.6%	$	0.26
Private placement investors		6,082,500		22.4%		8,974,344		24.5%	$	1.48
New investors		2,090,000		7.7%		22,740,000		61.9%	$	10.88
Total		27,167,500		100.0%	$	36,714,344		100.0%	$	1.35

The discussion and tables above do not give effect to the shares of common stock issuable upon an option to purchase a 7% ownership interest in the Company; [56,323] shares of common stock issuable upon exercise of a warrant; and [563,234] shares of common stock issuable upon conversion of [$3,368,960] in aggregate principal amount of our convertible notes.

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USE OF PROCEEDS

We estimate that, at a per share price of $12.00, the net proceeds from the sale of the 2,090,000 shares in this offering will be approximately $22,740,000, after deducting the estimated offering expenses of approximately $2,340,000.  If only the minimum number of 1,050,000 shares is sold, the net proceeds will be approximately $11,350,000 after deducting estimated offering expenses of $1,250,000.

The net proceeds of this offering will be used primarily to fund the effort for the next stage of our development plan, which is to build and analyze 25 prototype test vehicles.  The prototype test vehicles will be used in rigorous experiments for safety and performance, among other things.  This stage is anticipated to take four to six months.

Accordingly, we expect to use the net proceeds as follows:

	Minimum Offering					Maximum Offering
	Amount		Percentage			Amount		Percentage
Prototype building and testing	$	7,451,000		65.7	%	$	7,451,000		32.8	%
Engineering design and development		2,100,000		18.5	%		8,232,000		36.2	%
Advertising		414,000		3.6	%		1,625,000		7.1	%
Working capital (1)		1,385,000		12.2	%		5,432,000		23.9	%
TOTAL	$	11,350,000		100.0	%	$	22,740,000		100.0	%

(1) A portion of working capital will be used for officers’ salaries.

To the extent that we sell more than 2,090,000 shares, the additional net proceeds will be used for working capital.

The foregoing information is an estimate based on our current business plan.  We may find it necessary or advisable to re-allocate portions of the net proceeds reserved for one category to another, and we will have broad discretion in doing so.  Pending these uses, we intend to invest the net proceeds of this offering in short-term, interest-bearing securities.

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BUSINESS

Corporate Background and General Overview

Motivated by the belief that America can engineer and build a high quality, reliable, safe, eco-friendly and affordable vehicle for everyone, engineering veteran Paul Elio founded Elio Motors, Inc. in October 2009 as an Arizona corporation.  Today, Elio Motors is an American vehicle manufacturing company committed to providing safe, affordable and efficient vehicles.  Leveraging existing technology, Elio Motors has designed a revolutionary front engine, front-wheel drive, two-seat, gasoline-powered vehicle, with two wheels in the front and one wheel in the rear – the Elio. Its unique design makes the vehicle more aerodynamic with significantly higher gas mileage than standard vehicles.

Elio Motors hopes to make a game-changing impact beyond sales; creating thousands of jobs, reducing dependence on foreign oil, reducing emissions, and favorably affecting the trade deficit by reducing foreign oil purchases, exporting vehicles, and providing a significant return for investors.

The Elio

Vehicle specifications for the Elio based on our existing prototype are as follows:

The Elio – Vehicle Specifications Overview
Body and chassis
Chassis/Body:	Spaceframe & panel
Layout:	Front engine, front-wheel drive, 3-wheeled, open front wheel
Powertrain
Engine:	0.9 liter 3 cylinder, 55 horsepower
Transmission:	5 speed manual or automatic
Dimensions
Wheelbase:	110 inches
Length:	160.5 inches
Track Width:	66.8 inches
Height:	54.2 inches
Target Curb Weight:	1250 pounds
Trunk Space:	27 inches x 14 inches x 10 inches (2.2 cubic feet)
Performance
0-60 mph:	9.6 seconds
Top Speed:	100 miles per hour+
Fuel Economy:	84 miles per gallon EPA highway; 49 miles per gallon EPA city
Range:	672 miles
Other
Fuel:	Unleaded gasoline
Fuel Capacity:	8 gallons

The range of the Elio exceeds the range of electric vehicles (100 to 300 miles) and that of most other vehicles of its size (400 to 500 miles).  Configured in a three-wheel format, it is conceived with tandem seating for two passengers to travel in a front-to-back layout.  With a targeted retail price of $6,8001 per vehicle, we believe that the Elio provides the efficiency and environmental friendly benefits without the price premium, driving range anxiety or safety risks of electric or hybrid vehicles.  Based on the current prototype and sources for components, the retail price is approximately $7,600, but we are working to achieve the $6,800 targeted retail price.  Bill-of-materials (BOM) cost is the largest component of the retail price for the Elio vehicle. At the prototype phase of any automotive vehicle program it is quite customary to have a gap to a design BOM cost target. The cost targets for the Elio have been set based on the management team’s collective past experience in sourcing hundreds of automotive components.

1For a “base” vehicle without optional accessories.

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Actual BOM costs can vary up or down during vehicle development as engineering changes are made and validated through testing. Through continuous product refinement during vehicle development, supplier negotiation closer to production and scale economies post-production, this cost gap is typically bridged. While design-decision driven costs are within our control, the commodity price fluctuations driven by energy prices are beyond our control.  Additionally, the estimated $7,600 retail price is based on a 125,000 annual production volume and a BOM cost target of $5,654 that management expects to achieve at start of production. At 250,000 annual sales, we believe we can achieve the target $6,800 retail price due to lowered BOM costs (a target BOM cost of $5,132) resulting from economies of scale. Our management believes that based on the public response received to date, selling 250,000 vehicles per year at the $6,800 retail price is achievable.

The tandem seating design is a key component to the achievement of the Elio’s fuel efficiency; it reduces vehicle body2 width by half that of the typical side-by-side seated two to four passenger compact car (68.8 inches wide on average3), minimizing the wind drag on the vehicle by a corresponding one half.  Drivers will benefit from the vehicle’s three-wheel, two-passenger format, not only for additional practical reasons, but also as it permits them to utilize the High Occupancy Vehicle (HOV) or carpool lanes on roads and highways.  By employing the three-wheel design, the vehicle qualifies as a motorcycle4, lowering the degree of federal and state compliance requirements, as compared to vehicles with four wheels or more, and drastically reduces the cost of development and launch of the vehicle.  Where the typical small car would require 1,000 to 1,500 components for vehicle assembly, the Elio can be produced with only 270 components.  Although the vehicle is technically classified as a motorcycle, we have designed the Elio to meet the more stringent safety standards of cars.

Features and Options.  The vehicle is designed to have the same standard comfort and functional features customers have come to expect in modern automobiles:  air conditioning, heat, AM/FM stereo, power windows, power door lock, airbags, auxiliary port(s), anti-lock brakes, and traction control.  Other optional luxury features will be available as well, such as leather seats, power seats, and various exterior body aesthetic add-ons.  It will also have newer generation options, such as rear view/backup camera, remote engine ignition, GPS-mapping and navigation and web radio.

Customers will be able to select from seven different body color options:  Rocket Silver, Sour Apple, Creamsicle, Red Hot, True Blue, Licorice and Marshmallow.

Vehicle Development and Existing Technologies Used.  While the Elio is unique from what exists in the current market, many of its planned components and technologies are already in use and accessible in today’s automotive production market, thus reducing the need for, and costs and execution risks of, vehicle development.  Over 65% of the components utilized in the construction of the vehicle’s interior, chassis, powertrain and body, such as the transmission, steering column, brakes, rack and pinion system, airbags, and many others, are either available off-the-shelf or can be modified from off-the-shelf items for use in production of the vehicle.  “Off-the-shelf” means the components are in current production in other automaker vehicles and the component suppliers either own the production tooling and/or designs to these components or have the permission to sell these components to Elio Motors.  The benefits of using off-the-shelf components are proven and durable performance and lowered costs due to economies of scale.  We have already established letters of intent with industry-leading suppliers to provide the Elio’s systems and components.

2Based on the width of the vehicle’s body from left side panel to right side panel, and distinct from track width.

3Source:  Edmunds.com as of 2007 (http://usatoday30.usatoday.com/money/autos/2007-07-15-little-big-cars_N.htm)

4 The National Highway Traffic Safety Administration (NHTSA) defines a motorcycle as “a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in contact with the ground.”

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Automakers generally outsource a significant portion of the vehicle components to third-party suppliers. In fact, according to Oliver Wyman, in order to meet the evolving consumer demands and to remain competitive, suppliers’ share of the value creation in vehicle development was 77.3% in 2012 and is projected to increase to 81.1% by 2025.5 This means that Elio Motors is not alone in this regard. In addition, automakers single source components for a given vehicle platform, but use multiple suppliers for their portfolio of vehicle platforms in order to have pricing leverage over suppliers.  Although we are single sourcing any given automotive component, our purchasing group has a reserve of two or three capable suppliers to protect against pricing or other supply risks. In fact, we have successfully switched suppliers for a few components already.

Spaceframe and Body Panel Design.  The Elio is designed upon a spaceframe chassis, which utilizes a set of tubular steel struts, custom fitted and arranged in straight or curved geometric patterns for shape and/or strength.  Optimally positioned, the struts will promote the greatest rigidity in structure for three-dimensional load-bearing points.  By tailoring the spaceframe construction with the use of advanced high strength steels, the result is less weight and lower costs compared to the use of other expensive materials, such as aluminum and carbon fiber.  The Elio’s body panels, which have no structural function, are affixed to the spaceframe to add the aesthetic facets to the vehicle, and are made of sheet molding composite.  Composite panels result in a lighter weight, dent-resistant structure, as compared to steel body panels.  In addition, the use of composite panels can reduce repair costs, as it facilities a “replacement” strategy rather than a “repair” strategy.  In-mold reinforcements positioned within the panels help to further reduce tooling costs.

This frame and body design contrasts with the unibody frame design, common in the market today and which requires sheet metal stampings to serve as both the safety structure and aesthetic surface for a typical car design.  This frame technology is not unique to the Elio – spaceframes for automotive applications have been used frequently for decades in the production of motorcycles and racecars, and the spaceframe and body panel architecture are currently utilized in the production of autos ranging from exotic sports cars to more modestly priced models.  The advantages of this frame and panel design are the far greater utilization of materials in production, decreased tooling costs, and greater potential for left hand to right hand commonality.  As well, by decoupling the aesthetic and functional aspects of the frame, Elio Motors has greater freedom in design of the spaceframe itself.

Engine/Powertrain.  Perhaps the most critical aspect to the vehicle’s performance is the engine.   The Elio engine is an inline 0.9 liter combustible three-cylinder engine, which has been custom-developed for the Elio application.  Like the rest of the vehicle, it relies heavily on off-the-shelf components and is a great execution of current automotive technology.  To achieve the Elio’s fuel efficiency and power requirements, this version will include existing technologies found in production automobiles today:  variable valve lift and exhaust gas recirculation.

Newly Tooled Parts and Components.  While much of the vehicle’s construction involves readily available, off-the-shelf components and existing technologies, some parts are unique to the vehicle and will require new tooling of equipment to fabricate parts for production.  As described above, it has been noted that the engine powertrain for the vehicle will involve a new engine with off-the-shelf parts where possible and unique parts, such as the engine block being manufactured by current market leaders.  This system, along with other powertrain, interior, chassis and body components will also require new parts production to accommodate the performance, styling and features of the vehicle.

5Source:  Oliver Wyman Automotive Manager 2014 Articles (http://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2014/jul/17-19_AM_2014_Boosting%20Engineering%20Performance.pdf)

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Engineering and Development, to Date; Prototype Build and Design Validation.  Our development process of the Elio comprises five stages:  Concept Design, Engineering Analysis, Detailed Design, Prototype Build and Validation Testing.  As of the date of this offering circular, we have made considerable progress through the first three stages of the vehicle’s development.  Virtually all of the component design and engineering work has been completed on the Elio.  The next stage of vehicle engineering and development process is prototype build, vehicle test and engineering validation stage.  The primary use of proceeds for this financing round is to fund this stage.  Through this process, the vehicle safety characteristics, the gasoline efficiency and the cost of manufacturing the vehicle will be confirmed.

We plan to use Technosports Creative, a Livonia, Michigan-based prototype maker, to build 25 Elio prototypes and certain other manufactured parts used in the engineering and safety testing process.  Technosports will build prototypes using a combination of fabricated and soft-tooled and off-the-shelf components provided by the Elio suppliers.  Supplier components will take six to eight weeks from engineering drawing release.  Computer-aided design models or physical hardware are in place for over 90% of all non-off-the-shelf components. Once the components are available, the actual vehicle builds will likely take four to six weeks.  The vehicles will be built on a pilot manufacturing line to simulate the production build.  During the prototype build process, issues will be tracked and reported back to the component and vehicle engineering teams to be addressed.

The following tests are planned for the 25 prototypes, with some vehicles to be used for multiple tests:

1) Underhood thermal & HVAC testing – 4 vehicles

2) Electrical – 12 vehicles

3) General inspection – all vehicles

4) Serviceability – 1 vehicle

5) Powertrain (to include altitude testing, emission certification, engine/transmission development & calibration, economy and software development & verification) – 9 vehicles

6) Interior – 4 vehicles

7) Noise, vibration & harness – 4 vehicles

8) Steering – 1 vehicle

9) Ride & handling (to include vehicle turning, objective measurements, NHTSA Fish Hook, tire wear and electronic stability) – 6 vehicles

10) Performance (to include engine/transmission shift validation, 0-60 mph, hill climb, cold temperature start-up and drivability and maximum speed) – 1 vehicle

11) Fuel systems – 1 vehicle

12) Brakes – 4 vehicles

13) Body systems – 12 vehicles

14) Durability – 7 vehicles

15) Safety tests – 8 vehicles

All the tests outlined above will be performed by third parties. Since the Elio is classified as a motorcycle under the Federal Motor Vehicle Safety Standards and Regulations, the Elio does not have to meet any destructive safety tests. The crash safety testing for the Elio will be done purely as a due care measure and not because of any regulatory requirement. On the other hand, in order to be eligible for the Advanced Technology Vehicles Manufacturing (ATVM) loan (discussed below in “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Plan of Operations”), the Elio has to qualify as an “ultra-efficient vehicle” that achieves at least 75 miles per gallon6 while operating on diesel or gasoline. The Department of Energy (DOE) has informed us that Elio Motors has met the technical eligibility criteria for the ATVM loan based on preliminary analysis. However, it is possible that DOE may require physical testing of the Elio for validation of miles per gallon prior to disbursement of the ATVM loan.

6 ATVM’s 75 miles per gallon is based on the CAFÉ test method, which is a combined highway and city mileage number. The Elio is expected to achieve 92 mpg measured under the CAFÉ test method. On the other hand, the Elio’s projected 84 miles per gallon is a highway mileage number, which is based on EPA’s test method, which involves real-world driving conditions.

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 Cost Estimates Developed with Vendors.  We have also made considerable progress towards identifying and procuring component and parts supply partners who will provide the setup for and future production of components in the vehicle at the start of production.  To date, we have obtained cost estimates from nearly 90% of our potential parts and components supply partners, with detailed estimates from each supplier for the pre-production equipment tooling and the per part costs (based on vehicle production volumes).

The Market

We will be selling into the North American automobile market, which is highly competitive.  We have examined various considerations with regard to the Elio’s market impact, including driving cost analyses, the Elio’s unique profile, cost comparisons to existing vehicles in the market, market testing and target consumer markets.

Driving Cost Analyses.  We expect the total cost of operating an Elio to be substantially below that of any available vehicle due largely to the expected retail price of an Elio and its anticipated fuel efficiency.

Unique profile.  We have carefully assessed whether a two-passenger vehicle profile will be an impediment to broad market acceptance.  According to a survey of 150,000 households completed by the US Department of Transportation’s Federal Highway Administration in 2009 (the “2009 National Household Travel Survey”), the average vehicle occupancy across all types of trips (work, shopping, family errands, and social and recreational) totaled 1.67.  When traveling to and from work, the average vehicle occupancy declined to just 1.13, suggesting that almost all work commutes by automobile are made with the driver as the sole vehicle occupant.  Only social and recreational trips averaged more than two occupants, measuring at 2.2.

Cost comparisons to existing vehicles.  When compared to internal combustion engine vehicles (i.e., those powered by gasoline or diesel oil), the Elio is substantially more attractive on the basis of purchase cost, operating costs and efficiency.  When compared to electric vehicle alternatives, the Elio still represents a significantly better value proposition on the basis of purchase cost and convenience.  Electric vehicles range in purchase cost from $23,000 (Mitsubishi i-MiEV) to $70,000 (Tesla Model S), and the lack of available charging stations limits the driving range of many of the models, making them less convenient and impractical for longer trips.

Market testing.  Since May 2013, we have been touring a prototype Elio across the United States to build awareness, gather feedback and refine the offering.  The vehicle has been well received at more than 125 events nationwide.  We have been taking reservations through our website for future production models of the Elio, which require deposits of $100 to $1,000, with the average deposit received per reservation of $419, with 94% of the reservation dollar amounts being non-refundable.  As of September 30, 2015, the number of reservations taken through the website has exceeded 46,000.

Target markets.  We have surveyed consumers several times to understand the groups most likely to purchase an Elio.  The results of these surveys indicate that the demographics of an Elio purchaser will evolve, as the initial purchasers, or “early adopters,” will have a slightly different demographic profile than the broader group of purchasers anticipated in future years.  Based on our analyses, we are targeting the Second Vehicle and Used Car markets, the Clunker Replacement market, and the Third Vehicle market.

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· Second Vehicle and Used Car Markets – According to the 2009 National Household Travel Survey, there were 1.86 vehicles per household, and greater than 41 million households had two vehicles, accounting for 36.3% of all US households.  The 2014 Used Car Industry Report published by the National Independent Automobile Dealers Association indicated that for 2013, 41.99 million used vehicles and 15.58 new vehicles were sold.  The 2014 Used Vehicle Market Report prepared by Edmunds.com revealed that the average transaction price for a ten-year old vehicle was $7,689.  We believe that the Elio presents an attractive alternative to purchasing a used car for a second vehicle.  Given the option of purchasing a used vehicle with 120,000 miles on it for $7,689 versus a new vehicle with all the guarantees and warranties for under $7,600, many buyers, especially first-time buyers and college students, will present a solid opportunity.

· Clunker Segment - Of the 2587 million vehicles on the road in the U.S. today, 120 million are six to 14 years old or older, or “Clunkers.”  This segment consists of clunker drivers who today, have no intention of getting a different vehicle.  They do not want to (or cannot) purchase a substantially better vehicle.  Given the low upfront cost of the Elio and its low operating cost, we believe that the Elio will stand out as a newer, lost-cost alternative for clunker drivers.  If one were to finance the cost of the Elio over six years, and replaced a vehicle with 18 miles per gallon or less, the savings on gas from the new Elio would entirely pay for the vehicle8.

· Third Vehicle - We had Berline (a Detroit advertising agency), perform a survey to assess the market for the Elio.  Berline surveyed 2,000 people who watched a video about the Elio and then completed a questionnaire. 23.8% of the respondents classified themselves as either “Very Likely” or “Extremely Likely” to purchase an Elio, an impressive result for a new vehicle.  Even more interesting, 72.7% of this group of “Very Likely” or “Extremely Likely” indicated they would buy an Elio in addition to their current vehicles.

Reservations for an Elio

Since 2013, we have been accepting reservation deposits ranging from $100 to $1,000 for purposes of securing vehicle production slots.  We offer reservations on a non-refundable and refundable basis at the following levels:  $1,000, $500, $250 and $100.  Those holding non-refundable reservations have priority over those holding refundable reservations and within each group, those with higher deposits have greater preference over those with lower deposits.  As of December 31, 2014 and 2013, we received refundable deposits of $913,700 and $200,250, respectively, which are included as current liabilities on our balance sheets.  As of December 31, 2014 and 2013, we received nonrefundable deposits of $14,852,183 and $2,616,200, respectively, which are included as long-term liabilities on our balance sheets.  As of September 30, 2015, we had over 46,000 reservations totaling over $19.4 million.

Sales and Service Model

Sales Model.  The sales model for our vehicle is based on the establishment and operation of our own retail store network, as opposed to the conventional model utilizing factory-authorized dealer franchises.  Our distribution model is designed to enable customers to choose specific options for their vehicles at the point-of-sale.  Since they will be purchasing directly from the manufacturer, customers would be able to obtain their desired mix of options and features, rather than choosing from pre-set option packages.  With seven color choices and the choice of either a manual or automatic transmission, there will be 14 vehicle combinations available.  Customers can then select from an extensive list of add-ons to customize their vehicles.

7 IHS Automotive.  (2015).  Average Age of Light Vehicles in the U.S. Rises Slightly in 2015 to 11.5 years, IHS Reports [Press release].  Retrieved from http://press.ihs.com/press-release/automotive/average-age-light-vehicles-us-rises-slightly-2015-115-years-ihs-reports.

8Assumes price of gas is $2.75 per gallon, vehicle is driven approximately 10,000 miles per year, cost of an Elio is $7,600 and the Elio gets 84 miles per gallon.

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We envision situating our stores as small, stand-alone locations in highly visible community shopping centers of major cities, in which three full-size Elio vehicles can be displayed – one inside the store and two (a standard and an automatic) outside the store to accommodate test drives.  Customers would access four to six interactive kiosks placed in-store to assist in their vehicle and vehicle options choices, providing such information as option/accessory menus, pricing, warranty information, service locations and financing options.  With only three vehicles being displayed, our retail stores are expected to comprise approximately 4,000 square feet of space.

Fulfillment and Delivery.  Once a customer has finalized his/her vehicle and option selections, the order would be transmitted to one of several Elio marshaling/configuration centers, positioned within nine hours of an Elio retail store.  These marshaling centers would maintain a stock of base vehicles, provide parts installation of customers’ selected option add-ons to the vehicles, and facilitate the delivery of the vehicle to the retail location of purchase.  We expect vehicle orders to be transmitted real time throughout the day, then building out and customizing a base vehicle according to the customer’s specifications.  To provide the marshaling services, we have identified ADESA, Inc., a large national provider of vehicle remarketing services to automotive manufacturers, financial institutions, vehicle rental companies, and fleet management companies.

Service.  Since our retail stores are planned only as sales and distribution locations, we have identified an outsourced service partner - The Pep Boys - Manny, Moe & Jack, a publicly-traded, national provider and retailer of automotive aftermarket service and parts.  We believe that with an existing base of approximately 800 service centers in 36 states located in 90% of the markets in which we will operate, Pep Boys has the right combination of brand recognition and customer focus for its desired factory authorized service provider.  We entered into a preliminary memorandum of understanding as a first step towards securing this working relationship.

Production Plan

Manufacturing Facility.  See“Properties” for a description of the manufacturing facility.

Sourcing.  We intend to sole-source components initially from major component suppliers under multi-year supply agreements and develop dual sources of certain components as quickly as practical.

Production Plan.  Our Vice President of Manufacturing and Product Launches, Gino Raffin, and our consultant for project management of Shreveport operations have developed the production plan and facility layout.  The facility layout has been developed to utilize the existing infrastructure and flexible design of the buildings at the Shreveport facility.  A detailed 47-week launch plan has been developed, which includes 24 weeks of pre-production activities, 10 weeks of manufacturing validation and training, and 12 weeks9 of increased production to reach optimal production output.  Incorporated into the launch is the plan that the first 125 vehicles produced will not be sold, but utilized for internal purposes.

Management is committed to making this vehicle available to the public as soon as possible. However, we have encountered delays resulting in a slip of approximately two and a half years to the production schedule.  Approximately nine months of the delay was attributable to the refinement of project scope as new technical information became available.  We note that notwithstanding the sophisticated simulations that have been run to date, it is possible that vehicle testing in the next twelve months may uncover technical issues that may introduce a further program delay.

9 12 weeks to reach steady state production with one shift; 23 weeks to reach steady state with second shift.

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The additional delay of one year and nine months has been a function of a delay in funding milestones that we believe was largely as a result of the venture capital industry having moved away from investing in new vehicle startups. Fortunately, at present the investing public seems to be very interested in this category in general and the Company in particular, as evidenced by the large number of customer reservations and the overwhelming expressions of interest received in this offering.  As disclosed in the section of this offering circular entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operation – Plan of Operations,” in addition to the successful completion of this offering, we must raise an estimated $240 million to fund production.  Our anticipated production timetable is therefore highly dependent upon receiving such funding in a timely manner, and delays in obtaining additional funding will delay our production timetable.

Intellectual Property

Patents.  In order to minimize the cost of bring the Elio to market, we have chosen not to apply for patents for any of our mechanical innovations related to our development of the Elio.  The design of the Elio is copyrighted, but others could design a vehicle similar to the Elio and argue that although similar, the design has not been copied.  This means that others could develop a vehicle with a similar design and produce a competing product, which would adversely affect our business, prospects, financial condition and operating results.  If we are able to successfully launch the Elio, we expect that other companies – whether they are traditional auto companies, motorcycle companies, or other startups – would attempt to begin producing their own three-wheeled vehicles.  However, we believe Elio Motors  would be well positioned due to the following:

· We will be several years ahead of the competition in terms of the design and production schedule.

· We will have established a network of automotive supplier relationships that are not easily duplicated by motorcycle manufacturers or other startups.

· We believe we will have create a sustainable brand loyalty through the manner in which we treat our customers. The Elio is being deliberately priced at the $6,800 base price target even though the market will bear a higher price without any competitors at the outset. By not opportunistically pricing the Elio, it will be difficult for competitors to attract Elio customers away.  We believe that most major auto manufacturers are saddled with legacy costs (pension obligations, etc.) and massive corporate infrastructure and overhead that would make it very difficult for them to compete with our targeted $6,800 base price.

Trademark and Trade Name.  We have registered the following with the United States Patent and Trademark Office:

· “ELIO and Design” (the logo consisting of the name “Elio” in a circle) – Registered April 8, 2014, registration number 4510655.

· “ELIO MOTORS” (name only) – Registered September 2, 2014, registration number 4598749.

Government Regulation

Many governmental standards and regulations relating to safety, fuel economy, emissions control, noise control, vehicle recycling, substances of concern, vehicle damage, and theft prevention are applicable to new motor vehicles, engines, and equipment manufactured for sale in the United States, Europe, and elsewhere. In addition, manufacturing and other automotive assembly facilities in the United States, Europe, and elsewhere are subject to stringent standards regulating air emissions, water discharges, and the handling and disposal of hazardous substances. The most significant of the standards and regulations affecting us are discussed below:

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Mobile Source Emissions Control.The federal Clean Air Act imposes stringent limits on the amount of regulated pollutants that lawfully may be emitted by new vehicles and engines produced for sale in the United States. The current ("Tier 2") emissions regulations promulgated by the Environmental Protection Agency (EPA) set standards for motorcycles. Tier 2 emissions standards also establish durability requirements for emissions components to 5 years or 30,000 kilometers.

California has received a waiver from EPA to establish its own unique emissions control standards for certain regulated pollutants. New vehicles and engines sold in California must be certified by the California Air Resources Board (CARB).  CARB's emissions standards for motorcycles are in line with those of the EPA.

Motor Vehicle Safety.The National Highway Traffic Safety Administration (NHTSA) defines a motorcycle as “a motor vehicle with motive power having a seat or saddle for the use of the rider and designed to travel on not more than three wheels in contact with the ground.”  In order for a manufacturer to sell motorcycles in the US, the manufacturer has to self-certify to meet a certain set of regulatory requirements promulgated by the NHTSA in its Federal Motor Vehicle Safety Standards (FMVSS).

Our FMVSS strategy is designed to meet motorcycle requirements and conform as much as possible to automotive FMVSS requirements while not violating the motorcycle requirements that we must meet.

The National Traffic and Motor Vehicle Safety Act of 1966 (the “Safety Act”) regulates vehicles and vehicle equipment in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable vehicle safety standards established by NHTSA. Meeting or exceeding many safety standards is costly, in part because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it determines the vehicles do not comply with a safety standard. Should we or NHTSA determine that either a safety defect or noncompliance exists with respect to any of our vehicles, the cost of such recall campaigns could be substantial.

Operator’s License and Helmet Requirements.  Since the Elio is a motorcycle by NHTSA definition, laws and regulations pertaining to the operation of a motorcycle and wearing a helmet apply to us.  We are approaching several state legislatures to seek an exemption from the application of these requirements.  As of the date of this offering circular, five states require the use of helmets while operating an enclosed three-wheel vehicle if the operator is under a specified age (generally under 18, although one state requires a helmet if under the age of 21) and two states require the use of helmets regardless of age.

The American Association of Motor Vehicle Administrators (AAMVA), which is a tax-exempt, nonprofit organization developing model programs in motor vehicle administration, law enforcement and highway safety, and which represents the state and provincial officials in the United States and Canada who administer and enforce motor vehicle laws, issued a report in October 2013, titled “Best Practices for the Regulation of Three-Wheel Vehicles.”  In that report, the AAMVA distinguishes a traditional three-wheel motorcycle from what it calls an “autocycle” – a three-wheel motorcycle that has a steering wheel and seating that does not require the operator to straddle or sit astride it.  In addition, the AAMVA issued the following recommendations for autocycles:

· Registering autocycles differently than three-wheel motorcycles – using AU instead of 3W for the body style and creating a distinguishing plate alpha/numeric configuration or using a distinguishing feature on the plate to indicate the vehicle is registered as an autocycle; and

· With respect to driver license requirements, allowing operation of autocycles with a standard automobile license

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As of the date of this offering circular, 19 states recognize the definition of autocycle (with the added provision that it must be an enclosed or partially enclosed motorcycle).

Pollution Control Costs.  We are required to comply with stationary source air and water pollution and hazardous waste control standards that are now in effect or are scheduled to come into effect with respect to our manufacturing operations. We do not yet have an estimate of the cost of compliance.

Motor Vehicle Manufacturer and Dealer Regulation.  State laws regulate the manufacture, distribution, and sale of motor vehicles, and generally require motor vehicle manufacturers and dealers to be licensed in order to sell vehicles directly to consumers in the state.  As described above in the “Sales and Service Model” section, establishing and operating our own retail store network means that we will need to secure dealer licenses in order to do so.  It will not be possible to obtain a dealer license in all 50 states since a few states presently do not permit motor vehicle manufacturers to be licensed as dealers or to act in the capacity as a dealer, or otherwise restrict a manufacturer’s ability to deliver vehicles.  Where we are unable to obtain a dealer license, we may have to conduct sales out of the state using our website, phone or mail.  We do not yet have an estimate of the cost of compliance with motor vehicle manufacturer and dealer regulations.

Competition

The worldwide automotive market, particularly for economy and alternative fuel vehicles, is highly competitive today and we expect it will become even more so in the future. Other manufacturers have entered the three-wheeled vehicle market and we expect additional competitors to enter this market within the next several years. As they do so we expect that we will experience significant competition. With respect to the Elio, we also face strong competition from established automobile manufacturers, including manufacturers of high-MPG vehicles, such as Toyota Prius, Smart, Fiat, Nissan Leaf, and other high efficiency, economy cars.

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. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in a further downward price pressure and adversely affect our business, financial condition, operating results and prospects. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets and our market share. There can be no assurances that we will be able to compete successfully in our markets. 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.

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Research and Development

During the fiscal years ended December 31, 2014 and 2013, we spent $5,715,716 and $6,903,023, respectively, on engineering, research and development activities.

Employees

As of September 30, 2015, we employed a total of 17 full-time and no part-time people.   None of our employees are covered by a collective bargaining agreement.  Most of the significant engineering work on the Elio design has occurred through our prospective suppliers and partners and engineering consultants.

Legal Proceedings

There are no legal proceedings material to our business or financial condition pending and, to the best of our knowledge, there are no such legal proceedings contemplated or threatened.

PROPERTIES

Our principal office is located at 2942 North 24th Street, Suite 114-700, Phoenix, Arizona, which is a mailing address of an executive suite leased on a month-to-month basis for $46 per month.  In August 2015, we entered into a one-year lease agreement for an office located at 2266 South Dobson Road, Suite 263, Mesa, Arizona for $799 per month.

In 2013, we purchased the former General Motors (GM) light truck assembly plant in Shreveport, Louisiana to house our manufacturing operations.  The property was one of the facilities transferred to the Revitalizing Auto Communities Environmental Response (“Racer”) Trust in March 2011, which was created to redevelop and sell 89 former GM facilities.  The facility was purchased by us from the Racer Trust, with all of the GM manufacturing equipment in place, for $3 million in cash and a $23 million promissory note.  The real property was purchased by an affiliate of Industrial Realty Group, LLC (“IRG”), the Shreveport Business Park, LLC, for $7.5 million.  IRG and Shreveport Business Park, LLC are entities owned and controlled by Stuart Lichter, one of our directors and significant shareholders.

A portion of the purchased machinery and equipment secures a promissory note due to CH Capital Lending, LLC in the principal amount of $9,850,000.  CH Capital Lending purchased the note from GemCap Lending I, LLC in August 2014.  GemCap Lending originally made the loan to us in February 2013.  Interest accrues on the note at 10% per annum, which was due on July 31, 2015.  We entered into a forbearance agreement with CH Capital Lending in which CH Capital Lending has agreed to forbear on enforcing the payment of the note until July 31, 2016.  CH Capital Lending, LLC is an affiliate of Stuart Lichter and Mr. Lichter has guaranteed the repayment of this note.  At December 31, 2014, the unpaid principal balance of the note was $9,850,000.  See Note 4. Long-Term Debt of the Notes to Financial Statements for more information regarding this debt obligation.

The note to Racer Trust is secured by a lien subordinated to the lien of CH Capital Lending on certain machinery and equipment and is non-interest bearing.  The note, as amended, requires monthly principal payments of $173,500 from January 1, 2016 through July 1, 2017, with the remaining outstanding principal due on July 1, 2017.  As of December 31, 2014, the outstanding principal balance was $21,038,818.  See Note 4. Long-Term Debt of the Notes to Financial Statements for more information regarding this debt obligation.

We plan to keep some of the equipment that is appropriate for our own manufacturing activities and sell the balance, with the sales proceeds to be used to satisfy the CH Capital Lending note.

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GM invested $1.5 billion during the 2002 expansion of the facility and as a result, it is one of the most modern automobile manufacturing facilities in North America, with fully integrated chassis conveyors, and moving workstations for engine, interior, body, and glass installation and fluid filling. We believe that the use of this facility by us greatly lowers start-up production risks of the project, prospectively saving as much as $350 million in facility and equipment costs prior to the start of production.

The facility is located on approximately 437 acres in Caddo Parish, in an industrial park southwest of Shreveport, Louisiana. There are three main structures on the property, excluding the wastewater treatment and power generation facilities. The three structures include the general assembly building (to be used by us), the former metal stamping and body manufacturing building (not to be used by us) and the original manufacturing building and paint shop (to be partially used by us). Of the approximately 3.2 million square feet of manufacturing space, we will utilize less than a third.

The facility is located 2 miles from Interstate 20 and approximately 12 miles from downtown Shreveport. It is serviced by 7 active rail spurs, utilized for delivery of raw material and component supplies to the factory floor, as well as for the loading and rail transport of finished vehicles in the marshaling and shipping yard (to be used by us) at the northern end of the property.

In December 2013, we entered into an agreement with Shreveport Business Park, LLC to lease 997,375 rentable square feet of manufacturing and warehouse space for a 25-year term, which provides for a rent-free period until the earlier of four months after the start of production or August 1, 2015, after which the base rent will be $249,344 per month.  We have two options to extend the term of the lease for 25 additional years each, as well as an option to expand into additional space.  Since December 2013, we have been obligated to pay taxes, insurance expenses and common expenses with respect to this space.  On July 31, 2015, we entered into an amendment to the lease which extended the base rent commencement date to February 1, 2016 and deferred payment of the base rent for the period February 1, 2016 through July 31, 2016 until August 1, 2016.

Among the terms of our purchase agreement with Racer Trust was our agreement to use and develop the property so as to create at least 1,500 new jobs.  We agreed that if we had not created 1,500 new jobs by February 28, 2016, we would pay Racer Trust $5,000 for each full-time, permanent direct job that fell below the required number.  We have requested an extension of this requirement from Racer Trust, as we do not anticipate that we will be in production until the end of 2016 at the earliest.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Since our incorporation in October 2009, we have been engaged primarily in developing the design of the Elio and obtaining loans and funds from investors to fund that development.  We are considered to be a development stage company, since we are devoting substantially all of our efforts to establishing our business and planned principal operations have not commenced.  We completed the initial design for the Elio as well as our business model in December 2012.  We began accepting reservations in January 2013 for the Elio, closed on the purchase of manufacturing equipment in February 2013, built three prototypes from January 2013 through January 2014, secured a manufacturing facility in December 2013, sourced suppliers and services providers during 2014, and applied for the ATVM loan (described below) in August 2014.

Cash investment has totaled $8,599,344, net of related expenses, from incorporation through December 31, 2014 and loans have totaled $39,776,659 from incorporation through December 31, 2014.  We have also obtained deposits from persons desiring to reserve an Elio totaling $15,765,883 through December 31, 2014.

Operating Results

We have not yet generated any revenues and do not anticipate doing so until late in 2016 at the earliest, but more likely in 2017.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013.  Operating expenses for the 2014 fiscal year increased by 49% over the 2013 fiscal year, reflecting our first full year of headcount and activity.  We had 11 full-time employees at December 31, 2013 who started with us at various times during the 2013 fiscal year, as compared to 13 full-time employees at December 31, 2014, most of whom were us for the entire 2014 fiscal year.  Marketing costs increased by 199% from $1,269,987 to $3,800,353 due to increased advertising, social media and promotions.  General and administrative expenses for the 2014 fiscal year increased from $1,777,971 to $5,328,108 (200%), with the majority of the increase being due to $1,545,521 in taxes, insurance and common expenses associated with the Shreveport facility, an increase in professional services of $985,970 for lobbying expenses and consultants, and $261,563 in credit card processing fees.

Interest expense increased by 188% for the 2014 fiscal year over the 2013 fiscal year, due to the default interest charges on the note to Racer Trust.  See Note 4. Long-Term Debt of the Notes to Financial Statements for more information regarding this debt obligation.

As a result, our net loss for the 2014 fiscal year was $24,661,441, as compared to $13,365,228 for the 2013 fiscal year, an increase of 84%.  Our accumulated deficit was $44,956,239 at December 31, 2014.

Six Months Ended June 30, 2015 Compared to June 30, 2014.  Operating expenses for the six months ended June 30, 2015 decreased by 36% over the comparable 2014 period, due to reduced engineering, research and development.

Interest expense increased by 109% for due to the default interest charges on the note to Racer Trust, offsetting the decrease in operating expenses.

As a result, our net loss for the six months ended June 30, 2015 was $8,837,148, as compared to $9,181,221 for the comparable 2014 period, a slight decrease of 4%.  Our accumulated deficit was $53,793,387 at June 30, 2015.

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Liquidity and Capital Resources

December 31, 2014.  As of December 31, 2014, we had cash of $374,652 and a working capital deficit of $8,446,483, as compared to cash of $869,107 and working capital of $260,884 at December 31, 2013.  Included in the current liabilities is a note payable due to IAV Automotive Engineering Inc. in the amount of $1,600,000 as payment for research and development work.  The note is due December 31, 2015 and secured by a third position security interest in our equipment at the Shreveport facility.  We have agreed to pay monthly installments of $150,000 against the note.

The decrease in working capital was due primarily to the net loss for the 2014 fiscal year.  We funded our operations primarily with customer reservation deposits of $12,949,433 and net advances received from related party of $11,708,900.

June 30, 2015.  As of June 30, 2015, we had cash of $148,916 and a working capital deficit of $10,631,640.  The increase in the working capital deficit was due primarily to the increase in interest payable.

We obtained a forbearance agreement until July 31, 2016 with respect to a $9,850,000 loan due July 31, 2015, secured by a first position in equipment in the Shreveport, Louisiana manufacturing facility.  The lender, CH Capital Lending, is an affiliate of Stuart Lichter, one of our directors and significant shareholders.  We have three loans from Mr. Lichter totaling $1,900,500 which are also due July 31, 2016. We also obtained a deferral of the lease payments on the Shreveport facility until August 1, 2016.  Such payments were to have commenced on August 1, 2015.  The lessor, Shreveport Business Park, is an affiliate of Mr. Lichter.

We also have a long-term loan of $23,000,000 from the Racer Trust which was incurred in March 2013 in connection with the purchase of the equipment at the Shreveport facility.   This loan was to be repaid in monthly installments of $173,500 beginning on November 1, 2013, with the entire remaining balance due September 1, 2016.  We were delinquent on the first payment, which triggered default interest to be charged on the loan at 18% per annum.  Payments made in 2014 were applied to this interest.  In March 2015, we entered into an amendment to the promissory note which deferred the installment payments until January 1, 2016 and extended the maturity date to July 1, 2017.

In addition to the agreements made with our lenders to defer cash outlays, we have funded our operations during the current fiscal year primarily through customer reservations (approximately $3.7 million through September 30, 2015) and the net proceeds from a placement of convertible subordinated secured notes due September 30, 2022 (approximately $3.4 million through September 30, 2015).

These notes, which have offered and sold only to accredited investors, are convertible into shares of our common stock at any time prior to their maturity in 2022 at a conversion price equal to $5.98 per share.  Interest of 5% per annum accrues on the unpaid principal balance and all unpaid principal and interest are to be paid at maturity.  The notes are secured, but subordinated to the liens of CH Capital Lending, the Racer Trust, and IAV Automotive Engineering.  We have granted unlimited piggyback registration rights covering the shares issuable upon conversion of the notes and holders of the notes have a right of participation for an amount equal to 25% of future equity or convertible financings (“Subsequent Financings”) undertaken by us at the valuation of such future financings.  If a note holder decides not to participate in a Subsequent Financing, the note holder will lose its right to participate in future Subsequent Financings.

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Plan of Operations

Much of the vehicle engineering has been completed, and we are finalizing our engineering simulations, which suggest that the important vehicle performance milestones can be achieved.  To date, $17.4 million has been invested in vehicle engineering and development. We are now seeking $25 million in funding from this Regulation A offering to fund the build of 25 prototypes and the completion of the safety and final engineering tests. Upon completion of this phase, which management expects to take six months, the vehicle production costs, as well as the performance and safety profiles, will be understood to a level that will allow for the kick-off of hard tooling.  With the development risks addressed, we will then be in a position to raise larger amounts of capital - to be up to another estimated $240 million to fund production activities. The diagram below portrays the stages of development for the current financing round and the subsequent phases leading to production.

We are in the process of refining our production plans with suppliers to start production in 15 months from the completion of this offering. The key milestones for the 15-month schedule are as follows (with E1, S1 and S2 referring to various vehicle prototype phases):

• $25M Regulation A offering underway

• E1 Engineering drawing release – Month 2

• E1 Builds begin – Month 3

• E1 Testing  – Month 4

• S1 Production drawing release & tooling kickoff  - Month 7

• Order long lead equipment  – Month 9

• Shreveport plant integration – Month 9

• Initial 10 retail locations selected – Month 10

• Retail lease agreements signed – Month 11

• Service partner agreements signed – Month 11

• S1 Builds and production validation – Month 13

• Initial 10 retail stores build out complete – Month 14

• S2 Builds & EPA/CARB certification complete – Month 14

• Start of Production – Month 15

The anticipated budgets required to achieve the milestones are provided in the table below:

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We do not anticipate raising additional funds in the next six months after the completion of this offering to complete the prototype phase. However, as noted in the chart above, we need to raise an additional estimated $240 million to fund production activities in the next 15 months and are pursuing multiple options for such funding, rather than relying on one source.  We believe funding will come from a combination of short-term and long-term sources and from one or more of the sources discussed below, as well as more traditional sources (not discussed), such as venture debt arrangements and capital leasing on equipment.

Customer Reservations.  Customer reservations have provided significant funding for us in the past and we expect reservations to be a significant source of short-term liquidity in the future.  With each progressive step in our development, we have experienced a surge in reservations.  Through September 30, 2015, we have received over $19.4 million in reservations, an average of $600,000 per month.  As we achieve each additional milestone in the development of the Elio, customer confidence increases.  Accordingly, we expect to see surges in reservations as the following milestones are achieved and announced:  completion of prototypes, testing results, confirmation of mileage, guarantee of the sales price, hiring at the manufacturing facility, and, hopefully before production commences, scarcity.

Sale of Excess Equipment.  We will not use all of the equipment purchased at the Shreveport facility.  Through September 30, 2015, sales of excess equipment has yielded approximately $3.5 million.  We will continue to sell excess equipment and use the proceeds to pay down the CH Capital Lending loan.

Release of Reservation Holdbacks.  We currently have $4.5 million held by former credit card processing companies as a percentage of non-refundable reservations.  These funds are expected to be released in the next six to twelve months.

Advanced Technology Vehicles Manufacturing (ATVM) Loan Program.In 2007, the Advanced Technology Vehicles Manufacturing (ATVM) Program was established by Congress to support the production of fuel-efficient, advanced technology vehicles and components in the United States.  To date, the program, which is administered by the U.S. Department of Energy’s Loan Programs Office, has made over $8 billion in loans, including loans to Ford ($5.9 billion), Nissan ($1.45 billion) and Tesla ($465 million).  This loan program provides direct loans to automotive or component manufacturers for re-equipping, expanding, or establishing manufacturing facilities in the United States that produce fuel-efficient advanced technology vehicles (ATVs) or qualifying components, or for engineering integration performed in the U.S. for ATVs or qualifying components.  The ATVM loans are made attractive to applicants due to their low interest rates (set at U.S. Treasury rates (approximately 2% to 4%), minimal fees (no application fees or interest rate spread and only a closing fee of 0.1% of loan principal amount), and long loan term life of up to 25 years (set at the assets’ useful life).  In order to qualify, auto manufacturers must be able to deliver “light duty vehicles” having 25% greater fuel economy than comparable models produced in 2005 or “ultra efficient vehicles” that achieve at least 75 miles per gallon.  In addition, ATVM borrowers must remain financially viable over the life of the loan without the receipt of additional federal funding associated with the proposed project.

We have engaged Black Swan LLC to provide lobbying services on our behalf.  We issued 62,500 shares of our common stock to Black Swan as partial compensation for these lobbying services and owe Black Swan a $400,000 cash payment.  If the event we obtain funds as a result of the ATVM loan program, or its successor program if ATMV were to be modified, we have agreed to pay a success fee to Black Swan in the amount of $1,000,000.

The ATVM application process is comprised of 4 stages:

1. Application – Part I:  Determine basic eligibility

2. Application – Part II: Confirmatory due diligence

3. Conditional Commitment: Negotiate term sheet

4. Loan Guarantee: Negotiate final agreements

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Elio Motors has completed the first stage by submitting an application for a loan of approximately $185 million, the proceeds of which would be used to partly fund the purchase of equipment and equipment installation into the Shreveport facility prior to and ramp up after the start of production.  As of January 15, 2015, the Department of Energy has confirmed that the Company has achieved the technical criteria for the loan.  Due diligence has been pending upon the confirmation of the Company’s financial backing, which includes the proceeds from this current offering. The specific terms and conditions of the ATVM loan will be negotiated with each applicant during the conditional commitment stage.  As indicated in this “Plan of Operations” discussion, if the Company is unable to obtain a loan under the ATVM Program, it will rely on funding through customer reservations, selling debt securities, and possibly CAFE credits.
                                

CAFE Credits.  In 1975 in response to the Arab oil embargo, the U.S. Congress enacted Corporate Average Fuel Economy (CAFE) standards in an effort to reduce U.S. dependence on foreign oil and save on fuel costs through the improvement of U.S. automobile fuel efficiencies.  The National Highway Traffic Safety Administration (NHTSA) is responsible for administering the CAFE program, which was amended in 2007 to establish a trading credit program to incentivize auto manufacturers to further improve vehicle fuel efficiencies.  Auto manufacturers may earn CAFE credits (or be penalized) by exceeding (or failing to meet) increasingly more ambitious compliance standards for the model year of each passenger car or light duty truck produced.  Accumulated CAFE credits are transferable and saleable to other auto manufacturers and can be carried forward up to five years.  Credits (or penalties) are totaled for the manufacturer’s entire production fleet for a particular model year, and are applied at a rate of $55 per 1 mpg above (or below) the standard.  The CAFE standard has been amended to increase mpg for cars and light trucks to 48.7 to 49.7 mpg by 2025.

According to the estimated fuel economy of the Elio, it is expected that we could be well positioned to earn a substantial number of credits, from which we could generate extensive future revenues through the sale and transfer of these credits to other auto industry manufacturers. We have received indications from auto industry manufacturers that they would purchase our credits upon confirmation that we can participate in the CAFE program.  Currently, we do not qualify for participation in the CAFE program, since the Elio is not an automobile.  We have been working with members of Congress and with the former acting head of the NHTSA to permit participation in the program by autocycles.

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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

Our directors, executive officers and significant employees, and their ages as of July 31, 2015, are as follows:

Name	Position	Age	Term of Office
Executive Officers:
Paul Elio	Chairman and Chief Executive Officer	51	October 2009
Hari Iyer	Chief Operating Officer	50	January 2014
Connie Grennan	Chief Financial Officer	67	March 2013
Directors:
Paul Elio	Director	51	October 2009
James Holden	Director	64	November 2012
Hari Iyer	Director	50	November 2012
Stuart Lichter	Director	66	November 2012
David C. Schembri	Director	62	November 2012
Kenneth L. Way	Director	76	November 2012
Significant Employees:
Gino Raffin	Vice President of Manufacturing and Product Launches	72	March 2013
Steven Semansky	Vice President of Supply Chain Management	51	March 2013
Don Harris	Vice President of Retail Operations	60	April 2014
Tim Andrews	Senior Vice President of Marketing	49	November 2013
Chip Stempeck	Vice President of Customer Experience	50	March 2013
Jerome Vassallo	Vice President of Sales	50	April 2013
Joel Sheltrown	Vice President of Governmental Affairs	68	March 2013

All of our executive officers and significant employees work full-time for us.  There are no family relationships between any director, executive officer or significant employee.  During the past five years, none of the persons identified above has been involved in any bankruptcy or insolvency proceeding or convicted in a criminal proceeding, excluding traffic violations and other minor offenses.

Executive Officers

Paul Elio, Chief Executive Officer and Elio Motors Board Chairman.Mr. Elio founded Elio Motors and has been its CEO and Chairman since the Company’s inception. He has over 18 years of experience in business management and engineering, most recently as founder and CEO, from 1998 to 2011, of Elio Engineering, dba ESG Engineering. ESG was a Tempe, Arizona company which designed, engineered and prototyped products using state-of-the-art design tools and techniques, evaluated them for engineering feasibility and designed them for high volume manufacturing and assembly. Mr. Elio held various positions at Johnson Controls from 1992 to 1997. He holds numerous patents related to various mechanisms. He graduated from the General Motors Institute of Engineering & Management (now Kettering University) with a Bachelor of Science in Mechanical Engineering in 1995.

Hari Iyer, Chief Operating Officer and Elio Motors Board Member.  Mr. Iyer has been with Elio Motors since January 2014 and brings nearly 25 years of product development, business strategy and operations expertise in the automotive industry. From January 2011 to August 2013, Mr. Iyer was Executive Vice President at Envia Systems, a Silicon Valley battery manufacturer, where he led all aspects of business strategy and product commercialization. From October 2009 to November 2010 (and as a full-time consultant from ESG Engineering from October 2006 to September 2009), he served as Vice President of Engineering at Next Autoworks Company. At Next Autoworks, Mr. Iyer developed the original vehicle architecture, led the selection of vehicle technologies and suppliers and was responsible for all module engineering teams. From June 1999 to September 2009, Mr. Iyer was co-founder and Chief Operating Officer at ESG Engineering, a product development firm specializing in the automotive and cleantech space. Mr. Iyer held various positions at Johnson Controls, Automotive Systems Group from January 1989 to August 1997. He received his M.S. in Mechanical Engineering from Penn State and his M.B.A. from Stanford Graduate School of Business.

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Connie Grennan, Chief Financial Officer.  Ms. Grennan has been the Chief Financial Officer of Elio Motors since March 2013, and has over 30 years of financial and operational experience in similar positions in several startup organizations, as well as valuable experience in the large corporate environment with a division of Lockheed Martin as Director of Finance and Administration. Her experience includes management of accounting and finance, banking and investor relationships, human resources, facilities, information systems, and contract management. From March 2010 to February 2013, Ms. Grennan consulted as the chief financial officer for OzMo Inc., a company based in Palo Alto, California, which developed and provided Wi-Fi compatible communication technology products.  She received her Bachelor of Science in Accounting from Arizona State.

Directors

James Holden, Director.  Mr. Holden is the former Chief Executive Officer of DaimlerChrysler, where he worked in various leadership positions for 19 years until November 2000. He has been a director of Sirius XM Radio, Inc. since August 2001, of Speedway Motorsports, Inc. since 2004, and of Snap-on, Inc. since 2009. Mr. Holden was a director of Motors Liquidation Company until its dissolution in December 2011. Mr. Holden earned a B.S. in political science from Western Michigan University and a MBA degree from Michigan State University.

Stuart Lichter, Director.Mr. Lichter is President and Chairman of the Board for Industrial Realty Group, LLC (IRG), a privately-held real estate development and investment firm specializing in the acquisition, development and management of commercial and industrial real estate across the United States.  IRG’s core competency is retrofitting otherwise obsolete buildings, corporate campuses, former military bases and industrial complexes.  Mr. Lichter oversees all critical aspects of the business, including acquisitions, leasing, and property management at IRG, which he founded 40 years ago.

David C. Schembri, Director. Since August 2012, Mr. Schembri has been the CEO of the Active Aero Group, of Belleville, Michigan, a supply-chain solutions provider focused on transportation logistics for customers with sensitive or time-critical freight, principally in the United States and Mexico.  From February 2010 to August 2012, he was the CEO of Vehicle Production Group, a company based in Allen Park, Michigan, that made vans for the disabled.  From July 2006 to January 2010, Mr. Schembri was the President of Smart USA, a Penske Automotive Group company. He was responsible for the successful launch of Smart USA (a division of Mercedes-Benz), which included establishing and maintaining a sales and service retail network, customer relations, logistics, advertising, marketing, PR, government relations, and a parts distribution network.  Much of his career was spent in various executive positions at Mercedes-Benz (1994 to 2005) and Volkswagen (1979 to 1993). He attended the University of Detroit, where he earned both his Bachelor’s degree and his MBA.

Kenneth L. Way, Director.  Mr. Way served as the Chief Executive Officer of Lear Corporation from 1988 to September 2000 and Chairman of the Board from 1988 to December 2002. Mr. Way served with Lear Corporation and its predecessor companies for 37 years in various engineering, manufacturing and general management capacities. During his career he has served as a director for several organizations.  At present, he is a director of CMS Energy of Jackson, Mississippi, and of Cooper Standard Auto, of Novi, Michigan, positions he has held since 1997 and 2004, respectively.

Significant Employees

Gino Raffin, Vice President of Manufacturing and Product Launches.Mr. Raffin emerged from retirement to join Elio Motors.  He worked for Chrysler from 1968 to 2006 and was involved with major automotive product and automotive manufacturing process launches involving hundreds of millions of dollars in tooling, equipment, facility and launch costs of new product, process and modified facility designs. As part of these initiatives, Mr. Raffin was responsible for all aspects of program launch including safety, quality, delivery and costs, overseeing engineering and purchasing teams for features such as dimensional management, sealing, underbody, side aperture, framing-body, closure panels – panel alignment, trim, chassis, powertrain and electrical. In addition to major product and process launches, Mr. Raffin has also been involved in advanced manufacturing engineering. He has led teams that designed, developed and executed the manufacturing production processes for tooling, equipment, facility, processing (both direct and indirect labor), material logistics, and controls and mechanicals at the operational assembly plant.  Mr. Raffin is a graduate of the Lawrence Institute of Technology with a degree in Mechanical Engineering.

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Steven Semansky, Vice President of Supply Chain Management.Mr. Semansky brings to Elio Motors experience in Interiors and Styling design and production, component engineering, sales, component sourcing and logistics, and international manufacturing and supplier networks.  In 2001, Mr. Semansky formed Jmarc Engineering and Sales, in Wixom, Michigan, to represent manufacturers of component products supplied to Tier 1 and Tier 2 automotive companies. Products sourced included aluminum die-casting, roll form, stamping, plastic injection molded components, fasteners, and CNC machined products. In building the company to peak annual sales of $89 million and 8 sales representatives covering the USA, China and Mexico, Mr. Semansky and his team aimed to match components for fit and function, while recommending aggressive design and process changes to reduce total cost of assembly.  When he joined us in March 2013, he turned day-to-day management of the company to his wife.  Over his career, Mr. Semansky has completed projects for the International Sales Management (ISM) on behalf of Chrysler for lighting, electronics, storage and other interiors components used in Chrysler vehicles.  Mr. Semansky received his B.S. in marketing from Wayne State University and has completed coursework towards his Mechanical Engineering degree.

Don Harris, Vice President of Retail Operations.Mr. Harris began his career in the automotive space in retail sales nearly 34 years ago, and brings a range of experience stemming from his firm background with retail and wholesale auto dealerships and automotive auction platforms. Mr. Harris joined Elio Motors in April 2014 to set up the distribution of the vehicles from the point of manufacture to their retail locations. He is knowledgeable regarding the licensing needs of various states in the realm of retail operations, and is versed in the utilization of marshaling yards nationwide for the Company’s distribution model to handle 20,000 vehicles monthly. In January 2005, Mr. Harris invested in and assisted with the development of a large new concept called Automotive Consignment, in Charlotte, North Carolina, an automotive retail platform which assisted private sellers in the consignment sale of their vehicles. He continued with Automotive Consignment until March 2012, when he was approached to help develop a new business opportunity named CarBuyCo, which was developed to enable the private sellers of automobiles to get an instant purchase offer for their car via the internet. Mr. Harris led CarBuyCo to become a nationwide service by setting up buying centers across the US with the proper DMV licenses, management and processes, later generating purchase offers for thousands of prospective vehicle sellers weekly and millions of dollars of purchases each week.

Tim Andrews, Senior Vice President of Marketing.Mr. Andrews brings over 18 years executive management experience and over 22 years marketing experience working with various fortune 500 brands in the categories of automotive, communications, healthcare and travel. From September 2007 to December 2010, he served as Chief Strategy Officer of TLA Marketing Communications, a firm specializing in strategic planning and marketing management. He received industry acclaim for developing the “Hybrid Direct Marketing” strategy that enabled Cox Communications to successfully launch the concept of “bundling,” which resulted in increased market share, establishing Cox as a leader in the digital spectrum. He has also helped build three major startups providing operational and marketing leadership and followed them into established companies. Prior to joining Elio Motors in November 2013, he taught at Grand Canyon University and Rio Salado Community College.  Mr. Andrews is a graduate of Arizona State University with a Bachelor of Arts degree in Journalism with an emphasis in Marketing and Advertising from the Walter Cronkite School of Communications. He completed an MBA degree at the University of Phoenix.

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Chip Stempeck, Vice President of Customer Experience.Mr. Stempeck brings over 25 years of automotive experience in sales, marketing and program launch to Elio Motors. Immediately prior to joining Elio Motors in March 2013, he operated a consulting business, CJS Consulting, which was started in January 2006, advising clients on sales and operations management.  Mr. Stempeck also served as the vice president online operations for Brookline College from January 2010 through June 2011.  He graduated from Oregon State University with a Bachelor of Science in Management and Psychology.

Jerome Vassallo, VP of Sales.Mr. Vassallo brings over 20 years of experience in the automotive and pleasure boating industries, working for notable automotive companies, such as Suzuki, Volkswagen of America and Mitsubishi.  Prior to joining Elio Motors Inc. in April 2013, Mr. Vassallo most recently served as Zone Manager for Suzuki Motor Corporation from January 2012 to November 2012 and as Mitsubishi District Manager from November 2005 to January 2012 where he oversaw wholesale and retail vehicle sales as well as fixed operations within the district. Additionally, Mr. Vassallo is well-versed in all aspects of the sales process including new product launches, sales training and development, financial forecasting and reviews, distribution/logistics, dealer and supplier relationship-driven programs, contract negotiations, production planning and event marketing activities.

Joel Sheltrown, VP of Governmental Affairs.  Mr. Sheltrown joined Elio Motors in March 2013 to manage governmental affairs and remain knowledgeable of any state or federal statutes or regulations that may impact the Company. He was a state representative for the 103rd district in the Michigan House of Representatives from 2005 to January 2011 and was a professional lobbyist from February 2011 to February 2013 with deep roots in the automotive industry. He provides language and legislative guidance to legislators and regulatory agencies in numerous states. He also lobbies for the elimination of helmet and motorcycle endorsement requirements. Mr. Sheltrown attended Western Michigan University and also Kirtland Community College.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information about the annual compensation of each of our three highest paid persons who were executive officers or directors during our last completed fiscal year.

Name	Capacities in which compensation was received	Cash compensation ($)	Other compensation ($)	Total compensation ($)
Paul Elio	Chief Executive Officer	250,000	-0-	250,000
Hari Iyer	Chief Operating Officer	250,000	-0-	250,000
Connie Grennan	Chief Financial Officer	150,000	-0-	150,000

Compensation of Directors

We do not compensate our directors for attendance at meetings.  We reimburse our officers and directors for reasonable expenses incurred during the course of their performance.  We have no long-term incentive plans.

Future Compensation

Compensation paid to the three individuals listed in the table above for 2015 is at the same levels as 2014.

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

Set forth below is information regarding the beneficial ownership of our common stock, our only outstanding class of capital stock, as of September 30, 2015 by (i) each person whom we know owned, beneficially, more than 10% of the outstanding shares of our common stock, and (ii) all of the current directors and executive officers as a group.  We believe that, except as otherwise noted below, each named beneficial owner has sole voting and investment power with respect to the shares listed.  Unless otherwise indicated herein, beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting or investment power with respect to shares beneficially owned.

Name and address of beneficial owner (1)	Amount of nature of beneficial ownership (2)			Amount and nature of beneficial ownership acquirable			Percent of class(3)
Paul Elio		17,995,000	(4)		-0-			71.8%
Elio Engineering, Inc.		12,750,000			-0-			50.8%
Stuart Lichter		5,000,000			2,155,047	(5)		26.3%
All directors and officers as a group (7 persons)		23,272,500	(4)		2,155,047	(5)		93.4%

*less than 1%

(1) The address of those listed is c/o Elio Motors, Inc., 2942 North 24th Street, Suite 114-700, Phoenix, Arizona 85016.

(2) Unless otherwise indicated, all shares are owned directly by the beneficial owner.

(3) Based on 25,077,500 shares outstanding prior to this offering.  Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of September 30, 2015 are deemed outstanding for purposes of computing the percentage ownership of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

(4) Includes 12,750,000 shares owned of record by Elio Engineering, Inc. of which Mr. Elio is the President, a director and majority shareholder.

(5) Mr. Lichter has the right to convert promissory notes in the principal amount of $1,600,000 into 267,493 shares of common stock.  If Mr. Lichter were to exercise the option held by him to acquire up to 7% of the Company, exclusive of his then existing ownership, he would acquire an additional 1,887,554 shares.  See “Interest of Management and Others in Certain Transactions.”

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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

Paul Elio and ESG Engineering

The original design for the Elio was conceived by Paul Elio and Elio Engineering, Inc., dba ESG Engineering, a company partially owned and controlled by Paul Elio.  ESG Engineering transferred all rights to the design to the Company, valued at $5,000,000, as consideration for 25,000,000 shares of common stock in the Company.  In addition, we assumed approximately $1,277,187 of payables that ESG Engineering had incurred on behalf of Elio Motors.  At December 31, 2014 and 2013, these outstanding payables were $344,827 and $346,627, respectively.  ESG Engineering transferred 12,250,000 shares of common stock in the Company to Paul Elio in November 2012 in consideration for his services in forming and organizing Elio.

Transfer of Consumer Financing Rights

In 2012, we transferred the right to provide consumer financing for the purchase of the Elio to Carr Finance Company, LLC in consideration of Paul Elio’s efforts to devote his time and attention to developing the business of the Company with only limited compensation.  Mr. Elio is a member of Carr Finance Company, LLC.

Guaranty of Loan Repayment Provided by Stuart Lichter; Loan from CH Capital Lending

On February 28, 2013, in connection with the acquisition of certain machinery and equipment at the Shreveport facility, we entered into a promissory note with GemCap Lending I, LLC for $9,850,000, the payment of which is secured by a first lien on our equipment at the Shreveport facility.  Stuart Lichter personally guaranteed the payment of this note.  CH Capital Lending, LLC purchased the loan from GemCap on August 1, 2014.  CH Capital Lending is an affiliate of Stuart Lichter.  On July 31, 2015, we entered into a forbearance agreement with CH Capital Lending in which CH Capital Lending has agreed to forbear on enforcing the payment of this note until July 31, 2016.

Lease with Shreveport Business Park, LLC

Our equipment is located in a plant in Shreveport, Louisiana, which is leased by Shreveport Business Park, LLC, an entity owned and controlled by Stuart Lichter, one of Elio’s directors and significant shareholders.  We entered into an agreement with Shreveport Business Park in December 2013 to sublease 997,375 square feet of manufacturing and warehouse space for a 25-year term, which provides for a rent-free period until the earlier of four months after the start of production or August 1, 2015, after which the base rent will be $249,344 per month.  Since December 2013, the Company has been obligated to pay taxes, insurance expenses and common expenses with respect to this space and is past due in paying these amounts.  On July 31, 2015, we entered into an amendment to the lease which extended the base rent commencement date to February 1, 2016 and deferred payment of the base rent for the period February 1, 2016 through July 31, 2016 until August 1, 2016.

Advances to Paul Elio

During 2014, we advanced a total of $74,966 to Paul Elio, our Chief Executive Officer.  The advance is non-interest bearing and is due on demand.  In June 2015, we advanced an additional $25,000.

Loans Made by Stuart Lichter

Stuart Lichter has made several loans to us, the proceeds of which were used for working capital and to pay amounts owed to GemCap Lending I, LLC.  The promissory notes evidencing the loans are as follows:

33

Date	Amount	Maturity	Payment Terms	Interest Expense for 2014
March 6, 2014	$1,000,500	July 31, 2016	Unsecured; interest accrues at 10% per annum; all accrued interest and unpaid principal are payable upon maturity; $500 drawn March 6, 2014; $1,000,000 drawn December 2, 2014	$8,097
May 30, 2014	$300,000	July 31, 2016	Unsecured; interest accrues at 10% per annum; all accrued interest and unpaid principal are payable upon maturity; $100,000 drawn May 30, 2014; $200,000 drawn November 10, 2014	$8,806
June 19, 2014	$600,000	July 31, 2016	Secured by Elio Motors’ reservation accounts and deposit held by Racer Trust; interest accrues at 10% per annum; all accrued interest and unpaid principal are payable upon maturity; $100,000 drawn April 17, 2014; $500,000 drawn June 20, 2014	$34,111

In addition to the loans described in the table above, during 2015, Mr. Lichter has purchased convertible subordinated secured notes due September 30, 2022 in the aggregate principal amount of $1,600,000 on the same terms offered to other accredited investors in this offering made pursuant to Rule 506(c) under the Securities Act of 1933.  These notes are convertible into shares of our common stock at any time prior to their maturity in 2022 at a conversion price equal to $5.98 per share.

Options Granted to Stuart Lichter

In consideration for the March 6, 2014 loan of $1,000,500 and the guaranty of the $9,850,000 loan originally made to us by GemCap Lending I, LLC, we granted Stuart Lichter an option to purchase a number of shares of common stock in Elio Motors sufficient to give him a 5% ownership interest, exclusive of his existing ownership (the “5% Option”).  Mr. Lichter may exercise the 5% Option at any time and from time to time until December 15, 2024 for $7,500,000.

We granted a second option to Mr. Lichter in consideration of the May 30, 2014 loan of $300,000.  This second option permits Mr. Lichter to purchase a number of shares of common stock in Elio Motors sufficient to give him a 2% ownership interest, exclusive of his existing ownership (the “2% Option”).  Mr. Lichter may exercise the 2% Option at any time and from time to time until June 29, 2025 for $3,000,000.

Future Transactions

All future affiliated transactions will be made or entered into on terms that are no less favorable to us than those that can be obtained from any unaffiliated third party.  A majority of the independent, disinterested members of our board of directors will approve future affiliated transactions, and we will maintain at least two independent directors on our board of directors to review all material transactions with affiliates.

34

SECURITIES BEING OFFERED

Our authorized capital stock consists of 100,000,000 shares of common stock, no par value, and 10,000,000 shares of preferred stock, no par value.  As of September 30, 2015, we had 25,077,500 shares of common stock and no shares of preferred stock outstanding.

The following is a summary of the rights of our capital stock as provided in our articles of incorporation and bylaws.  For more detailed information, please see our articles of incorporation and bylaws, which have been filed as exhibits to the offering statement of which this offering circular is a part.

Common Stock

Voting Rights.  The holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders.  Arizona law provides for cumulative voting for the election of directors.  As a result, any shareholder may cumulate his or her votes by casting them all for any one director nominee or by distributing them among two or more nominees.  This may make it easier for minority shareholders to elect a director.

Dividends.  Subject to preferences that may be granted to any then outstanding preferred stock, holders of common stock are entitled to receive ratably such dividends as may be declared by the board of directors out of funds legally available therefor as well as any distributions to the shareholders.  The payment of dividends on the common stock will be a business decision to be made by our board of directors from time to time based upon results of our operations and our financial condition and any other factors that our board of directors considers relevant.  Payment of dividends on the common stock may be restricted by loan agreements, indentures and other transactions entered into by us from time to time.

Liquidation Rights.In the event of our liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of our assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock.

Absence of Other Rights or Assessments.Holders of common stock have no preferential, preemptive, conversion or exchange rights.  There are no redemption or sinking fund provisions applicable to the common stock.  When issued in accordance with our articles of incorporation and law, shares of our common stock are fully paid and not liable to further calls or assessment by us.

Preferred Stock

Our board of directors is authorized by our articles of incorporation to establish classes or series of preferred stock and fix the designation, powers, preferences and rights of the shares of each such class or series and the qualifications, limitations or restrictions thereof without any further vote or action by our shareholders.  Any shares of preferred stock so issued would have priority over our common stock with respect to dividend or liquidation rights.  Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in our control without further action by our shareholders and may adversely affect the voting and other rights of the holders of our common stock.  At present we have no plans to issue any additional shares of preferred stock or to adopt any new series, preferences or other classification of preferred stock.

The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal.  For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable a holder to block such a transaction.  In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of holders of our common stock.  Although our board of directors is required to make any determination to issue preferred stock based on its judgment as to the best interests of our shareholders, our board could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of our shareholders might believe to be in their best interests or in which such shareholders might receive a premium for their stock over the then market price of such stock.  Our board presently does not intend to seek shareholder approval prior to the issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange rules.
           

35

Certain Anti-takeover Effects

General.  Certain provisions of our articles of incorporation, our bylaws, and Arizona law may have an anti-takeover effect and may delay or prevent a tender offer or other acquisition transaction that a shareholder might consider to be in his or her best interest.  The summary of the provisions of our articles, bylaws and Arizona law set forth below does not purport to be complete and is qualified in its entirety by reference to our articles, bylaws and Arizona law.

Special Meetings of Shareholders.  Our bylaws provide that, except as required by law, special meetings of shareholders may be called by a majority of our Board of Directors, the Chairman of the Board, the President, or shareholders who hold in the aggregate at least 25% of the voting power of the outstanding capital stock of the Company (“Requesting Shareholders”).  Requesting Shareholders must meet certain qualifications and must submit a written request to our Corporate Secretary, containing the information required by our bylaws.  A request for a special meeting made by Requesting Shareholders may be rejected if (1) a meeting of shareholders that included an identical or substantially similar item of business, as determined in good faith by our Board of Directors, was held not more than 90 days before our Corporate Secretary received the request; (2) our Board of Directors has called or calls for a meeting of shareholders to be held within 90 days after our Corporate Secretary receives the request and our Board of Directors determines in good faith that the business to be conducted at such meeting includes similar business to that stated in the request; or (3) the request relates to an item of business that is not a proper subject for shareholder action under, or involves a violation of, applicable law.

Shareholder Proposals and Director Nominations.  A shareholder can submit shareholder proposals and nominate candidates for election to our Board of Directors in connection with our annual meeting if he or she follows the advance notice and other relevant provisions set forth in our bylaws.  With respect to director nominations at an annual meeting, shareholders must submit written notice to our Corporate Secretary at least 180 days prior to the date of the meeting.  With respect to shareholder proposals to bring other business before the annual meeting, shareholders must submit a written notice to our Corporate Secretary not fewer than 90 nor more than 120 days prior to the first anniversary of the date of our previous year’s annual meeting of shareholders.  However, if we have changed the date of the annual meeting by more than 30 days from the anniversary date of the previous year’s annual meeting, the written notice must be submitted no earlier than 120 days before the annual meeting and not later than 90 days before the annual meeting or ten days after the day we make public the date of the annual meeting.

A shareholder must also comply with all applicable laws in proposing business to be conducted and in nominating directors.  The notice provisions of the bylaws do not affect rights of shareholders to request inclusion of proposals in our proxy statement pursuant to Rule 14a-8 of the Exchange Act.

Amendment to Articles of Incorporation and Bylaws.  Both the Board of Directors and the shareholders must approve amendments to an Arizona corporation’s articles of incorporation, except that the Board of Directors may adopt specified ministerial amendments without shareholder approval.  Unless the articles of incorporation, Arizona law or the Board of Directors would require a greater vote or unless the articles of incorporation or Arizona law would require a different quorum, the vote required by each voting group allowed or required to vote on the amendment would be:

· a majority of the votes entitled to be cast by the voting group, if the amendment would create dissenters’ rights for that voting group; and

· in any other case, if a quorum is present in person or by proxy consisting of a majority of the votes entitled to be cast on the matter by the voting group, the votes cast by the voting group in favor of the amendment must exceed the votes cast against the amendment by the voting group.

36

The Board of Directors may amend or repeal the corporation’s bylaws unless either: (1) the articles or applicable law reserves this power exclusively to shareholders in whole or in part or (2) the shareholders in amending or repealing a particular bylaws provide expressly that the Board may not amend or repeal that bylaw.  An Arizona corporation’s shareholders may amend or repeal the corporation’s bylaws even though they may also be amended or repealed by the Board of Directors.  Our bylaws may not be amended or repealed without the vote of a majority of the Board of Directors then in office or the affirmative vote of a majority of votes cast on the matter at a meeting of shareholders.

Transfer Agent and Registrar

FundAmerica Stock Transfer, LLC, 2300 West Sahara Avenue, Suite 803, Las Vegas, Nevada 89102 is the transfer agent and registrant for our common stock.

37

PLAN OF DISTRIBUTION

We are offering a minimum of 1,050,000 shares of common stock and a maximum of 2,090,000 shares of common stock on a “best efforts” basis.  If $12,600,000 in subscriptions for the shares (the “Minimum Offering”) is not deposited in escrow on or before ___________, 2015 (the “Minimum Offering Period”), all subscriptions will be refunded to subscribers without deduction or interest.  Subscribers have no right to a return of their funds during the Minimum Offering Period.  If this minimum offering amount has been deposited by __________, 2015, the offering may continue until the earlier of __________, 2016 (which date may be extended at our option) or the date when all shares have been sold.  We reserve the right to accept subscriptions for up to an additional 418,000 shares, for an additional $5,016,000 in gross proceeds.

We are not selling the shares through commissioned sales agents or underwriters.  We will use our existing website, www.eliomotors.com, to provide notification of the offering.  Persons who desire information will be directed to https://www.startengine.com/startup/elio-motors, a website owned and operated by an unaffiliated third party that provides technology support to issuers engaging in equity crowdfunding efforts.  We will pay StartEngine Crowdfunding, Inc. $20 per investor in cash and warrants to purchase shares of our common stock at $12 per share equal to the cash compensation.  The warrants are exercisable for a period of three years from the completion of this offering.

This Offering Circular will be furnished to prospective investors via download 24 hours per day, 7 days per week on the startengine.com website.

The startengine.com website will be the exclusive means by which prospective investors may subscribe in this offering.  All prospective investors who submitted non-binding indications of interest will be given the first opportunity to purchase shares, which will be the seven-day period commencing upon the qualification of this offering by the Securities and Exchange Commission.  If by the end of the seven-day period, we receive subscriptions for more shares than the 2,090,000 being offered, we will reduce proportionately all subscriptions received in excess of the $600 minimum purchase.  If all 2,090,000 shares have not been sold during the initial seven-day period, the shares will be offered to the general public.

In order to subscribe to purchase the shares, a prospective investor must complete a subscription agreement and send payment by check, wire transfer or ACH.  Investors must answer certain questions to determine compliance with the investment limitation set forth in Rule 251(d)(2)(i)(C) under the Securities Act of 1933, which states that in offerings such as this one, where the securities will not be listed on a registered national securities exchange upon qualification, the aggregate purchase price to be paid by the investor for the securities cannot exceed 10% of the greater of the investor’s annual income or net worth.  In the case of an investor who is not a natural person, revenues or net assets for the investor’s most recently completed fiscal year are used instead.

The investment limitation does not apply to accredited investors, as that term is defined in Rule 501 under the Securities Act of 1933.  An individual is an accredited investor if he/she meets one of the following criteria:

· a natural person whose individual net worth, or joint net worth with the undersigned’s spouse, excluding the “net value” of his or her primary residence, at the time of this purchase exceeds $1,000,000 and having no reason to believe that net worth will not remain in excess of $1,000,000 for the foreseeable future, with “net value” for such purposes being the fair value of the residence less any mortgage indebtedness or other obligation secured by the residence, but subtracting such indebtedness or obligation only if it is a liability already considered in calculating net worth; or

· a natural person who has individual annual income in excess of $200,000 in each of the two most recent years or joint annual income with that person’s spouse in excess of $300,000 in each of those years and who reasonably expects an income in excess of those levels in the current year.

38

An entity other than a natural person is an accredited investor if it falls within any one of the following categories:

· an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended, (i) if the decision to invest is made by a plan fiduciary which is either a bank, savings and loan association, insurance company, or regis­tered investment adviser; (ii) if such employee benefit plan has total assets in excess of $5,000,000; or (iii) if it is a self-directed plan whose investment decisions are made solely by accredited investors;

· a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust or a partnership, which was not formed for the specific purpose of acquiring the securities offered and which has total assets in excess of $5,000,000;

· a trust, with total assets in excess of $5,000,000, which was not formed for the specific purpose of acquiring the securities offered, whose decision to purchase such securities is directed by a “sophisticat­ed person” as described in Rule 506(b)(2)(ii) under Regulation D; or

· certain financial institutions such as banks and savings and loan associations, registered broker-dealers, insurance companies, and registered investment companies.

We have engaged FundAmerica Securities, LLC, a broker-dealer registered with the Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA), to perform the following administrative functions in connection with this offering in addition to acting as the escrow agent:

· review the subscription agreements to determine whether all of the necessary information has been obtained from the investors, to determine compliance with the investment limitation requirement, and to perform anti-money laundering checks;

· contact the investors if necessary to gather additional information or clarification;

· provide us with prompt notice for subscriptions that cannot be accepted; and

· transmit the subscription information data to FundAmerica Securities Transfer LLC, our transfer agent and an affiliate of FundAmerica Securities, LLC.

As compensation for the services listed above, we have agreed to pay FundAmerica Securities $2.00 per domestic investor for the anti-money laundering check and a fee equal to 1.0% of the gross proceeds from the sale of the shares offered hereby.  If we elect to terminate the offering prior to its completion, we have agreed to reimburse FundAmerica Securities for its out-of-pocket expenses incurred in connection with the services provided under this engagement (including costs of counsel and related expenses) up to an aggregate cap of $10,000.  In addition, we will pay FundAmerica Securities $225 for escrow account set up, $25 per month for so long as the offering is being conducted, but in no event longer than two  years ($600 in total fees), and up to $15.00 per investor for processing incoming funds. We will also pay FundAmerica Securities a technology service fee for the technology services provided by its affiliate, FundAmerica Technologies, LLC, of $2.00 for each subscription agreement executed via electronic signature.  FundAmerica Securities Transfer LLC, an affiliate of FundAmerica Securities, will serve as transfer agent to maintain stockholder information on a book-entry basis; there are no set up costs for this service, fees for this service will be limited to secondary market activity.

39

FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-1
Balance Sheets at December 31, 2014 and 2013	F-3
Statements of Operations for the years ended December 31, 2014 and 2013	F-4
Statement of Stockholders’ Deficit for the two years ended December 31, 2014	F-5
Statements of Cash Flows for the years ended December 31, 2014 and 2013	F-6
Notes to Financial Statements December 31, 2014 and 2013	F-7
Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014	F-20
Statements of Operations for the six months ended June 30, 2015 and 2014 (unaudited)	F-21
Statement of Stockholders’ Deficit through the six months ended June 30, 2015 (unaudited)	F-22
Statements of Cash Flows for the six months ended June 30, 2015 and 2014 (unaudited)	F-23
Notes to Financial Statements June 30, 2015 (unaudited)	F-24

40

Independent Auditor’s Report

To the Board of Directors of

Elio Motors, Inc.:

We have audited the accompanying financial statements of Elio Motors, Inc. (the "Company"), which comprise the balance sheets as of December 31, 2014 and 2013, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of  financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the  financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Elio Motors, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

11444 W. Olympic Boulevard, 11th Floor, West Los Angeles, CA  90064  ●  3011 Townsgate Road, Suite 400, Westlake Village, CA  91361

100 Oceangate, Suite 800, Long Beach, CA  90802  ●  117 East Colorado Boulevard, 6th Floor, Pasadena, CA  91105

555 Anton Boulevard, Suite 700, Costa Mesa, CA  92626  ●  15760 Ventura Boulevard, Suite 1700, Encino, CA  91436

400 W.  Ventura Boulevard, Suite 250, Camarillo, CA 93010  ●  115 West Second Street, Suite 204, Fort Worth, TX  76102

F-1

Independent Auditor’s Report

(Continued)

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, certain conditions indicate that the Company may be unable to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

Los Angeles, California

August 12, 2015

F-2

ELIO MOTORS, INC.
(AN ARIZONA CORPORATION)
BALANCE SHEETS
DECEMBER 31, 2014 AND 2013
Assets
	2014			2013
Current assets:
Cash and cash equivalents	$	374,652		$	869,107
Restricted cash held in escrow		476,055			876,229
Prepaid expenses and other current assets		104,383			360,693
Total current assets		955,090			2,106,029
Restricted cash held for customer deposits		4,855,499			1,095,529
Machinery and equipment, net		20,124,788			20,340,169
Facility under capital sublease, net		7,200,000			7,500,000
Other assets		74,966			-
Total assets	$	33,210,343		$	31,041,727
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable and accrued liabilities	$	4,420,104		$	889,451
Customer deposits		913,700			200,250
Advances due to related party		344,827			386,427
Interest payable, current portion		2,122,942			57,563
Convertible notes payable		-			285,000
Note payable, net of discount		1,600,000			26,454
Total current liabilities		9,401,573			1,845,145
Customer deposits, net of current portion		14,852,183			2,616,200
Interest payable, net of current portion		2,241,134			-
Notes payable, net of current portion and discount		18,546,911			26,262,674
Notes payable due to related party, net of discount		10,549,348			-
Capital sublease obligation		7,500,000			7,500,000
Total liabilities		63,091,149			38,224,019
Commitments and contingencies (see notes to financial statements)
Stockholders' deficit:
Common stock, no par value, 1,000,000 shares authorized,
50,155 shares and 50,000 shares issued and outstanding
as of December 31, 2014 and 2013, respectively		15,075,433			13,112,506
Accumulated deficit		(44,956,239	)		(20,294,798	)
Total stockholders' deficit		(29,880,806	)		(7,182,292	)
Total liabilities and stockholders' deficit	$	33,210,343		$	31,041,727

See accompanying notes to financial statements.

F-3

ELIO MOTORS, INC.
(AN ARIZONA CORPORATION)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
	2014			2013
Costs and expenses:
Engineering, research and development costs	$	5,715,716		$	6,903,023
General and administrative expenses		5,328,108			1,777,971
Sales and marketing expenses		3,800,353			1,269,987
Total costs and expenses		14,844,177			9,950,981
Loss from operations		(14,844,177	)		(9,950,981	)
Other income (expense):
Other income		213,382			69,083
Interest expense		(9,998,630	)		(3,465,980	)
Other expense		(32,016	)		(17,350	)
Total other expense, net		(9,817,264	)		(3,414,247	)
Net loss	$	(24,661,441	)	$	(13,365,228	)

See accompanying notes to financial statements.

F-4

ELIO MOTORS, INC.
(AN ARIZONA CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
								Total
	Common Stock				Accumulated			Stockholders'
	Shares		Amount		Deficit			Deficit
Balance, December 31, 2012		50,000	$	5,690,000	$	(6,929,570	)	$	(1,239,570	)
Net loss		-		-		(13,365,228	)		(13,365,228	)
Issuance of common stock, net of issuance
costs of $77,494 (Note 8)		-		7,422,506		-			7,422,506
Balance, December 31, 2013		50,000		13,112,506		(20,294,798	)		(7,182,292	)
Net loss		-		-		(24,661,441	)		(24,661,441	)
Convertible notes payable
converted to equity (Note 4)		-		336,838		-			336,838
Issuance of stock warrants (Note 5)		-		1,101,089		-			1,101,089
Issuance of common stock (Note 8)		155		525,000		-			525,000
Balance, December 31, 2014		50,155	$	15,075,433	$	(44,956,239	)	$	(29,880,806	)

See accompanying notes to financial statements.

F-5

ELIO MOTORS, INC.
(AN ARIZONA CORPORATION)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
	2014			2013
Cash flows from operating activities:
Net loss	$	(24,661,441	)	$	(13,365,228	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		300,000			-
Amortization of discount on note payable		2,107,366			1,189,335
Amortization of deferred financing costs		264,628			312,520
Accrued interest on capital sublease obligation		2,241,134			-
Change in operating assets and liabilities:
Prepaid expenses and other current assets		256,310			(354,693	)
Other assets		(74,966	)		-
Accounts payable and accrued liabilities		5,495,653			889,451
Customer deposits		12,949,433			2,808,100
Interest payable		2,127,217			25,650
Net cash provided by (used in) operating activities		1,005,334			(8,494,865	)
Cash flows from investing activities:
Increase in restricted cash		(3,359,796	)		(1,866,740	)
Purchases of machinery and equipment		-			(3,000,000	)
Proceeds from sale of machinery and equipment		215,381			-
Net cash used in investing activities		(3,144,415	)		(4,866,740	)
Cash flows from financing activities:
Issuance of common stock, net of issuance costs		150,000			7,422,506
Proceeds from notes payable		-			9,850,000
Repayments of notes payable		(9,850,000	)		(2,678,509	)
Repayments of payables assumed from shareholder		-			(79,532	)
Advances received from related party		11,750,500			-
Repayments of advances from related party		(41,600	)		(5,200	)
Payment of deferred loan costs		(364,274	)		(529,043	)
Net cash provided by financing activities		1,644,626			13,980,222
Net change in cash and cash equivalents		(494,455	)		618,617
Cash and cash equivalents, at beginning of year		869,107			250,490
Cash and cash equivalents, at end of year	$	374,652		$	869,107
Supplemental disclosures of cash flow information:
Cash paid during the year for interest	$	5,561,257		$	1,938,475
Cash paid during the year for income taxes	$	-		$	-
Supplemental disclosures of non-cash financing activities:
Convertible notes payable converted to equity	$	336,838		$	23,000,000
Conversion of accounts payable to note payable	$	1,600,000		$	7,500,000
Expense recognized under equity grant	$	375,000		$	5,659,831

See accompanying notes to financial statements.

F-6

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Activities

Elio Motors, Inc. (an Arizona Corporation) (the “Company”), was formed on October 26, 2009. The Company was created to provide affordable transportation to those commuters seeking an alternative to the day’s offerings; at the same time provide vital American jobs. The Company is in the process of designing a three wheeled vehicle for mass production in the U.S. that achieves ultra-high fuel economy, exceeds safety standards and retails for under $7,600 per vehicle.

Pursuant to the articles of incorporation, the Company is authorized to issue 1,000,000 shares of common stock and 100,000,000 preferred shares, of which 100,000 preferred shares are designated as Series A Convertible Preferred shares (“Series A shares”). The Company’s common stock and preferred shares have no par value. The Series A shares are convertible into an equal number of common shares, subject to certain dilution adjustments, at the holder’s election. The Series A shares rank senior and prior to the common shares and any other class of preferred shares with respect to dividend rights, and rights upon liquidation, winding up or dissolution. Issued Series A shares shall accrue and accumulate an 8% cumulative preferential cash dividend based on the purchase price per share. Such dividends are payable when declared by the Board of Directors of the Company. There were no preferred shares issued at December 31, 2014 and 2013.

On July 14, 2015, the articles of incorporation were amended and the authorized common stock and preferred stock were modified to 100,000,000 shares and 10,000,000 shares, respectively. In connection with the amendment, the Board of Directors of the Company approved a 500 for 1 common stock split for all outstanding common stock at July 14, 2015.

Liquidity and Capital Resources

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. From inception, the Company has financed its business activities through debt issuance and contributions from shareholders. The Company expects to obtain funding through additional equity placement offerings until it consistently achieves positive cash flow from operations after starting production. Management expects that cash on hand combined with anticipated funding sources will provide the Company with adequate funding through December 31, 2015. There are no assurances that the Company will be able to raise adequate funds, achieve, or sustain profitability or positive cash flows from its operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Through December 31, 2014, the Company has not recorded any revenues for the sale of its vehicle product nor does it expect to record revenues of any significant amount of product prior to commercialization of its vehicle. Once the Company’s planned principal operations commence, its focus will be on the manufacturing and marketing of its vehicles and the continued research and development of new products. The Company may not be profitable even if it succeeds in commercializing its product. The Company expects to make substantial expenditures and to incur additional operating losses for at least the next several years as they continue to develop the vehicle, increase manufacturing capacity for production, and enter into production and marketing collaborations with other companies, if available on commercially reasonable terms, or develop these capabilities internally.

F-7

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Accounting

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Significant estimates include the valuation of services provided in exchange for common stock and the discount on debt for detachable warrants granted in connection with the issuance of promissory notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid unrestricted investments with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted cash held in escrow includes cash deposited in escrow accounts with financial institutions for future payment of property taxes. Long term restricted cash is primarily related to cash proceeds held back from customer deposits deposited with financial institutions as required by the financial institutions.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Major improvements are capitalized while expenditures for maintenance, repairs and minor improvements are charged to expense. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation and amortization are eliminated from the accounts, and any resulting gain or loss is reflected in operations. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for property and equipment are as follows:

Facility under capital sublease	25 years
Machinery and equipment	10 years

F-8

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting for Warrants

The Company accounts for the issuance of debt with detachable warrants under FASB ASC Subtopic 470-20, Debt with Conversion and Other Options (“ASC 470-20”). Pursuant to ASC 470-20, the warrants issued in connection with the related party debt (Note 4) are accounted for as equity due to the stock settlement available to the holder. The Company used the Black-Scholes option pricing model as the valuation model to estimate the fair value of the warrants. These warrants were fair valued on the issuance date and recorded at the relative fair value of the warrants and underlying related party promissory notes. The warrants are not subsequently revalued.

Impairment of Long-Lived Assets

In accordance with FASB ASC 360, Property, Plant and Equipment – Impairment or Disposal of Long Lived Assets, property and equipment and identifiable intangible assets with estimable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment losses were recognized for the years ended December 31, 2014 and 2013.

Concentrations of Business and Credit Risk

The business is subject to significant risks, including, but not limited to, the risks in the regulatory approval process, the results of research and development efforts, and competition from other vehicles.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company has its cash and cash equivalents on deposit with various financial institutions. Accounts at each U.S. institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Cash may at times exceed the amount covered by FDIC insurance; however management does not believe the Company has significant risk in this area.

Income Taxes

The Company is taxed as a C corporation in the United States of America (“U.S.”). The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. The realizability of deferred tax assets is assessed throughout the year and a valuation allowance is established as necessary.

F-9

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes (Continued)

The Company follows the requirements of ASC 740, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, the Company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position. Management believes that the Company has taken no uncertain tax positions as of December 31, 2014 and therefore no accruals have been made in the financial statements related to uncertain tax positions. The Company is subject to U.S. federal and state income tax examinations for all years from inception. No examinations are currently pending.

Advertising Costs

Advertising costs are expensed as incurred. Such costs, which amounted to $3,800,353 and $1,269,987 for the years ended December 31, 2014 and 2013, respectively, are included in sales and marketing expenses in the accompanying statements of operations.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consists primarily of contract engineering services, payroll and employee benefits of those employees engaged in research and development activities.

Recent Accounting Pronouncements

In June 2014, the FASB issued a new accounting standard which eliminates the requirements for development stage entities to present inception to date information in the statements of income, cash flows, and shareholder equity, label the financial statements as those of a development stage entity, and disclose a description of the development stage activities in which the entity is engaged. The standard is effective for interim and annual reporting periods beginning after December 15, 2014. Early adoption of the standard is permitted. The Company adopted the new accounting pronouncement in 2013. The accompanying statements of operations, changes in stockholders’ deficit and cash flows have been prepared accordingly and exclude activity from inception to December 31, 2012.

Debt Issuance Costs

Deferred financing costs are legal and other costs incurred in connection with obtaining new financing. During 2015, FASB Accounting Standards Update 2015-03, Interest—Imputation of Interest (Subtopic 835-30) (“ASU 2015-03”) was issued. ASU 2015-03 simplifies the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the balance sheets as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company has elected to early adopt such guidance in order to simplify the accounting for its debt issuance costs. The Company has retrospectively applied the ASU 2015-03 to the December 31, 2013 activity included in the accompanying balance sheets at December 31, 2014 and 2013.

F-10

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Debt Issuance Costs (Continued)

ASU 2015-03 does not change the accounting for amortization of the debt issuance costs. The Company amortizes the debt issuance costs to interest expense over the term of the respective note payable using the effective yield method. Deferred financing costs amortized to interest expense amounted to $264,628 and $312,520 for the years ended December 31, 2014 and 2013, respectively.

Reclassifications

Certain reclassifications have been made to the 2013 financial statements to conform to the 2014 presentation. These reclassifications consist of debt issuances costs within the balance sheets accounted for in accordance with ASU 2015-03, as described above.

NOTE 2.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2014 and 2013:

	2014			2013
Facility under capital sublease	$	7,500,000		$	7,500,000
Machinery and equipment		20,124,788			20,340,169
Total property and equipment		27,624,788			27,840,169
Less:  accumulated depreciation and amortization		(300,000	)		-
Property and equipment, net	$	27,324,788		$	27,840,169

Depreciation expense related to the facility under capital sublease amounted to $300,000 for the year ended December 31, 2014. No depreciation expense has been recorded on the facility under capital sublease for the year ended December 31, 2013. There was no depreciation expense related to machinery and equipment recorded for the years ended December 31, 2014 and 2013. The Company plans to start production in the fourth quarter of 2016 at which time the machinery and equipment will be placed in service.

The Company plans to dispose of excess or not strategically useful machinery and equipment in future years. Management has identified $14,875,319 of machinery and equipment identified for disposal at December 31, 2014. However, management has determined that the sale of the identified machinery and equipment does not meet the requirements for held for sale as defined by FASB ASC 360, Property, Plant and Equipment since the sale is not probable and expected to be completed within one year. No impairment has been recorded as of December 31, 2014 and 2013 in the accompanying financial statements in regards to the potential sale of the machinery and equipment.

F-11

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 3.  CUSTOMER DEPOSITS

The Company has received customer deposits ranging from $100 to $1,000 per order for purposes of securing their vehicle production slot. As of December 31, 2014 and 2013, the Company received refundable deposits of $913,700 and $200,250, respectively, which are refundable upon demand. Refundable deposits are included in current liabilities in the accompanying balance sheets. As of December 31, 2014 and 2013, the Company received nonrefundable deposits of $14,852,183 and $2,616,200, respectively. The nonrefundable deposits are included in long term liabilities in the balance sheets since production is expected to begin in the fourth quarter of 2016.

NOTE 4.   LONG-TERM DEBT

Senior Promissory Note

On February 28, 2013, in connection with the acquisition of certain machinery and equipment, the Company entered into a promissory note with GemCap Lending I, LLC, (“GemCap”), for $9,850,000. The note was secured by a first priority lien on certain machinery and equipment with an original value of $11,659,705 and is personally guaranteed by a shareholder. The note incurs interest at 15% per annum, payable monthly. All outstanding principal and interest was due upon maturity on February 28, 2014.

On February 27, 2014, the Company entered into the second amendment to the promissory note, which extended the maturity date to May 31, 2014 and reduced the interest rate to 12% per annum. On May 31, 2014, the Company entered into the third amendment to the promissory note, which extended the maturity date to July 31, 2014.

On August 1, 2014, CH Capital Lending, LLC, (“CH Capital”) a related party, purchased the $9,850,000 promissory note from GemCap. On August 1, 2014, the Company and CH Capital entered into the fourth amendment to the promissory note, which extended the maturity date to July 31, 2015 and reduced the interest rate to 10% per annum.

On July 31, 2015, the Company entered into a forbearance agreement with CH Capital, which defers the enforcement of the collection of the promissory note until July 31, 2016. The debt is included in long term liabilities in the accompanying balance sheets.

Interest expense incurred on this note for the year ended December 31, 2014 and 2013 amounted to $1,238,155 and $1,264,083, respectively. During December 2013, the Company entered into the first amendment to the promissory note, which required the prepayment of the remaining interest due under the amended note at December 31, 2013. The Company prepaid $247,250, which is included in prepaid expenses and other current assets in the accompanying balance sheets at December 31, 2013, in accordance with the first amendment to the promissory note. The Company had no prepaid interest at December 31, 2014.

The debt is reflected net of debt issuance costs of $212,493 and $52,237 in the accompanying balance sheets at December 31, 2014 and 2013, respectively.

F-12

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 4.  LONG-TERM DEBT (Continued)

Subordinated Promissory Notes

On March 3, 2013, in connection with the acquisition of certain machinery and equipment, the Company entered into a promissory note with the Revitalizing Auto Communities Environmental Response Trust (“RACER”) for $23,000,000. The promissory note is secured by a subordinated lien on certain machinery and equipment with an original value of $20,124,788. The note is non-interest bearing. In accordance with ASC 835-30, Imputation of Interest, a discount of $5,659,831 was recorded to reflect an imputed interest rate of 12% per annum which is based on the Company’s credit, collateral, terms of repayment and similar prevailing market rates.

The outstanding balance and unamortized debt discount amounted to $21,038,818 and $2,389,228, respectively, at December 31, 2014. The outstanding balance and unamortized debt discount amounted to $21,126,147 and $4,470,496 at December 31, 2013, respectively. Monthly minimum payments of $173,500 per month are due beginning November 1, 2013 through September 1, 2016. The remaining outstanding principal is due on maturity September 1, 2016.

On November 1, 2013, the Company missed a required monthly minimum payment triggering default interest of 18% per annum in accordance with the promissory note agreement. The default was cured in December 2013; however, default interest remained in effect throughout 2014. Accrued default interest amounted to $1,942,267 at December 31, 2014 under the subordinated promissory note. There was no accrued default interest at December 31, 2013. Default interest expense incurred amounted to approximately $4,016,000 and $220,614 for the year ended December 31, 2014 and 2013.

On March 17, 2015, the Company entered into the first amendment to the subordinated promissory note with RACER. The first amendment delayed the monthly minimum payments from January 1, 2015 until January 1, 2016. The first amendment also extended the maturity date from September 1, 2016 to July 1, 2017. The principal balance outstanding shall continue to bear default interest of 18% per annum until the payments are resumed on January 1, 2016.

The debt is reflected net of debt issuance costs of $102,679 and $164,286 in the accompanying balance sheets at December 31, 2014 and 2013, respectively.

On December 5, 2014, the Company converted $1,600,000 of payables owed to one of the research and development vendors to a promissory note. The note incurs interest at the Federal Funds rate (0.34% at December 31, 2014) per annum. The outstanding principal and interest are payable at maturity on December 31, 2015. Interest expense incurred on the note for the year ended December 31, 2014 amounted to $255.

Related Party Subordinated Promissory Notes

On June 19, 2014, the Company entered into a promissory note agreement with a shareholder of the Company for $600,000. The promissory note incurs interest at 10% per annum. All accrued interest and unpaid principal are payable upon maturity. The note matured on December 31, 2014, but was amended and the maturity date was extended to July 31, 2016. The outstanding principal and interest amounted to $600,000 and $34,111, respectively, at December 31, 2014. Interest expense incurred on the note for the year ended December 31, 2014 amounted to $34,111.

F-13

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 4.  LONG-TERM DEBT (Continued)

Related Party Subordinated Promissory Notes (Continued)

On March 6, 2014, the Company entered into a promissory note agreement with a shareholder of the Company for $1,000,500. The promissory note incurs interest at 10% per annum. All accrued interest and unpaid principal are payable upon maturity at July 31, 2016. The outstanding principal and interest amounted to $1,000,500 and $8,097, respectively, at December 31, 2014. Interest expense incurred on the note for the year ended December 31, 2014 amounted to $8,097.

On May 30, 2014, the Company entered into a promissory note agreement with a shareholder of the Company for $300,000. The promissory note incurs interest at 10% per annum. All accrued interest and unpaid principal are payable upon maturity at July 31, 2016. The outstanding principal and interest amounted to $300,000 and $8,806, respectively, at December 31, 2014. Interest expense incurred on the note for the year ended December 31, 2014 amounted to $8,806.

The $1,000,500 and $300,000 promissory notes described above were issued with detachable warrants. The promissory notes have been discounted using the relative fair value approach for the fair value of the warrants and the fair value of the debt. As of December 31, 2014, the unamortized discount amounted to $988,659. Amortization of the discount amounted to $112,430 during 2014 using the effective interest method, which is included in the accompany statements of operations. See Note 5 for additional information regarding the warrants.

Estimated future amortization of the debt discount at December 31, 2014 is as follows:

Years ending December 31,
2015	$	624,416
2016		364,243
Total	$	988,659

Convertible Notes Payable

The Company had executed various unsecured convertible notes payable (“convertible notes”) to multiple individuals and trusts. The convertible notes incurred interest, payable upon maturity, at 9% per annum on the principal amount. The convertible notes convert to common stock based on 200% of the ratio of the convertible note principal amount over the value of the Company.

At December 31, 2013, $285,000 and $57,563 of convertible notes principal and accrued interest, respectively, remained outstanding. At December 31, 2013, no convertible notes had been converted. During February 2014, the outstanding convertible notes and accrued interest were converted to 825 shares of common stock, which were transferred from the President and CEO’s personal holdings to the convertible note holders. The President and CEO did not receive any compensation for this transfer of shares. There are no outstanding convertible notes at December 31, 2014.

F-14

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 4. LONG-TERM DEBT (Continued)

Annual principal maturities of long-term debt are as follows:

Years ending December 31,
2015	$	1,944,827
2016		32,876,647
Total		34,821,474
Less: amount representing imputed interest		(2,476,557	)
Less: amount representing deferred loan costs		(315,172	)
Less: amount representing discount on debt		(988,659	)
		31,041,086
Less: current portion		(1,944,827	)
	$	29,096,259

NOTE 5. WARRANTS

During 2014, in connection with obtaining subordinated promissory notes for $1,000,500 from a stockholder, the Company issued detachable warrants for the purchase of up to an aggregate of 5% of the Company’s common stock as of the date of the option agreement at an exercise price of $7,500,000. These warrants are exercisable, in whole or part at any time up until the expiration of the warrant agreement at December 15, 2024. The aggregate fair value attributed to these detachable warrants was $839,375.

The fair value for the warrant issued was calculated using the Black-Scholes model with the following assumptions:

Dividend yield	0.0%
Volatility	55.30%
Risk free interest rate	0.4%
Expected life	10 years

As of December 31, 2014, none of the warrants had been exercised.

During 2014, in connection with obtaining subordinated promissory notes for $300,000 from a stockholder, the Company issued detachable warrants for the purchase of up to an aggregate of 2% of the Company’s common stock as of the date of the option agreement at an exercise price of $3,000,000. These warrants are exercisable, in whole or part at any time up until the expiration of the warrant agreement June, 29, 2025. The aggregate fair value attributed to these detachable warrants was $261,714.

F-15

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 5. WARRANTS (Continued)

The fair value for the warrant issued was calculated using the Black-Scholes model with the following assumptions:

Dividend yield	0.0%
Volatility	55.30%
Risk free interest rate	0.5%
Expected life	10 years

As of December 31, 2014, none of the warrants had been exercised.

NOTE 6.  INCOME TAXES

The Company has not recorded a provision for income taxes for the years ended December 31, 2014 and 2013 since the Company has incurred net losses from inception to December 31, 2014. The Company had deferred tax assets of $14,974,675 and $5,757,599 related to net operating loss carryforwards, which were fully reserved at December 31, 2014 and 2013, respectively, as further discussed below. The Company did not have any deferred tax liabilities at December 31, 2014 and 2013.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or the availability of refunds of previously paid taxes. The Company had federal and state net operating loss (“NOL”) carryforwards of approximately $37,437,000 and $14,394,000 at December 31, 2014 and 2013, respectively. These NOL carryforwards expire at various dates starting in December 31, 2016 for state and December 31, 2031 for federal returns. Management recorded a valuation allowance for $14,974,675 and $5,757,599 as of December 31, 2014 and 2013, respectively, against the deferred tax assets related to these NOL carryforwards, as realization of the benefits of these assets is uncertain. Management’s assessment is based on the Company’s historical and projected future taxable income.

NOTE 7.  CAPITAL SUBLEASE OBLIGATION

On December 27, 2013, the Company entered into a long term capital sublease agreement with a related party for its manufacturing facility in Shreveport, Louisiana with an aggregate cost of $7,500,000, which is based on the recent selling price of the property. The imputed interest under the capital sublease amounted to 26.4%. Initial sublease payments are waived until the earlier of the start of production or August 1, 2015, after which sublease payments of $249,343 are payable monthly. Capital sublease payments increase by 3% on each 10 year anniversary of the sublease commencement date. The sublease expires on December 27, 2038 and includes two 25 year options to extend. The Company recognized $2,241,134 in interest expense under this sublease agreement for the year ended December 31, 2014, which is included in long term interest payable on the accompanying balance sheets as of December 31, 2014. No interest expense was recognized under this sublease agreement for the year ended December 31, 2013 as the amount is insignificant to the financial statements.

F-16

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 7.  CAPITAL SUBLEASE OBLIGATION (Continued)

On July 31, 2015, the Company entered into an amendment to the capital sublease agreement. The amendment deferred the monthly sublease payments of $249,343 until February 1, 2016. Monthly payments for the period February 1, 2016 through July 31, 2016 shall be deferred and shall be due and payable in full on August 1, 2016 under the amendment.

Future minimum sublease payments under the noncancelable capital sublease are summarized as follows based on the amendment dated July 31, 2015 as described above:

Years ending December 31,
2015	$	-
2016		2,742,773
2017		2,992,116
2018		2,992,116
2019		2,992,116
Thereafter		58,841,158
Total minimum sublease payments		70,560,279
Less: amount representing interest		(63,060,279	)
	$	7,500,000

NOTE 8.  STOCKHOLDERS’ DEFICIT

During December 2013, in connection with an investor’s capital contribution of $7,422,506, net of equity issuance fees of $77,494, the President and CEO transferred 10,000 shares of common stock from his personal holdings to the investor. The President and CEO did not receive any compensation for this transfer of shares. The Company’s total shares issued and outstanding did not change as a result of this transfer during 2013.

During 2009, the Company received lobbying services from Black Swan, LLC (“Black Swan”). In exchange for these lobbying services, the Company issued a contingent equity grant. Black Swan is entitled to receive up to 4% of outstanding common stock of the Company if the Company receives funding in excess of $10,000,000 under the Advanced Technology Vehicle Manufacturing program. On July 17, 2014, the Company entered into an amended agreement where Black Swan relinquished their contingent equity grant in exchange for 125 shares of common stock. The Company recorded the common stock granted to Black Swan using the relative fair value approach based on the Company’s estimated fair value. The grant vested immediately and $375,000 was recorded to general and administrative expenses in the accompanying statement of operations for the year ended December 31, 2014.

During December 2014, two of the Company’s board members contributed $150,000 in exchange for 30 shares of common stock.

F-17

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 9. COMMITMENTS AND CONTINGENCIES

Sales Discounts

The Company provides a sales discount for nonrefundable deposit customers equal to 50% of the nonrefundable deposit, up to $500 per deposit. The deposit will be applied toward the purchase of vehicle at the time of customer purchase. No liability has been recorded for the nonrefundable deposit sales discount since the utilization cannot be reasonably estimated at this time. Future committed sales discounts offered amounted to approximately $7,435,000 and $1,308,100 as of December 31, 2014 and 2013, respectively.

Legal

In management’s opinion, the Company is not currently involved in any legal proceedings, which, individually or in the aggregate, could have a material effect on its financial condition, operations and/or cash flows.

NOTE 10.  RELATED PARTY TRANSACTIONS

During 2012, as part of the acquisition of the design rights for the vehicle, the Company assumed $426,159 in payables from a shareholder, ESG Engineering. There are no scheduled repayment terms, and the payables are non-interest bearing. Outstanding payables assumed amounted to $344,827 and $346,627 as of December 31, 2014 and 2013, respectively. The assumed payables are included in current liabilities on the accompanying balance sheets.

During 2014, the Company advanced to its President and CEO $74,966. This advance is reflected on the balance sheets as a long term asset. The advance is non-interest bearing and is due on demand. As of the date of the audit report, the President and CEO had not repaid the advance.

At December 31, 2013, the Company had advances due to a related party of $39,800. Accordingly, the advances are included in current liabilities on the accompanying balance sheets. The related party advances were repaid during 2014.

On August 1, 2014, CH Lending, a related party, purchased the promissory note from GemCap as further described in Note 4. In conjunction with the purchase, the Company and CH Lending entered into the fourth amendment to the promissory note which extended the maturity date to July 31, 2015 and reduced the interest rate to 10% per annum.

During 2014, the Company entered into three subordinated promissory notes with a stockholder of the Company for total proceeds of $1,900,500 as further discussed in Note 4 above. The secured promissory notes included detachable warrants as discussed in Note 4 and Note 5 above.

F-18

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014 AND 2013

NOTE 11.  SUBSEQUENT EVENTS

The Company has evaluated subsequent events that have occurred through August 12, 2015, which is the date that the financial statements were available to be issued, and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements except as discussed in Note 1, Note 4, Note 7 and below.

During 2015, the Company issued various convertible notes for combined proceeds of approximately $2,500,000.

As of August 12, 2015, the Company has received additional refundable and nonrefundable customer deposits for purposes of securing their vehicle production slot of approximately $128,000 and $1,979,000, respectively.

F-19

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

BALANCE SHEETS

JUNE 30, 2015 AND DECEMBER 31, 2014

	Unaudited
Assets	June 30, 2015			December 31, 2014
Current Assets
Cash and cash equivalents	$	148,916		$	374,652
Restricted cash held in escrow		849,935			476,055
Prepaid expenses and other current assets		546,095			104,383
Total Current Assets		1,544,946			955,090
Restricted cash held for customer deposits		5,344,902			4,855,499
Machinery and equipment, net		18,045,489			20,124,788
Facility under capital sublease, net		7,050,000			7,200,000
Other assets		99,966			74,966
Total Assets	$	32,085,303		$	33,210,343
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable and accrued liabilities	$	5,397,653		$	4,420,104
Customer deposits		1,042,150			913,700
Advances due to related party		344,127			344,827
Interest payable, current portion		4,297,675			2,122,942
Note payable, net of discount		1,094,981			1,600,000
Total Current Liabilities		12,176,586			9,401,573
Customer deposits, net of current portion		17,235,694			14,852,183
Interest payable, net of current portion		2,241,134			2,241,134
Convertible notes payable		2,174,907			-
Notes payable, net of current portion and discount		19,057,311			18,546,911
Notes payable due to related party, net of discount		10,417,625			10,549,348
Capital sublease obligation		7,500,000			7,500,000
Total Liabilities		70,803,257			63,091,149
Commitments and contingencies (see notes to financial statements)
Stockholders' deficit:
Common stock, no par value, 1,000,000 shares authorized,
50,155 shares issued and outstanding		15,075,433			15,075,433
Accumulated deficit		(53,793,387	)		(44,956,239	)
Total Liabilities and Stockholders’ Deficit	$	32,085,303		$	33,210,343

See accompanying notes to financial statements

F-20

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014 (UNAUDITED)

	Unaudited
	June 30, 2015			June 30, 2014
Costs and Expenses:
Engineering, research and development costs	$	26,506		$	3,381,502
General and administrative expenses		3,265,680			2,567,883
Sales and marketing expenses		1,480,536			1,502,047
Total costs and expenses		4,772,722			7,451,432
Loss from operations		(4,772,722	)		(7,451,432	)
Other income (expense):
Other income		4			212,077
Interest expense		(4,064,430	)		(1,941,866	)
Other expense		-			-
Total other income and expenses		(4,064,426	)		(1,729,789	)
Net Loss	$	(8,837,148	)	$	(9,181,221	)

See accompanying notes to financial statements

F-21

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

STATEMENTS OF CHANGES IN STOCKHOLDERS’S DEFICIT

JUNE 30, 2015 AND DECEMBER 31, 2014

	Accumulated			Stockholders’
	Deficit			Equity/Deficit
Balance at December 31, 2012	$	(6,929,570	)	$	(1,239,570	)
Issuance of stock		-			7,422,506
Net loss		(13,365,228	)		(13,365,228	)
Balance at December 31, 2013	$	(20,294,798	)	$	(7,182,292	)
Convertible notes payable converted to equity		-			336,838
Issuance of stock warrants		-			1,101,089
Issuance of stock		-			525,000
Net loss		(24,661,441	)		(24,661,441	)
Balance at December 31, 2014	$	(44,956,239	)	$	(29,880,806	)
Net loss		(8,837,148	)		(8,837,148	)
Period Ending June 30, 2015 (Unaudited)	$	(53,793,387	)	$	(38,717,954	)

See accompanying notes to financial statements

F-22

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014 (UNAUDITED)

	Unaudited
	June 30, 2015			June 30, 2014
Cash Flows From Operating Activities
Net Income	$	(8,837,148	)	$	(9,181,221	)
Depreciation and amortization		561,737			-
Prepaid expenses		(249,560	)		342,737
Other assets		(529,318	)		(632,579	)
Accounts payable and accrued liabilities		477,484			3,762,284
Deferred reserves		128,450			382,250
Net Cash Provided by Operating Activities	$	(8,448,355	)	$	(5,326,529	)
Cash Flows From Investing Activities
Purchases of equipment and facility		2,079,299			83,040
Deferred financing		(551,118	)		(1,326	)
Net Cash Provided by Investing Activities	$	1,528,181		$	81,714
Cash Flows from Financing Activities
Deferred non-refundable reserves		2,383,512			4,673,527
Loans		2,547,756			(366	)
Convertible notes		1,763,171			(275,000	)
Other financing		-			486,838
Net Cash Provided by Financing Activities	$	6,694,438		$	4,884,999
Net Change in Cash and Equivalents		(225,736	)		(359,816	)
Cash at Beginning of Period		374,652			869,107
Cash at End of Period	$	148,916		$	509,291

See accompanying notes to financial statements

F-23

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 (UNAUDITED)

The financial information presented should be read in conjunction with the entity's latest annual audited financial statements to obtain full disclosure information.

NOTE 1.  BASIS OF PRESENTAION

The accompanying financial statements have been prepared by the Company, without audit, and reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the consolidated financial statements reflect all adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the entire fiscal year.

NOTE 2. ORGANIZATION AND BUSINESS ACTIVITIES

On July 14, 2015, the articles of incorporation were amended and the authorized common stock and preferred stock were modified to 100,000,000 and 10,000,000 shares, respectively.  In connection with the amendment, the Board of Directors of the Company approved a 500 for 1 common stock split for all outstanding common stock at July 14, 2015.

NOTE 3.  PROPERTY AND EQUIPMENT

The Company started disposing of excess machinery and equipment from the Shreveport facility with approval of our secured creditors.  Through June 30, 2015, the equipment sales were $2,118,799 with $469,461 held in escrow, $1,467,209 applied to the senior promissory notes principal and interest and the balance paid in fees.

NOTE 4. CUSTOMER DEPOSITS

The Company has received customer deposits ranging from $100 to $1,000 per order for purposes of securing their vehicle production slot.  As of June 30, 2015, the Company received refundable deposits of $1,042,150 which are refundable upon demand. Refundable deposits are included in current liabilities in the accompanying balance sheet.  The Company has received $17,235,694 in nonrefundable deposits.  The nonrefundable deposits are included in long term liabilities in the balance sheet since production is expected to begin in the fourth quarter of 2016.

F-24

ELIO MOTORS, INC.

(AN ARIZONA CORPORATION)

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2015 UNAUDITED

NOTE 5. LONG TERM DEBT

Senior Promissory Note

The Company entered into a forbearance agreement with CH Capital Lending, LLC (“CH Capital”) a related party, which defers the enforcement long term liabilities in the accompanying balance sheet.

The Company started disposing of excess machinery and equipment from the Shreveport facility through agreement with our secured creditors.  Proceeds from the sale are being paid to the CH Capital note. Through June 30, 2015, the amount applied to principal and interest was $1,467,209.

Subordinated Promissory Notes

On March 17, 2015, the Company entered into the first amendment to the subordinated promissory note with RACER.  The first amendment delayed the monthly minimum payments from January 1, 2015 until January 1, 2016.  The first amendmentalso extended the maturity date from September 1, 2016 to July 1, 2017.  The principal balance outstanding shall continue to bear default interest of 18% per annum until the payments are resumed on January 1, 2016.

On March 13, 2015, the Company signed an installment payment agreement with IAV Automotive Engineering, Inc.  The agreement confirms the balance of the outstanding debt to be $1,323,000 and requires monthly payments of $150,000 to be made on the 15th day of each month with the balance paid in full by December 1, 2015.

Convertible Subordinated Secured Notes Payable

The Company has executed various convertible subordinated secured notes (“secured convertible notes”) to multiple individuals and trusts.  The notes can be converted into common stock and have a maturity date of September 30, 2022.  The convertible notes incur interest, payable upon maturity at 5% per annum on the principal amount.  As of June 30, 2015, the notes issued totaled $2,164,460 with accrued interest of $10,447.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Sales Discounts

The Company provides a sales discount for nonrefundable deposit customers equal to 50% of the nonrefundable deposit, up to $500 per deposit.  The deposit will be applied toward the purchase of the vehicle at the time of the purchase.  No liability has been recorded for the nonrefundable deposit sales discount since the utilization cannot be reasonably estimated at this time.  Future committed sales discounts offered amounted to approximately $8,186,954 at June 30, 2015.

NOTE 7.  RELATED PARTY TRANSACTIONS

Through June 30, 2015, the Company issued three convertible subordinated secured notes to a shareholder of the Company for a total of $1,350,000.  On June 19, 2015, the Company advanced to its President and CEO $25,000.

F-25

PART III

Index to Exhibits

Item 17 Number	Exhibit
2.1	Articles of Incorporation, as amended *
2.2	Amended and Restated Bylaws *
3.1	Form of Convertible Subordinated Secured Note due September 30, 2022 *
3.2	Form of Registration Rights Agreement *
3.3	Form of Pledge and Security Agreement *
3.4	Form of StartEngine Warrant
4.1	Form of Subscription Agreement
6.1	Loan and Security Agreement with GemCap Lending I, LLC dated February 28, 2013 *
6.2	Loan Agreement Schedule with GemCap Lending I, LLC dated February 28, 2013 *
6.3	Continuing Guarantee from Stuart Lichter dated February 28, 2013 *
6.4(i)	Amendment Number 4 to the Loan and Security Agreement and Loan Agreement Schedule with CH Capital Lending, LLC dated August 1, 2014 *
6.4(ii)	Fourth Amended and Restated Secured Promissory Note (Term Loan) to CH Capital Lending, LLC dated August 1, 2014 *
6.5	Forbearance Agreement with CH Capital Lending, LLC dated July 31, 2015 *
6.6	Promissory Note to Racer Trust *
6.7	Security Agreement with Racer Trust *
6.8	First Amendment to Promissory Note *
6.9	Lease with Shreveport Business Park, LLC dated December 27, 2014 *
6.10	First Amendment to Lease with Shreveport Business Park, LLC dated July 31, 2015 *
6.11	Promissory Note and Security Agreement to IAV Automotive Engineering, Inc. dated December 5, 2014 *
6.12	Installment Payment Agreement with IAV Automotive Engineering, Inc. dated March 13, 2015 *
6.13	Promissory Note to Stuart Lichter dated March 6, 2014 *
6.14	Promissory Note to Stuart Lichter dated May 30, 2014 *
6.15	Secured Promissory Note to Stuart Lichter dated June 19, 2014 *
6.16	First Amendment to Secured Promissory Note to Stuart Lichter dated July 20, 2015 *
6.17	Option Agreement with Stuart Lichter dated as of December 15, 2014 *
6.18	Option Agreement with Stuart Lichter dated as of June 29, 2015 *
6.19	Form of Broker-Dealer Services Agreement with FundAmerica Securities, LLC *
6.20	Form of Technology Services Agreement with FundAmerica Technologies, LLC
8.1	Form of Escrow Agreement
10.1	Power of attorney – reference is made to the signature page of this offering statement *
11.1	Consent of Holthouse Carlin & Van Trigt LLP *
11.2	Consent of Berline
12.1	Opinion of Dill Dill Carr Stonbraker & Hutchings, P.C.
13.1	Testing the Waters materials *

*filed previously

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Phoenix, State of Arizona, on October 21, 2015.

ELIO MOTORS, INC.
By:	/s/ Paul Elio
	Paul Elio, Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Paul Elio and Hari Iyer, or any of them, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 1-A offering statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and ratifying and confirming all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.

This offering statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Paul Elio	Chief Executive Officer and Director (Principal Executive Officer)	October 21, 2015
Paul Elio
/s/ Connie Grennan	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	October 21, 2015
Connie Grennan
*	Director	October 21, 2015
Hari Iyer
*	Director	October 21, 2015
James Holden
*	Director	October 21, 2015
Stuart Lichter
*	Director	October 21, 2015
David C. Schembri
*	Director	October 21, 2015
Kenneth L. Way

*By: /s/ Paul Elio, Attorney-in-fact

EX1A-3 HLDRS RTS

Exhibit 3.4

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

COMMON STOCK PURCHASE WARRANT

[COMPANY]

Initial Warrant Shares: _____________      Initial Exercise Date: _______ __, 2015         

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the third anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from ELIO MOTORS, INC., an Arizona corporation (the “Company”), up to _________ shares (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s common stock (“Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

Section 1.             Definitions.  In addition to the terms defined elsewhere in this Agreement, the following terms have the meanings indicated in this Section 1:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Board of Directors” means the board of directors of the Company.

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

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“Commission” means the United States Securities and Exchange Commission.

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company as compensation or pursuant to any stock or option plan duly adopted for such purpose by the Board of Directors or a committee of the Board of Directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on Initial Exercise Date, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Going Public Date” Such first date whereby the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act or the Common Stock is qualified under Regulation A.

“Liens” means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Trading Day” means a day on which the Common Stock is traded on a Trading Market.

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“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQX or the OTC Bulletin Board (or any successors to any of the foregoing.

“Transfer Agent” means FundAmerica Stock Transfer, LLC, the current transfer agent of the Company, with a mailing address of ___________________ and a facsimile number of _______________, and any successor transfer agent of the Company.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

Section 2.             Exercise.

a)           Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise form annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Business Day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

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b)           Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $12.00, subject to adjustment hereunder (the “Exercise Price”).

c)           Cashless Exercise.  If at the time of exercise hereof there is no effective registration statement registering for sale or resale the Warrant Shares, then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares.  The Company agrees not to take any position contrary to this Section 2(c).

d) Mechanics of Exercise.

i.      Delivery of Warrant Shares Upon Exercise.  The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid.

4

ii.          Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

iii.         Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

iv.         Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.  Following the Going Public Date, in addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

5

v.         No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round to the nearest whole share.

vi.      Charges, Taxes and Expenses.  Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

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vii.         Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

e)           Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

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Section 3.             Certain Adjustments.

a)           Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)           Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (it being understood and agreed that if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance at such effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued.  Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance.  The Company shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”).  For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise. If the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised.

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c)           Subsequent Rights Offerings.  In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

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d)           Pro Rata Distributions.  During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

e)           Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) or Section 2(f)] on the exercise of this Warrant), the

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number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) or Section 2(f)] on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any Successor Entity (as defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.  “Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

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f)           Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

g)           Notice to Holder.

i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

ii.      Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice  except as may otherwise be expressly set forth herein.

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Section 4.             Transfer of Warrant.

a)           Transferability.  Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

b)           New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

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c)           Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

d)           Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant, as the case may be, provides to the Company an opinion of counsel, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that the transfer of this Warrant does not require registration under the Securities Act.

e)           Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

Section 5.             Miscellaneous.

a)           No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

b)           Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

c)           Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

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d)           Authorized Shares.

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

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e)           Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof.  Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of this Warrant shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant.  If any party shall commence an action or proceeding to enforce any provisions of this Warrant, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

f)           Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

g)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

a)           Notices.  Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Exercise, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above Attention: Chief Financial Officer, facsimile number (602) _______________, email address _______________, or such other facsimile number, email address or address as the Company may specify for such purposes by notice to the Holders.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company.  Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

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h)           Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

i)           Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

j)           Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

k)           Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

l)           Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

m)           Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

(Signature Page Follows)

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

[COMPANY]
By:
	Name:
	Title:

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NOTICE OF EXERCISE

TO:     __________________

(1)      The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2)      Payment shall take the form of (check applicable box):

o in lawful money of the United States; or

o [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

(3)      Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

The Warrant Shares shall be delivered to the following DWAC Account Number:

[SIGNATURE OF HOLDER]

Name of Investing Entity: 

Signature of Authorized Signatory of Investing Entity:    

Name of Authorized Signatory:  

Title of Authorized Signatory:  

Date:  

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated:  ______________, _______

Holder’s Signature:   

Holder’s Address:

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX1A-4 SUBS AGMT

Exhibit 4.1

SUBSCRIPTION AGREEMENT

The securities offered hereby are highly speculative.  Investing in shares of Elio Motors, Inc. involves significant risks.  This investment is suitable only for persons who can afford to lose their entire investment.  Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time.  No public market currently exists for the securities, and if a public market develops following this offering, it may not continue.

The securities offered hereby have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities or blue sky laws and are being offered and sold in reliance on exemptions from the registration requirements of the Securities Act and state securities or blue sky laws.  Although an offering statement has been filed with the Securities and Exchange Commission (the “SEC”), that offering statement does not include the same information that would be included in a registration statement under the Securities Act.  The securities have not been approved or disapproved by the SEC, any state securities commission or other regulatory authority, nor have any of the foregoing authorities passed upon the merits of this offering or the adequacy or accuracy of the offering circular or any other materials or information made available to subscriber in connection with this offering over the web-based platform maintained by StartEngine.com (the “Platform”). Any representation to the contrary is unlawful.

No sale may be made to persons in this offering who are not “accredited investors” if the aggregate purchase price is more than 10% of the greater of such investors’ annual income or net worth.  The Company is relying on the representations and warranties set forth by each subscriber in this subscription agreement and the other information provided by subscriber in connection with this offering to determine compliance with this requirement.

Prospective investors may not treat the contents of the subscription agreement, the offering circular or any of the other materials available on the Platform (collectively, the “Offering Materials”) or any prior or subsequent communications from the Company or any of its officers, employees or agents (including “testing the waters” materials) as investment, legal or tax advice.  In making an investment decision, investors must rely on their own examination of the Company and the terms of this offering, including the merits and the risks involved.  Each prospective investor should consult the investor’s own counsel, accountant and other professional advisor as to investment, legal, tax and other related matters concerning the investor’s proposed investment.

The Company reserves the right in its sole discretion and for any reason whatsoever to modify, amend and/or withdraw all or a portion of the offering and/or accept or reject in whole or in part any prospective investment in the securities or to allot to any prospective investor less than the amount of securities such investor desires to purchase. 

Except as otherwise indicated, the Offering Materials speak as of their date. Neither the delivery nor the purchase of the securities shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since that date.

All persons who submitted a non-binding indication of interest are being given the first chance to purchase shares in the offering.  This period shall be the first seven days of the offering.  If the Company receives more subscriptions than shares to sell, that portion of all subscriptions in excess of the $600 minimum purchase will be reduced proportionately.  If the Company does not sell all of the shares during the first seven days of the offering, the shares will be offered to the general public.

Elio Motors, Inc. Subscription Agreement – page 1 of 7

This agreement (“Agreement”) is made as of the date set forth below by and between the undersigned (“Subscriber”) and ELIO MOTORS, INC., an Arizona corporation (the “Company”), and is intended to set forth certain representations, covenants and agreements between Subscriber and the Company with respect to the offering (the “Offering”) for sale by the Company of shares of its common stock (the “Shares”) as described in the Company’s Offering Circular dated ____________, 2015 (the “Offering Circular”), a copy of which has been delivered to Subscriber. The Shares are also referred to herein as the “Securities.”

ARTICLE I

SUBSCRIPTION

 1.01 Subscription.  Subject to the terms and conditions hereof, Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company the number of Shares set forth on the Subscription Agreement Signature Page, and the Company agrees to sell such Shares to Subscriber at a purchase price of $12.00 per Share for the total amount set forth on the Subscription Agreement Signature Page (the “Purchase Price”), subject to the Company’s right to sell to Subscriber such lesser number of Shares as the Company may, in its sole discretion, deem necessary or desirable.

1.02 Delivery of Subscription Amount; Acceptance of Subscription; Delivery of Securities.  Subscriber understands and agrees that this subscription is made subject to the following terms and conditions:

(a) Contemporaneously with the execution and delivery of this Agreement, Subscriber shall pay the Purchase Price for the Shares by check made payable to “___________”, ACH debit transfer, or wire transfer in accordance with the instructions set forth on Appendix A hereto;

(b) Payment of the Purchase Price shall be received by FundAmerica Securities, LLC (the “Escrow Agent”) from Subscriber.

(c) This subscription shall be deemed to be accepted only when this Agreement has been signed by an authorized officer or agent of the Company, and the deposit of the payment of the purchase price for clearance will not be deemed an acceptance of this Agreement;

(d) The Company shall have the right to reject this subscription, in whole or in part;

(e) The payment of the Subscription Amount (or, in the case of rejection of a portion of the Subscriber’s subscription, the part of the payment relating to such rejected portion) will be returned promptly, without interest or deduction, if Subscriber’s subscription is rejected in whole or in part or if the Offering is withdrawn or canceled;

(f) Upon the release of Subscriber’s Purchase Price to the Company by the Escrow Agent, Subscriber shall receive notice and evidence of the digital entry (or other manner of record) of the number of the Shares owned by Subscriber reflected on the books and records of the Company and verified by FundAmerica Stock Transfer, LLC (the “Transfer Agent”), which books and records shall bear a notation that the Shares were sold in reliance upon Regulation A.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER

By executing this Subscription Agreement, Subscriber (and, if Subscriber is purchasing the Securities subscribed for hereby in a fiduciary capacity, the person or persons for whom Subscriber is so purchasing) represents and warrants, which representations and warranties are true and complete in all material respects as of the date of each Closing Date:

Elio Motors, Inc. Subscription Agreement – page 2 of 7

2.01 Requisite Power and Authority. Such Subscriber has all necessary power and authority under all applicable provisions of law to execute and deliver this Subscription Agreement. All action on Subscriber’s part required for the lawful execution and delivery of this Subscription Agreement has been or will be effectively taken prior to the Closing. Upon execution and delivery, this Subscription Agreement will be a valid and binding obligation of Subscriber, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and (b) as limited by general principles of equity that restrict the availability of equitable remedies.

2.02 Investment Representations. Subscriber understands that the Securities have not been registered under the Securities Act. Subscriber also understands that the Securities are being offered and sold pursuant to an exemption from registration contained in the Securities Act based in part upon Subscriber’s representations contained in this Subscription Agreement.

2.03 Illiquidity and Continued Economic Risk. Subscriber acknowledges and agrees that there is no ready public market for the Securities and that there is no guarantee that a market for their resale will ever exist. Subscriber must bear the economic risk of this investment indefinitely and the Company has no obligation to list the Securities on any market or take any steps (including registration under the Securities Act or the Securities Exchange Act of 1934, as amended) with respect to facilitating trading or resale of the Securities. Subscriber acknowledges that Subscriber is able to bear the economic risk of losing Subscriber’s entire investment in the Securities. Subscriber also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities.

2.04 Accredited Investor Status or Investment Limits. Subscriber represents that either:

(a) Subscriber is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act. Subscriber represents and warrants that the information set forth in response to question (c) on the Subscription Agreement Signature Page hereto concerning Subscriber is true and correct; or

(b) The Purchase Price set out in paragraph (b) of the Subscription Agreement Signature Page, together with any other amounts previously used to purchase Securities in this offering, does not exceed 10% of the greater of the Subscriber’s annual income or net worth.

 Subscriber represents that to the extent it has any questions with respect to its status as an accredited investor, or the application of the investment limits, it has sought professional advice.

2.05 Shareholder Information. Within five days after receipt of a request from the Company or FundAmerica Securities, LLC, which is acting as an administrative agent for the Company, Subscriber hereby agrees to provide such information with respect to its status as a shareholder (or potential shareholder) and to execute and deliver such documents as may reasonably be necessary to comply with any and all laws and regulations to which the Company is or may become subject, including, without limitation, the need to determine the accredited status of the Company’s shareholders. Subscriber further agrees that in the event it transfers any Securities, it will require the transferee of such Securities to agree to provide such information to the Company as a condition of such transfer.

Elio Motors, Inc. Subscription Agreement – page 3 of 7

2.06 Company Information. Subscriber has read the Offering Circular filed with the SEC, including the section titled “Risk Factors.” Subscriber understands that the Company is subject to all the risks that apply to early-stage companies, whether or not those risks are explicitly set out in the Offering Circular. Subscriber acknowledges that no representations or warranties have been made to Subscriber, or to Subscriber’s advisors or representative, by the Company or others with respect to the business or prospects of the Company or its financial condition.

2.07 Valuation.  Subscriber acknowledges that the price of the Securities was set by the Company on the basis of the Company’s internal valuation and no warranties are made as to value. Subscriber further acknowledges that future offerings of Securities may be made at lower valuations, with the result that the Subscriber’s investment will bear a lower valuation.

2.08 Domicile. Subscriber maintains Subscriber’s domicile (and is not a transient or temporary resident) at the address shown on the signature page.

2.09 No Brokerage Fees. There are no claims for brokerage commission, finders’ fees or similar compensation in connection with the transactions contemplated by this Subscription Agreement or related documents based on any arrangement or agreement binding upon Subscriber. Subscriber will indemnify and hold the Company harmless against any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any such claim.

2.10 Foreign Investors. If Subscriber is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Subscriber hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Subscription Agreement, including (a) the legal requirements within its jurisdiction for the purchase of the Securities, (b) any foreign exchange restrictions applicable to such purchase, (c) any governmental or other consents that may need to be obtained, and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Subscriber’s subscription and payment for and continued beneficial ownership of the Securities will not violate any applicable securities or other laws of the Subscriber’s jurisdiction.

ARTICLE III

SURVIVAL; INDEMNIFICATION

3.01 Survival; Indemnification.  All representations, warranties and covenants contained in this Agreement and the indemnification contained herein shall survive (a) the acceptance of this Agreement by the Company, (b) changes in the transactions, documents and instruments described herein which are not material or which are to the benefit of Subscriber, and (c) the death or disability of Subscriber.  Subscriber acknowledges the meaning and legal consequences of the representations, warranties and covenants in Article II hereof and that the Company has relied upon such representations, warranties and covenants in determining Subscriber's qualification and suitability to purchase the Securities.  Subscriber hereby agrees to indemnify, defend and hold harmless the Company, its officers, directors, employees, agents and controlling persons, from and against any and all losses, claims, damages, liabilities, expenses (including attorneys' fees and disbursements), judgments or amounts paid in settlement of actions arising out of or resulting from the untruth of any representation of Subscriber herein or the breach of any warranty or covenant herein by Subscriber.  Notwithstanding the foregoing, however, no representation, warranty, covenant or acknowledgment made herein by Subscriber shall in any manner be deemed to constitute a waiver of any rights granted to it under the Securities Act or state securities laws.

Elio Motors, Inc. Subscription Agreement – page 4 of 7

ARTICLE IV

MISCELLANEOUS PROVISIONS

4.01 Captions and Headings.  The Article and Section headings throughout this Agreement are for convenience of reference only and shall in no way be deemed to define, limit or add to any provision of this Agreement.

4.02 Notification of Changes.  Subscriber agrees and covenants to notify the Company immediately upon the occurrence of any event prior to the consummation of this Offering that would cause any representation, warranty, covenant or other statement contained in this Agreement to be false or incorrect or of any change in any statement made herein occurring prior to the consummation of this Offering.

4.03 Assignability.  This Agreement is not assignable by Subscriber, and may not be modified, waived or terminated except by an instrument in writing signed by the party against whom enforcement of such modification, waiver or termination is sought.

4.04 Binding Effect.  Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and assigns, and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by and be binding upon such heirs, executors, administrators, successors, legal representatives and assigns.

4.05 Obligations Irrevocable.  The obligations of Subscriber shall be irrevocable, except with the consent of the Company, until the consummation or termination of the Offering.

4.06 Entire Agreement; Amendment.  This Agreement states the entire agreement and understanding of the parties relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written.  No amendment of the Agreement shall be made without the express written consent of the parties.

4.07 Severability.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect any other provision hereof, which shall be construed in all respects as if such invalid or unenforceable provision were omitted.

4.08 Venue; Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of Arizona.

4.09 Notices.  All notices, requests, demands, consents, and other communications hereunder shall be transmitted in writing and shall be deemed to have been duly given when hand delivered or sent by certified mail, postage prepaid, with return receipt requested, addressed to the parties as follows:  to the Company, 2942 North 24th Street, Suite 114-700, Phoenix, Arizona 85016, and to Subscriber, at the address indicated below.  Any party may change its address for purposes of this Section by giving notice as provided herein.

4.10 Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.

[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY.]

Elio Motors, Inc. Subscription Agreement – page 5 of 7

ELIO MOTORS, INC.

SUBSCRIPTION AGREEMENT SIGNATURE PAGE

The undersigned, desiring to purchase shares of common stock of Elio Motors, Inc., by executing this signature page, hereby executes, adopts and agrees to all terms, conditions and representations of the Subscription Agreement.

(a) The number of Shares the undersigned hereby irrevocably subscribes for is:
		(enter number of Shares)
(b) The aggregate Purchase Price (based on a price of $12.00 per Share) for the Shares the undersigned hereby irrevocably subscribes for is:		$
		(enter total Purchase Price)
(c) Check the applicable box:
□	The undersigned is an accredited investor (as that term is defined in Regulation D under the Securities Act).  The undersigned has checked the appropriate box on the attached Certificate of Accredited Investor Status indicating the basis of such accredited investor status.
□	The amount set forth in paragraph (b) above (together with any previous investments in the Securities pursuant to this offering) does not exceed 10% of the greater of the undersigned’s net worth or annual income.

(d) The Securities being subscribed for will be owned by, and should be recorded on the Company’s books as held in the name of:

(print name of owner or joint owners)

	If the Securities are to be purchased in joint names, both Subscribers must sign:
Signature	Signature
Name (Please Print)	Name (Please Print)
Email address	Email address
Address	Address
Telephone Number	Telephone Number
Social Security Number/EIN	Social Security Number
Date	Date

This Subscription is accepted	Elio Motors, Inc.
on _____________, 2015	By:
	Name:
	Title:

Elio Motors, Inc. Subscription Agreement – page 6 of 7

CERTIFICATE OF ACCREDITED INVESTOR STATUS

The undersigned is an individual “accredited investor,” as that term is defined in Regulation D under the Securities Act of 1933, as amended (the “Act”).  The undersigned has checked the box below indicating the basis on which it is representing its status as an “accredited investor”:

o a bank as defined in Section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(a)(13) of the Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act; a small business investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are “accredited investors”;

o a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

o an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

o a natural person whose individual net worth, or joint net worth with the undersigned’s spouse, excluding the “net value” of his or her primary residence, at the time of this purchase exceeds $1,000,000 and having no reason to believe that net worth will not remain in excess of $1,000,000 for the foreseeable future, with “net value” for such purposes being the fair value of the residence less any mortgage indebtedness or other obligation secured by the residence, but subtracting such indebtedness or obligation only if it is a liability already considered in calculating net worth;

o a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with the undersigned’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

o a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment; or

o an entity in which all of the equity holders are “accredited investors” by virtue of their meeting one or more of the above standards.

o an individual who is a director or executive officer of Elio Motors, Inc.

Elio Motors, Inc. Subscription Agreement – page 7 of 7

EX1A-6 MAT CTRCT

Exhibit 6.20

TECHNOLOGY SERVICES AGREEMENT

Account Form

This TECHNOLOGY SERVICES AGREEMENT ACCOUNT FORM, which consists of this account form (the “Account Form”) and the associated Terms and Conditions (the “Terms and Conditions”) attached hereto as Exhibit A, is made and entered into as of October __, 2015 (the “Effective Date”) between Elio Motors, Inc. (“Issuer”, “you”, “your”) and FundAmerica Technologies, LLC (“FAT”, “Service Provider,” “we,” “our,” or “us”) (each, a “Party,” and together, the “Parties”).

RECITALS

WHEREAS, FAT is a technology firm providing engineering and technology solution services; and,

WHEREAS FAT has created, owns and maintains proprietary tools and technology, negotiated third- party integrations, and has developed operational processes to provide certain back-end tools, technology services, to Issuers (the “Service” or “Services”); and,

WHEREAS, Issuer operates a website or otherwise intends to use technology to advertise equity and/or debt offerings to investors in a securities offering.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties have agreed to execute this Technology Services Agreement (the “Agreement”) to memorialize the terms and conditions for which FAT will provide Services to Issuer. Our Services are conditioned upon Issuer’s acceptance and compliance with the terms of this Agreement.

The parties hereby agree as follows:

1.  Financial Technology Services

FAT together with its subsidiaries and affiliated entities will provide the Services to Issuer, subject to the Terms and Conditions contained in the attached Exhibit A. Such Services include Application Programming Interface (the “API”) and the “Invest Now” buttons.

2.  Fees

Issuer shall pay fees as indicated in Exhibit A below.

Agreed as of the date first written above, by and between:

Elio Motors, Inc., by Paul Elio, its Chief Executive Officer, 10/__/15

FundAmerica Technologies, LLC, by Scott Purcell, its Chief Executive Officer, 10/__/15

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

TECHNOLOGY SERVICES AGREEMENT EXHIBIT A

TERMS AND CONDITIONS

1.            DEFINITIONS. For purposes of this Agreement:

1.1           “Agreement” means this Technology Services Agreement, which consists of the Account Form and this Exhibit A Terms and Conditions.

1.2           “Issuer” means the company and any related party, subsidiary, agent, representative, successor in interest, or other person or entity acting on behalf of or in place of the person or entity who is using (or enabling the use of) technology to raise capital and is identified on the Account Form as the Issuer.

1.3           “Issuer Materials” means all data, information, works of authorship, inventions, drawings, logos, software code or other materials provided by Issuer to FAT.

1.4           “Account Form” means the Technology Services Agreement Account Form.

1.5           “Investor” or “Subscriber” means a Person that commits to purchase equity or debt securities of an Issuer in an Offering.

1.6           “Offering” means an offering by an Issuer of its debt or equity securities.

1.7           “Person” means any individual, company, limited liability company, corporation, trust, estate, association, nominee or other entity.

1.8           “Services” has the meaning set forth in the Account Form.

1.9           “Term” has the meaning set forth in Section 8.

1.10         “Subsidiaries” or “Affiliates” or “Affiliate Entities” or “Affiliate Companies” of FAT include FundAmerica Securities, LLC and FundAmerica Stock Transfer, LLC.

1.11         “User” means Issuer, its customers and any other person using the Services in any way.

1.12         “Information” means any data or information, including personally identifiable information, provided by or relating to Users in connection with any Offering, whether provided directly by User or Funding Platform in connection with the Services.

2.  API AND HOSTING

2.1           API.

The FAT Application Programming Interface (the “API”) and “Invest Now” buttons will provide access to various Services, which may be selectively used at Issuer’s option pursuant to FAT policies in effect at the time of each desired use. Services may also be selectively enabled or disabled by Service Provider, in its sole discretion, limiting which Services, features and tools Issuer has access to use.

2.2  Hosting & Management.

At all times, the Services shall be hosted, managed and maintained by FAT and our appointed third-party service providers. Our Services are accessible via our API, and not by any separate software installation. FAT provides Services to numerous other customers, including other issuers and funding platforms. The Services that FAT provides are evolving and the Services that we provide may change from time to time without prior notice to you. FAT may update, modify, change or otherwise alter the hosting location(s) and/or methodology, as well as any or all features, functionality, user interface(s) located in Issuer’s account on apps.fundamerica.com (the “Control Panel”), business logic, policies, procedures, and/or the API from time to time at its sole discretion and without notice.

3.  SERVICES

3.1           Access.

FAT will make the Services available to Issuer and Issuer’s customers and other users (“Users”) in accordance with this Agreement and FAT’s rules, policies, and Terms of Use then in effect. Issuer acknowledges that its use of the Services are subject to this Agreement, including all applicable terms of service, privacy policies and other policies that are then in effect by FAT and posted to the Control Panel (as modified from time to time in FAT’s sole discretion and with no prior notice to you required), all of which are hereby incorporated by reference into this Agreement. Issuer acknowledges that some of the Services, even though a la carte in the system, may be interdependent and not available except and unless combined with other Services.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

3.2  API Restrictions.

Issuer will not directly itself, and will not permit or authorize third parties, including Issuer’s Users, employees or agents to: (a) rent, lease, sublet, resell, convert, license, exploit, use, modify, or otherwise permit unauthorized third parties to access or use any aspect of the API; (b) reverse engineer, reverse assemble or otherwise attempt to discover the source code for the API; (c) circumvent or disable any security or other technological features or measures of the API; (d) alter, modify, convert or attempt to, modify, convert or otherwise manipulate the API, software or code; or (e) clone or otherwise copy, replicate or duplicate in any fashion any part of the API design, workflow, features or methodology, all of which Issuer acknowledges are proprietary intellectual property wholly owned by FAT.

3.3  Reporting.

FAT will provide Issuer with access to regular updates via the WebHooks functionality of the API, which enables Issuer to get on-demand updates both for its own purposes and so it can create reports and alert systems for its customers and other users with respect to all receipts of funds, deposits, disbursements and other transactions for any escrow account for which its affiliate, FundAmerica Securities LLC, is acting as escrow agent or trustee for securities offerings conducted by the Issuer.  When the Services are used via the API, then FAT shall not be obligated to push or send reports or alerts to Issuer or any other person. When the Services are used via the “Invest Now” buttons or the manual control panel tools, then FAT will send confirmations and alerts, generally on Issuer’s behalf (meaning “from” you, which you hereby unequivocally and unconditionally instruct, direct and authorize us to do).

3.4  FAT Duties.

FAT will at all times manage the API and all related engineering functions, including application maintenance, upgrades, hosting and modifications.  FAT will provide the API and the Services availability on an ongoing basis in exchange for Fees, (defined below) including technology, upgrades, operating systems, databases and backups, SSL certificates, third-party service integrations, and related technology licenses.

3.5  Issuer’s Obligations.

Issuer warrants that it will operate its business in compliance with all federal and state laws.

3.6  Ethics, Reputation.

Issuer will use the Services in compliance with all applicable laws and regulations, and refrain from any conduct, use or misuse that may damage the reputation of FAT or its subsidiaries or affiliated entities.

3.7  No Warranties.                                

Issuer will not make or publish any representations, warranties, or guarantees on behalf of FAT concerning FAT’s Services.

3.8  Content, Use, and Protection Against Unauthorized Use.

FAT reserves the right to suspend or terminate any User from using the API for any violation of the terms or intent of this Agreement, as determined by FAT in its sole discretion. Issuer is prohibited from using FAT’s or its subsidiaries and affiliated entities API or “Invest Now” buttons in any unlawful or unethical manner, or in any manner that interferes with, disrupts, or disables the API or the networks or Services on which the API operates, or that is in any way a violation of the site Terms of Use of any federal or state laws, rules or regulations. Issuer is solely responsible for the content of its postings, data and transmissions using the API, and any other use of the API and “Invest Now” buttons. Issuer is expressly authorized to use the API and “Invest Now” buttons in conjunction with any securities offerings for which FAT or any of its affiliates have been engaged.  Issuer will use its best efforts to prevent any unauthorized use of the API and “Invest Now” buttons and immediately notify FAT in writing of any unauthorized use that comes to Issuer’s attention. Issuer will take all steps reasonably necessary to terminate the unauthorized use. Issuer hereby indemnifies and holds FAT harmless for any and all violations or breaches of this Section 3.8 or any unauthorized use or any misuse as discussed above.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserve

3.9 Terms of Use, Privacy Policy, Service Level Agreement.

Except as set forth in this Agreement, the Services shall be subject to the most current, then in effect, Terms of Use and Privacy Policy, as available via links at the bottom of the www.fundamerica.com website. Furthermore, the Services shall be available to Issuer in accordance with the Service Level Agreement (the “SLA”) as available via a link at the bottom of the www.fundamerica.com website. In the event of any conflict between any terms or provisions of the website Terms of Use and the terms and provisions of this Agreement, the applicable terms and provisions of this Agreement shall control.

3.10 Ownership.

Except for the rights expressly granted in this Agreement, nothing shall be construed or shall grant, convey, transfer, assign, or imply the conveyance of rights, claims, ownership or other claim to any right or title to the technology, software, business processes or intellectual property of Issuer. Issuer will not acquire any right, title, or interest in or to the API, “Invest Now” buttons, or other software, technology, business processes, copyrights, trademarks, or intellectual property of FAT or its subsidiaries and affiliated entities by any reason, including:

(a) the execution and delivery of this Agreement, (b) the disclosure of any information with respect to the Invest Now buttons or the API by FAT either pursuant to this Agreement or prior or subsequent to execution hereof, (c) Issuer’s discovery of confidential information in the course of the commercial relationship contemplated by this Agreement, or (d) any licensed or unlicensed use of FAT’s proprietary information, software, the API, the “Invest Now” buttons, brand, or intellectual property and/or the creation or evolution of any derivative or new intellectual property, software, information, arising from the use or misuse of the Services. Rather, FAT retains the sole and exclusive ownership of all intellectual property and proprietary rights with respect to the API and software, the “Invest Now” buttons as well as business and technological processes, including the sole and exclusive ownership to any improvements and derivative works of the API developed by Issuer or any other person. Issuer hereby grants to FAT a nonexclusive, worldwide, royalty free right and license to its copyrights, intellectual property and proprietary rights strictly in connection with FAT’s development, integration, implementation, hosting, marketing, advertising and operation of the Services.

4. FEES

4.1 Fees, Compensation.

Fees for the Services provided under this Agreement are included within the service fees set forth in the FundAmerica Broker-Dealer Agreement and the Escrow Agreement entered between Issuer and FAT’s affiliate, FundAmerica Securities LLC.

All Fees are incurred at the time Services are provided. For purposes of this Agreement, fees may be paid via ACH debit to Issuer’s bank account and the parties agree that the definition of “investments” in the “ACH Debit Authorization Form” is hereby expanded to include fees due hereunder.  All fees for FAT’s Services other than the technology core fee are not contingent upon the success or amount of any offering. FAT may increase or decrease (“change”) the Fees we charge at any time upon sixty (60) days’ notice, with such changes applying only to offerings approved after the notice; changes shall never affect current offerings which are approved, live and raising funds. All Fees are not to be prorated for any partial periods, nor are they refundable in whole or in part unless agreed to in writing by FAT or FundAmerica Securities LLC, as may be appropriate, for the specific Service on which Fees were charged.

4.2 Taxes.

Each party to this Agreement shall be solely responsible for their own federal and state taxes, and will pay their own taxes, duties, withholding taxes, and other governmental and/or regulatory charges (collectively, the “Taxes”) resulting from or pursuant to its performance under this Agreement and as they apply to its respective business.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

4.3 Late Charges.

Any amount not paid by Issuer when due will be subject to finance charges equal to one and one-half percent (1.5%) per month, determined and compounded daily from the date due until the date paid. Issuer will also reimburse all costs and expenses (including, but not limited to, reasonable attorneys’ fees) incurred by FAT or its subsidiaries and affiliated entities to collect any amounts not paid when due. FAT, may, at any time, in its sole and absolute discretion, suspend availability of the Services on any account which is late in payment.

5.  MUTUAL WARRANTIES

5.1  Mutual Warranties.

Each party to this Agreement represents and warrants to the other that it has the right and authority to enter into this Agreement and to perform all of its respective obligations and undertakings. Each party further represents and warrants that: (a) this Agreement has been duly executed and delivered and constitutes a valid and binding agreement enforceable against such party in accordance with its terms; (b) no authorization or approval from any other person is required in connection with such party’s execution, delivery, or performance of this Agreement; and (c) the execution, delivery, and performance of this Agreement does not violate the terms or conditions of any other agreement to which it is a party or by which it is otherwise bound.

5.2  Warranties by Issuer.

(a)           Issuer Materials. Issuer hereby represents and warrants that the Issuer Materials comply with all applicable laws, and will not infringe the copyright, trade secret, privacy, publicity, or other rights of any third party. Issuer hereby indemnifies and holds FAT and its subsidiaries and affiliated entities harmless for any and all violations or breaches of this Section 5.2. Issuer acknowledges that it is sharing its Issuer Materials with FAT in order for us to provide the Services and perform under this Agreement.

(b)  Breach of Warranties.

In the event of any breach of any of Issuer’s responsibilities or warranties herein, in addition to any other remedies available at law or in equity, FAT has the right to immediately, in FAT’s sole discretion, suspend any related API features and/or Services if deemed necessary by FAT to prevent or eliminate difficulties in the operation of Services or harm to FAT’s reputation, or to prevent potential litigation or other controversies.

5.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES MAKE NO REPRESENTATION OR WARRANTY OF ANY KIND WHETHER EXPRESS, IMPLIED (EITHER IN FACT OR BY OPERATION OF LAW). FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES EXPRESSLY DISCLAIM ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUALITY, ACCURACY, TITLE, AND NON-INFRINGEMENT. FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES DO NOT WARRANT AGAINST INTERFERENCE WITH THE USE OF THE SERVICES OR SOFTWARE OR AGAINST INFRINGEMENT. FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES DO NOT WARRANT THAT THE SERVICES OR SOFTWARE ARE ERROR-FREE OR THAT OPERATION OF THE API, THE “INVEST NOW” BUTTONS OR THE SERVICE WILL BE SECURE OR UNINTERRUPTED. FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES EXPRESSLY DISCLAIM ANY AND ALL LIABILITY ARISING OUT OF THE FLOW OF DATA AND DELAYS ON THE INTERNET. ISSUER WILL NOT HAVE THE RIGHT TO MAKE OR PASS ON ANY REPRESENTATION OR WARRANTY ON BEHALF OF FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES TO ANY THIRD PARTY. ISSUER’S ACCESS TO AND USE OF THE SERVICES OR ANY API ARE AT ISSUER’S OWN RISK. ISSUER UNDERSTANDS AND AGREES THAT THE SERVICES ARE PROVIDED TO IT ON AN “AS IS” AND “AS AVAILABLE” BASIS. FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES EXPRESSLY DISCLAIM LIABILITY TO ISSUER FOR ANY DAMAGES RESULTING FROM ISSUER’S RELIANCE ON OR USE OF THE SERVICES.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

6.  LIMITATION OF LIABILITY:

6.1           Disclaimer of Consequential Damages. ISSUER HEREBY ACKNOWLEDGES AND AGREES, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES, WILL NOT, UNDER ANY CIRCUMSTANCES, BE LIABLE TO ISSUER FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR EXEMPLARY DAMAGES ARISING OUT OF OR RELATED TO THE TRANSACTION CONTEMPLATED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR LOSS OF BUSINESS.

6.2           Cap on Liability. ISSUER HEREBY ACKNOWLEDGES AND AGREES UNDER NO CIRCUMSTANCES WILL FAT’S AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES TOTAL LIABILITY OF ANY AND ALL KINDS ARISING OUT OF OR RELATED TO THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO WARRANTY CLAIMS), REGARDLESS OF THE FORM AND REGARDLESS OF WHETHER ANY ACTION OR CLAIM IS BASED ON CONTRACT, TORT, OR OTHERWISE, EXCEED THE TOTAL AMOUNT OF FEES PAID, IF ANY, BY ISSUER TO FAT AND/OR ITS SUBSIDIARIES OR AFFILIATED ENTITIES UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTH PERIOD PRIOR TO THE OCCURRENCE OF THE EVENT GIVING RISE TO SUCH LIABILITY.

6.3  General Indemnification.

Each Party hereby agrees to indemnify, protect, defend and hold harmless the other Party and/or its subsidiaries and/or affiliates and their its officers, directors, members, shareholders, employees, agents, partners, vendors, successors and assigns from and against any and all third party claims, demands, obligations, losses, liabilities, damages, regulatory investigations, recoveries and deficiencies (including interest, penalties and reasonable attorneys’ fees, costs and expenses), the indemnified party and/or its subsidiaries and/or affiliates may suffer as a result of: (a) any breach of or material inaccuracy in the representations and warranties, or breach, non-fulfillment or default in the performance of any of the conditions, covenants and agreements, of the indemnifying party contained in this Agreement or in any certificate or document delivered by the indemnifying party or its agents pursuant to any of the provisions of this Agreement, or (b) any obligation which is expressly the responsibility of the indemnifying party under this Agreement, or (c) any other cost, claim or liability arising out of or relating to operation or use of the license granted hereunder, or, (d) any breach, action or regulatory investigation arising from the indemnifying party’s failure to comply with any state blue sky laws or other securities laws, and/or arising out of any alleged misrepresentations, misstatements or omissions of material fact in the Issuers’ offering memoranda, general solicitation, advertisements and/or other offering documents. Each Party is required to immediately defend the other Party and its subsidiaries and affiliated entities including the immediate payment of all attorney fees, costs and expenses, upon commencement of any regulatory investigation arising or relating to the Issuer’s offering and/or items (a) through (d) in this paragraph. Any amount due under the aforesaid indemnity will be due and payable by the indemnifying party within thirty (30) days after demand thereof. Furthermore, each Party shall protect, hold harmless and indemnify the other Party and its subsidiaries and affiliated entities and their officers, directors, members, shareholders, employees, agents, partners, vendors, successors and assigns from and against any and all liability related to the indemnifying party’s business and business related operations and affairs, and use of the API, license, the Services API or any breach of the terms of this Agreement.

7.  MUTUAL CONFIDENTIALITY OF INFORMATION

7.1           Definition of Confidential Information. As used herein, the “Confidential Information” means all confidential and proprietary information of a party disclosed (“Disclosing Party”) to the other party (“Receiving Party”), whether orally or in writing, that is designated as confidential or that reasonably should be understood to be confidential given the nature of the information and the circumstances of disclosure, including the terms and conditions of this Agreement (including pricing and other terms reflected in all Account forms hereunder), data, business and marketing plans, technology and technical information, product designs, API designs, “Invest Now” buttons, and business processes. Confidential Information shall not include any information that: (i) is or becomes generally known to the public without breach of any obligation owed to Disclosing Party; (ii) was known to Receiving Party prior to its disclosure by Disclosing Party without breach of any obligation owed toe Disclosing Party; (iii) was independently developed by Receiving Party without breach of any obligation owed to Disclosing Party; or (iv) is received from a third party without breach of any obligation owed to Disclosing Party. All intellectual property, work product, software, code, and other proprietary information or work product of both parties to this Agreement is expressly agreed to be Confidential Information.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

7.3  Protection.

Each party agrees to protect the confidentiality of the Confidential Information of the other party in the same manner that it protects the confidentiality of its own proprietary and confidential information of like kind, but in no event using less than reasonable care.

7.4  Remedies.

If Receiving Party discloses or uses or threatens to disclose or use any of the Confidential Information of Disclosing Party in breach of the terms hereunder, Disclosing Party shall have the right, in addition to any other remedies available in law and equity, to seek injunctive relief to enjoin such act, it being specifically acknowledged by the parties that any other available remedies are inadequate.

8.  TERM AND TERMINATION

8.1  Term.

Subject to prior termination pursuant to Section 8.2, this Agreement shall become effective on the Effective Date and shall continue during the pendency of the Offering.

8.2  Termination.

Either party may terminate this Agreement upon thirty (30) days written notice of a material breach to the other party of such breach. Such breaches include, but are not limited to: 1) failure to pay all amounts due when due; or (2) the filing by a party to this Agreement of any petition in bankruptcy or initiation of any other proceeding relating to insolvency, receivership, liquidation or assignment for the benefit of creditors.

8.3  Effect of Termination.

Upon expiration or termination as provided in Section 8.2 of this Agreement, (a) Issuer will cease using the API, “Invest Now” buttons and all associated Services and FAT will be relieved from any further obligation to provide the Services; (b) each party will retain all rights and claims arising hereunder prior to the effective date of any expiration or termination; (c) the rights and obligations of the parties under Sections 3.2, 3.7, 3.8, 3.9, 3.12, 5, 6, 7, 8, and 9 will survive an expiration or termination, and (d) FAT will continue to hold data and maintain records as required by securities regulations and/or good business practices.

9. MISCELLANEOUS

9.1  Notices.

a.            Any communication in connection with this agreement must be exclusively in person or via email or other electronic communication as may be agreed upon by the Parties.

b.            Such communications shall be addressed as follows:

To FAT:

FundAmerica Technologies, LLC

Attention:  Scott Purcell

Email:  scott@fundamerica.com

Telephone: 212-774-3000

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

With a copy to:

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas, 11th Floor, New York NY 10105

Attention: Douglas S. Ellenoff, Esq.

Email: Ellenoff@EGSllp.com

Telephone: 212-370-1300

To Issuer:

Elio Motors, Inc.

2942 North 24th Street, Suite 114-700

Phoenix, AZ 85016

Attention: Paul Elio & Connie Grennan

Email:  pelio@eliomotors.com; cgrennan@eliomotors.com

Telephone: 480-500-6800

With a copy to:

Dill Dill Carr Stonbraker & Hutchings, P.C.

455 Sherman Street, Suite 300

Denver, CO 80203

Attention:  Fay Matsukage, Esq.

Email:  fmm@dillanddill.com

Telephone:  303-777-3737

c.           Any party may change their email notice address by giving written notice thereof in accordance with this Paragraph.  All notices hereunder shall be deemed given: (1) if served in person, when served; or  (2) if sent by email, when the receiving party has responded to the communication or acknowledged receipt of the communication..

9.2  No Implied License.

Except as expressly provided in this Agreement, this Agreement is not intended and will not be construed to confer upon either party any license rights to any patent, trademark, copyright, or other intellectual property rights of either party hereto or any other rights of any kind not specifically conferred in this Agreement. All right, title, and interest in and to the Services are and will remain the exclusive property of FAT.

9.3  Severability.

If any provision of this Agreement is for any reason found to be ineffective, unenforceable, or illegal by any court having jurisdiction, such condition will not affect the validity or enforceability of any of the remaining portions hereof.

9.4  Independent Contractors.

Performance by the parties under this Agreement will be as independent contractors. This Agreement is not intended and shall not be construed as creating a joint venture or partnership, or as causing either party to be treated as the agent of the other party for any purpose or in any sense whatsoever or to create any fiduciary duty or relationship or any other obligations other than those expressly imposed by this Agreement.

9.5  Limited License of Trademarks.

During the term of this Agreement, Issuer has the option to generally use FAT’s name, logo and trademarks on its website and other marketing materials so long as such use is not construed in any way to imply that any securities offering or transaction is endorsed, recommended, or vetted by FAT or its subsidiaries or affiliated entities, or that Issuer is authorized to act as a securities agent or a representative of FAT or its subsidiaries or affiliated entities. Furthermore, it is agreed that FAT, has the option to use the name and logo of Issuer in publicly disclosing the existence of this business relationship.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

9.6  No Legal, Tax or Accounting Advice.

Issuer agrees without reservation that FAT and/or its subsidiaries or affiliated entities are NOT providing any legal, tax or accounting advice in any way, nor on any matter, regardless of the tone or content of any communication (oral, written or otherwise). Issuer unconditionally agrees to rely solely on its legal, tax and accounting professionals for any such advice and on all matters.

9.7  No Investment Advice or Recommendations.

Issuer agrees that FAT and/or its subsidiaries or affiliated entities are not providing any investment advice, nor do we make any recommendations to any issuer of, or investor in, any securities. Issuer agrees that it will only rely on the advice of its attorneys, accountants and other professional advisors, including any registered broker-dealers acting as an underwriter of an offering.

9.8  Electronic Signature and Communications Notice and Consent.

Digital (“electronic”) signatures, often referred to as an “e-signature”, enable paperless contracts and help speed up business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures. The mechanics of this Agreements’ electronic signature include your signing this Agreement below by typing in your name, with the underlying software recording your IP address, your browser identification, the timestamp, and a securities hash within an SSL encrypted environment. This electronically signed Agreement will be emailed to Issuer and FAT and will be stored on the Service and accessible in the Control Panel. Each of Issuer and FAT hereby consent and agree that electronically signing this Agreement constitutes each party’s signature, acceptance and agreement as if actually signed by that party in writing. Further, all parties agree that no certification authority or other third party verification is necessary to validate any electronic signature; and that the lack of such certification or third party verification will not in any way affect the enforceability of your signature or resulting contract between Issuer and FAT. Each party understands and agrees that their e-signature executed in conjunction with the electronic submission of this Agreement shall be legally binding. Each party agrees that their electronic signature is the legal equivalent of their manual signature on this Agreement consents to be legally bound by this Agreement's terms and conditions. Furthermore, each of Issuer and FAT hereby agree that all current and future communications regarding this Agreement specifically, and future communications in general between the parties, may be made by email, sent to the email address of record as set forth in the Notices section above or as otherwise from time to time changed or updated and disclosed to the other party, without necessity of confirmation of receipt, delivery or reading, and such form of electronic communication is sufficient for all matters regarding the relationship between the parties. If any such electronically-sent communication fails to be received for any reason, including but not limited to such communications being diverted to the recipients’ spam filters by the recipients email service provider, or due to a recipients’ change of address, or due to technology issues by the recipients’ service provider, the parties agree that the burden of such failure to receive is on the recipient and not the sender, and that the sender is under no obligation to resend communications via any other means, including but not limited to postal service or overnight courier, and that such communications shall for all purposes, including legal and regulatory, be deemed to have been delivered and received. No physical, paper documents will be sent to Issuer, and if you desire physical documents then you agree to be satisfied by directly and personally printing, at your own expense, the electronically-sent communication(s) and maintaining such physical records in any manner or form that you desire. Your Consent is Hereby Given: By signing this Agreement electronically, you explicitly agree to this Agreement and to receive documents electronically, including your copy of this signed Agreement as well as ongoing communications.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

9.9  Assignment.

No party may transfer or assign its rights and obligations under this Agreement without the prior written consent of the other parties. Notwithstanding the foregoing, without the consent of the other parties, any party may transfer or assign its rights and obligations hereunder in whole or in part (a) pursuant to any merger, consolidation or otherwise by operation of law, and (b) to the successors and assigns of all or substantially all of the assets of such assigning party, provided such entity shall be bound by the terms hereof. This Agreement will be binding upon and will inure to the benefit of the proper successors and assigns.

9.10        Non-Absolute Standards. All of the Services are provided under a “reasonability” standard. This means that no service may be held to an absolute or perfect standard. All services are provided in such a manner that they are reasonable, and not perfect or flawless. Issuer acknowledges this and agrees that the reasonable Services meet its requirements and for the fees charged, and that all applicable sections of this Agreement apply to this concept, including, but not limited to, Sections 3.8, 3.9, 3.10, and Sections 5 and 6.

9.11  Binding Arbitration, Applicable Law and Venue, Attorneys Fees.

This Agreement is governed by, and will be interpreted and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws. Any claim or dispute arising under this Agreement may only be brought in arbitration, with venue in New York, New York pursuant to the rules of the American Arbitration Association. Issuer and FAT each consent to this method of dispute resolution, as well as jurisdiction, and consent to this being a convenient forum for any such claim or dispute and waives any right it may have to object to either the method or jurisdiction for such claim or dispute. In the event of any dispute among the parties, the prevailing party shall be entitled to recover damages plus reasonable costs and attorney’s fees and the decision of the arbitrator shall be final, binding and enforceable in any court.

9.13  Counterparts; Facsimile; Email; Signatures.

This Agreement may be executed in counterparts, each of which will be deemed an original and all of which, taken together, will constitute one and the same instrument, binding on each signatory thereto. This Agreement may be executed by signatures, electronically or otherwise, delivered by facsimile or email, and a copy hereof that is properly executed and delivered by a party will be binding upon that party to the same extent as an original executed version hereof.

9.14  Force Majeure.

No party will be liable for any default or delay in performance of any of its obligations under this Agreement if such default or delay is caused, directly or indirectly, by fire, flood, earthquake or other acts of God; labor disputes, strikes or lockouts; wars, rebellions or revolutions; riots or civil disorder; accidents or unavoidable casualties; interruptions in transportation or communications facilities or delays in transit or communication; supply shortages or the failure of any person to perform any commitment to such party related to this Agreement; or any other cause, whether similar or dissimilar to those expressly enumerated in this Section, beyond such party’s reasonable control.

9.15  Interpretation.

Each party to this Agreement has been represented by or had adequate time to obtain the advice and input of independent legal counsel with respect to this Agreement and has contributed equally to the drafting of this Agreement. Therefore, this Agreement shall not be construed against either party as the drafting party. All pronouns and any variation thereof will be deemed to refer to the masculine and feminine, and to the singular or plural as the identity of the person or persons may require for proper interpretation of this Agreement. And it is the express will of all parties that this Agreement is written in English and uses the font styles and sizes contained herein.

9.17  Captions.

The section headings in this Agreement are intended solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

9.18  Beneficiaries.

There are no third party beneficiaries to this Agreement.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

9.19  Entire Agreement; Amendments.

This Agreement sets forth the entire understanding of the parties concerning the subject matter hereof, and supersedes all prior or contemporaneous communications, representations or agreements between the parties, whether oral or written, regarding the subject matter of this Agreement, and may not be modified or amended, except by a written instrument executed after the effective date of this Agreement by the party sought to be charged by the amendment or modification.

10. SUBSTITUTE FORM W-9- TAXPAYER IDENTIFICATION NUMBER CERTIFICATION:

Section 6109 of the Internal Revenue Code requires us to provide you with our Taxpayer Identification Numbers (TIN).

Company Name: FundAmerica Technologies, LLC

Contact: Nicoleta Purcell, CFO

Address: 2300 W. Sahara Ave., Suite 803, Las Vegas, NV 89102

Tax ID Number (EIN): 45-4970618

[X] We are exempt from backup withholding.

Under penalties of perjury, FundAmerica Technologies, LLC hereby certifies that the number shown above is our correct taxpayer identification number, that we are not subject to backup withholding, and that we are a U.S. person.

© Copyright 2015, FundAmerica Technologies, LLC  All Rights Reserved

EX1A-8 ESCW AGMT

Exhibit 8.1

ESCROW SERVICES AGREEMENT

This Escrow Services Agreement (this “Agreement”) is made and entered into as of <date> by and between FundAmerica Securities, LLC (“FundAmerica Securities”, “Trustee” or “Escrow Agent”), a Delaware limited liability company, and Elio Motors, Inc., an Arizona corporation (Issuer).

RECITALS

WHEREAS, Issuer proposes to offer for sale to investors as disclosed in its offering circular on Form 1-A (the “Offering Document”) filed with the US Securities and Exchange Commission (the “SEC”), its common stock (the “Securities”) pursuant to Tier 2 of Regulation A under the Securities Act of 1933, as amended, either directly (issuer-direct) and/or through one or more registered broker-dealers (selling group) (the “Offering”), in the amount of at least $12,600,000.00 (the “Minimum Amount of the Offering”) and up to $25,080,000.00  (the “Maximum Amount of the Offering”).

WHEREAS, Issuer desires to establish an Escrow Account in which funds received from prospective investors (“Subscribers”) will be held during the Offering, subject to the terms and conditions of this Agreement. FundAmerica Securities agrees to serve as Trustee or Escrow Agent  for the Subscribers with respect to such Escrow Account in accordance with the terms and conditions set forth herein to be held at BofI Federal Bank, a FDIC insured bank (the “Bank”), in a separately named (as defined below) account.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing, it is hereby agreed as follows:

1. Establishment of Escrow Account. Prior to the date the SEC issues a qualification for the sale of the Securities pursuant to the Offering Statement (the “Qualification Date”), the Trustee shall establish an account at BofI Federal Bank, entitled “FundAmerica Securities as Trustee for Investors in Elio Motors, Inc.” (the “Escrow Account”). The Escrow Account shall be a segregated, deposit account at the Bank. All parties agree to maintain the Escrow Account and escrowed funds in a manner that is compliant with SEC Rules 10b-9 and 15c2-4, promulgated under the Securities Exchange Act of 1934, as amended.

2. Escrow Period. The Escrow Period shall begin on the Qualification Date and shall terminate in whole or in part upon the earlier to occur of the following:

a.           The date upon which subscription amounts for the Minimum Amount of the Offering required to be sold have been deposited and cleared in the Escrow Account and the Issuer has triggered a closing on those funds. Escrow shall remain open pending receipt of Securities to meet the Maximum Amount of the Offering; or

b.           The expiration of <auto term> from the date of commencement of the Offering if the Minimum has not been reached; or

c.           The date upon which a determination is made by Issuer and/or their authorized representatives, including any lead broker or placement agent that may be engaged by the Issuer, to terminate the Offering prior to closing.

During the Escrow Period, the parties agree that (i) Escrow Account and escrowed funds will be held for the benefit of the Subscribers, and that (ii) the Issuer is not entitled to any funds received into escrow, and that no amounts deposited into the Escrow Account shall become the property of Issuer or any other entity, or be subject to any debts, liens or encumbrances of any kind of Issuer or any other entity, until the contingency has been satisfied by the sale of the Minimum of such Securities to such investors in bona fide transactions that are fully paid for, as specified in the offering documents.

In addition, Issuer and Escrow Agent acknowledge that the total funds raised cannot exceed the Maximum Amount of the Offering permitted by the Offering Memorandum. Issuer represents that no funds have yet been raised for Elio Motors, Inc. and that all funds to be raised for the Offering will be deposited in the Escrow Account established by FundAmerica Securities at the Bank.

3. Deposits into the Escrow Account. All Subscribers will be instructed by Issuer or its agents to transfer funds by wire or ACH directly into the Escrow Account or deliver checks made payable to “FundAmerica Securities as Agent for Elio Motors, Inc. Escrow Account” for prompt deposit into the Escrow Account. Any check payable other than to the Escrow Account as required hereby shall be returned promptly to the prospective purchaser, or if the Trustee has insufficient information to do so, then to the Issuer, and such check shall be deemed not to have been delivered to the Escrow Account pursuant to the terms of this Agreement.  Trustee shall cause the Bank to process all Escrow Amounts for collection through the banking system and shall maintain an accounting of each deposit posted to its ledger, which also sets forth, among other things, each Subscriber’s name and address, the quantity of Securities purchased, and the amount paid. All monies so deposited in the Escrow Account and which have cleared the banking system are hereinafter referred to as the "Escrow Amount." Issuer or its agents shall promptly, concurrent with any new or modified subscription, provide Trustee with a copy of the Subscriber’s signed subscription agreement and other information as may be reasonably requested by Trustee in the performance of its duties under this Agreement. As required by government regulations pertaining to the US Treasury, Homeland Security, the Internal Revenue Service and the SEC, federal law requires financial institutions to obtain, reasonably verify and record information that identifies each person (natural person or legal entity, including its authorized persons) who funds and executes Securities transactions. Information requested of the Issuer and Subscribers will be typical information requested in the gathering and verification guidelines and best practices promulgated by anti-money laundering (“AML”) rules and regulations and those regulatory agencies that enforce them.

Trustee is under no duty or responsibility to enforce collection of any wire, check, or ACH delivered to it hereunder.

Trustee reserves the right to deny, suspend or terminate participation in the Escrow Account of any Subscriber to the extent Trustee deems it advisable or necessary to comply with applicable laws or to eliminate practices that are not consistent with securities industry laws, rules, regulations or best practices. Trustee may at any time reject or return funds to any Subscriber (i) that do not clear background checks (anti-money laundering, USA PATRIOT Act, social security number issues, etc.) to the satisfaction of Trustee, in its sole and absolute discretion, or, (ii) for which Trustee determines, in its sole discretion, that it would be improper or unlawful for Trustee to accept or hold the applicable Subscriber’s funds, as Trustee, due to, among other possible issues, issues with the Subscriber or the source of the Subscriber’s funds. Trustee shall promptly inform Issuer of any such return or rejection.

4. Disbursements from the Escrow Account. In the event Trustee does not receive the Minimum Amount of the Offering on or prior to the termination of the Escrow Period, Trustee shall terminate Escrow and make a full and prompt return of funds so that refunds are made to each Subscriber in the exact amount received from said Subscriber, without deduction, penalty, or expense to Subscriber.

In the event Trustee receives cleared funds for at least the Minimum Amount of the Offering  prior to the termination of the Escrow Period and Trustee receives a written instruction from Issuer (generally via notification in the application programming interface (“API”)), Trustee shall, pursuant to those instructions, distribute funds from such Escrow Amount pursuant to the instructions of Issuer. Issuer acknowledges that there is a 24-hour (one business day) processing time once a request has been received to break Escrow. Issuer’s written instructions to Trustee shall certify that all conditions set forth in the Offering Statement for release of funds have been met for a closing of the Offering and include a schedule of deductions from the Escrow Account for any broker fees and other funds for management and offering and selling expenses from the gross proceeds of the Escrow Account prior to remitting such funds, if and when due, to Issuer. Trustee is hereby directed to remit such funds as directed by Issuer directly to the broker(s) and other parties, if any, to which they are due. Net proceeds (meaning gross proceeds less amounts remitted pursuant to Issuer’s instructions to brokers and other parties, and does not include interest earned or accumulated in the Escrow Account) will then be remitted to Issuer as described above. Furthermore, Issuer directs Trustee to accept instructions regarding fees from any registered securities broker in the syndicate, if any, only with Issuer’s written approval.

5. Collection Procedure. Trustee is hereby authorized, upon receipt of Subscriber funds not transmitted directly into the Escrow Account, to promptly deposit them in the Escrow Account. Any Subscriber funds which fail to clear or are subsequently reversed, including but not limited to ACH chargebacks and wire recalls, shall be debited to the Escrow Account, with such debits reflected on the Escrow ledger. Any and all fees paid by Issuer for funds receipt and processing are non-refundable, regardless of whether ultimately cleared, failed, rescinded, returned or recalled. In the event of any Subscriber refunds, returns or recalls after funds have already been remitted to Issuer, then Issuer hereby agrees to immediately and without delay or dispute address such situation directly with said Subscriber, including taking whatever actions necessary to return such funds to Subscriber, but Issuer shall not involve Trustee in any such disputes.

6. Investment of Escrow Amount. Trustee may, at its discretion, invest any or all of the Escrow account balance as permitted under SEC Rule 15c2-4. This generally means short term investments in: (1) bank accounts, (2) bank money-market accounts, (3) short term certificates of deposit issued by a bank, and/or (4) short-term securities issued or guaranteed by the U S Government. Interest accumulated on the balances is the property of Trustee as part of its Escrow Administration Fee.

7. Escrow Administration Fees, Compensation of Trustee. Trustee will charge Escrow Administration Fees to Issuer as follows: $225.00 set up, plus $25.00 per month for bank account fee, plus any applicable fees for fund transfers as follows:  Inbound funds fees – For each ACH, $0.50 plus $1 per $1,000 (capped at a fee of $5.50 regardless of amount inbound via ACH), $15 per Wire, $10 per Check; and Outbound funds fees – For each ACH, $0.50 regardless of amount, $15 per Wire, $8 per Check. Bad actor checks ($30.00 per entity, including issuer and each associated person) and electronic signature ($2.00 per investment, unlimited documents), which Issuer is liable to Trustee to pay and agrees to pay Trustee, regardless of whether Issuer has entered an agreement that said fees are to be paid by a funding platform, lead syndicate broker or another representative of Issuer. The set-up fee and a minimum of [     ] Bank fees are due immediately upon receipt of this Agreement, and are not contingent in any way on the success or failure of the Offering. Additional per-Subscription processing fees, as applicable, will be due and payable upon release of funds from Escrow.  Furthermore, Trustee is exclusively entitled to retain as part of its compensation, any and all investment interest, gains and other income earned pursuant to item 6 above. No fees, charges or expense reimbursements of Trustee are reimbursable, and are not subject to pro-rata analysis. All fees and charges, if not paid by a representative of Issuer (e.g. funding platform, lead syndicate broker, etc.), may be made via either the Issuers credit card or ACH information on file with FundAmerica Securities. It is acknowledged and agreed that no fees, reimbursement for costs and expenses, indemnification for any damages incurred by the Issuer or the Trustee shall be paid out of or chargeable to the investor funds on deposit in the escrow account.

8. Term and Termination. This Agreement will remain in full force during the Escrow Period. Even after this Agreement is terminated, certain provisions will remain in effect, including, but not limited to, items 3, 4, 5, 9, 10 and 12 of this Agreement.

9. Binding Arbitration, Applicable Law and Venue, Attorneys Fees: This Agreement is governed by, and will be interpreted and enforced in accordance with the regulations of the SEC and FINRA, and laws of the State of New York, without regard to principles of conflict of laws. Any claim or dispute arising under this Agreement may only be brought in arbitration, pursuant to the rules of the Financial Industry Regulatory Authority (“FINRA”), with venue in New York City, New York. Each of the parties hereby consents to this method of dispute resolution, as well as jurisdiction, and waives any right it may have to object to either the method, venue or jurisdiction for such claim or dispute. Any award an arbitrator makes will be final and binding on all parties and judgment on it may be entered in any court having jurisdiction. Furthermore, the prevailing party shall be entitled to recover damages plus reasonable attorney’s fees.

10. Liability. The Trustee shall not be liable for any action taken or omitted hereunder, or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence.

The Trustee shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Amounts, the Fund or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the Fund or any part thereof.

11. Indemnity. You agree to defend, indemnify and hold FundAmerica Securities and its affiliates (including FundAmerica Technologies, LLC), directors, employees, service providers, officers, agents, and partners and third-party service providers, including BofI Federal Bank (the “Indemnified Parties”) harmless from any loss, liability, claim, or demand, including reasonable attorney’s fees, made by any third party due to or arising out of this Agreement and/or arising from a breach of any provision in this Agreement, except to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) result from the willful misconduct or gross negligence of the Indemnified Parties. This defense and indemnification obligation will survive termination of this Agreement.

FundAmerica Securities reserves the right to assume, at its sole expense, the exclusive defense and control of any such claim or action and all negotiations for settlement or compromise, and you agree to reasonably cooperate with FundAmerica Securities in the defense of any such claim, action, settlement or compromise negotiations, as requested by FundAmerica Securities.
   

12. Entire Agreement, Severability and Force Majeure. This Agreement contains the entire agreement between Issuer and FundAmerica Securities regarding the Escrow Account. If any provision of this Agreement is held invalid, the remainder of this Agreement shall continue in full force and effect. Furthermore, no party shall be responsible for any failure to perform due to acts beyond its reasonable control, including acts of God, terrorism, shortage of supply, labor difficulties (including strikes), war, civil unrest, fire, floods, electrical outages, equipment or transmission failures, internet interruptions, vendor failures (including information technology providers), or other similar causes.

13. Changes. Trustee may, at its sole discretion, comply with any new, changed, or reinterpreted regulatory or legal rules, laws or regulations, and any interpretations thereof, and without necessity of notice, to modify either this Agreement and/or the Escrow Account to comply or conform to such changes or interpretations. Furthermore, all parties agree that this Agreement shall continue in full force and be valid, unchanged and binding upon any successors of FundAmerica Securities. Changes to this Agreement will be sent to you via email.

14. Notices.

a.            Any communication in connection with this agreement must be in writing and, unless otherwise stated, may be given:

i)            in person, by post or fax; or

ii)           by e-mail or other electronic communication.

b.            Such communications shall be addressed as follows:

To Escrow Agent:

FundAmerica Securities, LLC

[address]

Attention:  ___________________

Email:  escrow@fundamericasecurities.com

Telephone:

Fax:

With a copy to:

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas, 11th Floor

Attention: Douglas Ellenoff, Esq.

Email: Ellenoff@EGSllp.com

Telephone: 212-370-1300

Fax: 212-370-7889

To Issuer:

Elio Motors, Inc.

2942 North 24th Street, Suite 114-700

Phoenix, AZ 85016

Attention: Paul Elio & Connie Grennan

Email:  pelio@eliomotors.com; cgrennan@eliomotors.com

Telephone: (480) 500-6800

Fax:

With a copy to:

Dill Dill Carr Stonbraker & Hutchings, P.C.

455 Sherman Street, Suite 300

Denver, CO 80203

Attention:  Fay Matsukage, Esq.

Email:  fmm@dillanddill.com

Telephone:  (303) 777-3737

Fax:  (303) 777-3823

c.           Any party may change their notice or email address and/or facsimile number by giving written notice thereof in accordance with this Paragraph.  All notices hereunder shall be deemed given: (1) if served in person, when served; (2) if sent by facsimile or email, on the date of transmission if before 6:00 p.m. Eastern time, provided that a hard copy of such notice is also sent by either a nationally recognized overnight courier or by U.S. Mail, first class; (3) if by overnight courier, by a nationally recognized courier which has a system of providing evidence of delivery, on the first business day after delivery to the courier; or (4) if by U.S. Mail, on the third day after deposit in the mail, postage prepaid, certified mail, return receipt requested.

15. Counterparts. This Agreement may be executed in several counterparts or by separate instruments and by email transmission and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.

[Remainder of this page intentionally left blank.]

   

Agreed by the undersigned as of the date set forth above by and between:

Elio Motors, Inc.

By: Paul Elio

Title: President

FundAmerica Securities, LLC

By: Jonathan Self

Title: President

[Execution page to Escrow Services Agreement]

EX1A-11 CONSENT

Exhibit 11.2

CONSENT

I hereby consent to the reliance in this offering statement on Form 1-A (“Offering Statement”) of Elio Motors, Inc. (the “Company”) on my Market Report Study Analysis dated June 14, 2013, which the Company has referred to in the Offering Circular included in this Offering Statement.

/s/ Jim Berline

Jim Berline

The Berline Group Inc. dba Berline

10/20/15

Date

EX1A-12 OPN CNSL

Exhibit 12.1

	455 Sherman St., Suite 300 Denver, Colorado 80203 303-777-3737 303-777-3823 FAX www.dillanddill.com	Arthur H. Bosworth, II Christopher W. Carr* Daniel W. Carr John J. Coates Kevin M. Coates H. Alan Dill Robert A. Dill Thomas M.  Dunn John A. Hutchings Stephen M. Lee Fay M. Matsukage**
October 20, 2015 Elio Motors, Inc. 2942 North 24th Street, Suite 114-700 Phoenix, Arizona 85016		Adam P. Stapen Jon Stonbraker Craig A. Stoner Frank W. Suyat Patrick D. Tooley *Also licensed in Washington **Also licensed in Nevada

Gentlemen:

We are acting as counsel to Elio Motors, Inc. (the “Company”) in connection with the preparation and filing with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, of the Company’s Offering Statement on Form 1-A.  The Offering Statement covers 2,090,000 shares of the Company’s common stock, plus an additional 418,000 shares in the event of an over-subscription, for a total of 2,508,000 shares (the “Shares”).

In our capacity as such counsel, we have examined and relied upon the originals or copies certified or otherwise identified to our satisfaction, of the Offering Statement, the form of Subscription Agreement and such corporate records, documents, certificates and other agreements and instruments as we have deemed necessary or appropriate to enable us to render the opinions hereinafter expressed.

On the basis of such examination, we are of the opinion that:

1. The Shares have been duly authorized by all necessary corporate action of the Company.

2. When issued and sold by the Company against payment therefor pursuant to the terms of the Subscription Agreement, the Shares will be validly issued, fully paid and non-assessable.

We hereby consent to the use of our name in the Offering Statement and we also consent to the filing of this opinion as an exhibit thereto.  In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regula­tions of the Commission thereunder.

Very truly yours,

/s/ Dill Dill Carr Stonbraker & Hutchings, P.C.

DILL DILL CARR STONBRAKER & HUTCHINGS, P.C.

CORRESP

	455 Sherman St., Suite 300 Denver, Colorado 80203 303-777-3737 303-777-3823 FAX www.dillanddill.com	Arthur H. Bosworth, II Christopher W. Carr* Daniel W. Carr John J. Coates Kevin M. Coates H. Alan Dill Robert A. Dill Thomas M.  Dunn John A. Hutchings Stephen M. Lee Fay M. Matsukage** Adam P. Stapen Jon Stonbraker
October 21, 2015		Craig A. Stoner Frank W. Suyat Patrick D. Tooley *Also licensed in Washington **Also licensed in Nevada

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

Mail Stop 3561

100 F Street, N.E.

Washington, D.C. 20549

Re:      Elio Motors, Inc.

Offering Statement on Form 1-A

Filed on August 28, 2015

File No. 024-10473

Dear Mr. Dobbie:

On behalf of Elio Motors, Inc. (the “Company”) Amendment No. 1 to the offering statement on Form 1-A is being filed.

The comments of the Staff in its letter dated September 24, 2015, have been addressed in this filing pursuant to your request.  The comments are set forth below, together with the Company’s responses, which refer to the EDGAR page, which contains revised disclosure.

To assist the staff in its review of this Amendment, we are sending a redline of the offering statement, which has been marked to show all of the changes. 

Preliminary Offering Circular cover page

1. Please quantify in footnote 2 the total offering expenses to be borne by you in connection with the offering assuming the minimum and maximum offering conditions.  Refer to Instruction 6 to Item 1(e) of Part II to Form 1-A.

Response:   Complied.  Footnote 2 has been revised.

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

October 21, 2015

Page 2

2. Please disclose your escrow arrangements on the cover page as required by Item 1(e) of Part II to Form 1-A.  Please also explain to us how the terms of your escrow agreement will comply with Exchange Act Rule 15c2-4.

Response:  Complied.  See the revised disclosure on the cover page.  Please note that FundAmerica Securities LLC is not acting as an underwriter or placement agent for this offering.  It is providing services solely as an accommodating broker for state blue sky purposes.  FundAmerica is not conducting any solicitation activities and is not recommending securities to prospective investors.  Notwithstanding its limited role, FundAmerica Securities LLC is complying with Rule 15c2-4 by promptly depositing subscription funds in a segregated bank account, with respect to which it will act as trustee or agent, and, upon the occurrence of the relevant contingency, will promptly make the appropriate transfer of funds to the persons entitled thereto upon instruction from the Company.  As reflected in the Escrow Services Agreement between the Company and FundAmerica Securities, LLC (filed with this amendment as Exhibit 8.1), FundAmerica will serve as trustee or escrow agent and establish a segregated account at Bofl Federal Bank.  All funds from subscriptions will be deposited into that account and released only upon the earliest to occur of the following: (a) the subscription amount representing the Minimum Offering having been deposited and cleared; (b) the expiration of the offering period; or (c) the determination make by the Company to terminate the offering prior to closing.

3. We note the disclosure on the cover page that you contemplate commencing this offering in 2015 and possibly continuing into 2016.  We also note that you reserve the right to accept subscriptions for up to an additional 418,000 shares in connection with this offering.  Please reconcile these disclosures with the information in Item 4 of Part I to Form 1-A that you do not intend to offer securities on a delayed or continuous basis pursuant to Rule 251(d)(3) and that the maximum number of securities offered does not include the additional 418,000 shares.  Please also explain why the legality opinion filed as Exhibit 12.1 does not include the additional 418,000 shares.

Response:  Item 4 of Part I to Form 1-A has been revised to state that the Company intends to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3) and that the maximum number of shares offered is 2,508,000.  A revised legality opinion has been filed as Exhibit 12.1 to include the additional 418,000 shares.

Business, page 10

4. You state that based on the current prototype and components, the retail price of the Elio is $7,600 but you “are working to achieve the $6,800 targeted retail price.”  Please discuss the most significant factors that enable you or limit you in achieving your target base price.  Please also discuss the extent to which these costs, including those attributed to “new tooling,” are controllable by you.  To the extent you have made price guarantees for customer reservations or if non-refundable deposits could be refunded if you fail to meet price, delivery date, or performance targets, please discuss accordingly.

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

October 21, 2015

Page 3

Response:  Complied.  See the revised disclosure on pages 11 and 12.  Elio Motors has not made any price guarantees in connection with customer reservations.  Its Customer Reservation Agreement states that the price “is subject to change until agreed upon in an executed Purchase Agreement”.  Furthermore, the Agreement states that it “does not constitute an agreement for the sale of a vehicle and does not lock in pricing, a production slot, or an estimated delivery date”.

5. Please discuss your substantial dependence on third parties for the development and distribution of the Elio, the extent to which their involvement will impact your ability to meet your targeted base price of $6,800, the risks to the extent material arising from your decision not to seek patent rights, and your ability to identify alternative arrangements in the event you are unable to enter into final binding agreements with third parties.

Response:  Complied.  See the revised disclosure on pages 13 and 18.

6. Please clarify whether the testing protocols you identify beginning on page 12 will be validated by you or by third parties and briefly discuss whether you are required to obtain third party validation of miles per gallon or safety tests for the purposes of meeting any state or federal regulations or to participate in the ATVM loan program.

Response:  Complied.  See the revised disclosure on page 14.

Engineering and Development, page 12

7. Please file the agreement with Technosports Creative as an exhibit to the offering statement and describe here the material terms of the agreement or explain to us why this agreement is not material to you or you are otherwise not substantially dependent upon it.  Refer to Item 17(6) of Part III to Form 1-A.

Response:  Technosports Creative is a prototype shop, which the Company has engaged previously for the fabrication of its pre-production prototypes. Once the prototype validation and testing is complete, all production vehicles will be assembled using a mass-manufacturing process at the Company’s Shreveport Louisiana assembly plant at the rate of approximately 1000 vehicles per day at full volume – orders of magnitude higher than Technosports’ scale. Because of the pre-production nature of the Technosports relationship, the Company does not deem it material to its long-term production operations.  Technosports provides a quotation to the Company for each prototype it is asked to build, which constitutes the agreement with Technosports.  Other prototype builders are available to the Company.  Accordingly, the Company does not view its business as being dependent upon Technosports.  Use of the word “partnering” with respect to Technosports likely created the misunderstanding of the relationship and that has been changed. See page 14.

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

October 21, 2015

Page 4
                          

The Market, page 13

8. It appears you have summarized the market survey report prepared by Berline.  Please explain to us why Berline’s consent is not required to be filed.  Refer to Item 17(11)(a) of Part III to Form 1-A.

Response:  Berline’s consent is filed as exhibit 11.2.

Sales and Service Model, page 14

9. We note that several states have enacted legislation designed to restrict or prohibit the retail sales model utilized by Tesla.  Please discuss the applicability to you of state franchise dealer laws, the extent to which you have determined not to operate in certain geographic locations because of these laws, and the alternative methods of distribution, if any, to service customers in these states.

Response:     A discussion entitled, “Motor Vehicle Manufacturer and Dealer Regulation” has been added to the “Government Regulation” section to address this comment.  See page 20.

Production Plan, page 15

10. We are aware from media reports that you have encountered production delays.  Please discuss your production plans on a historic basis and discuss the significant factors, including the availability of financing, that influence your historic and anticipated production timetable.

Response:  Complied.  See the revised disclosure on pages 17 and 18.

Properties, page 18

11. We are aware from media reports that you may be subject to penalties if you do not achieve certain employment levels within a specified timeframe for the Shreveport facility.  If true, please disclose and quantify these targets or explain to us why you do not believe this disclosure is required.

Response:    Complied.  See the revised disclosure on page 22.

Plan of Operation, page 21

12. Please quantify the anticipated budgets and disclose the key milestones to complete prototype design and testing, development of your retail sales model, and any other material aspects of your plan of operations.  Please also clarify whether, in your opinion, the proceeds from the offering will satisfy your cash requirements or whether you anticipate it will be necessary to raise additional funds in the next six months to implement your plan of operations.  Refer to Item 9(c) of Part II to Form 1-A.

Response:  Complied.  See the revised disclosure on pages 25 and 26.

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

October 21, 2015

Page 5

13. Please disclose the material terms and conditions of the ATVM loan program, including the remaining financial eligibility and any other application requirements necessary for your loan approval.  Please also discuss the extent to which you are dependent on this financing to implement your plan of operations.

Response:  Complied.  See the revised disclose on page 27.  Please note that the material terms and conditions of the ATVM loan program are already disclosed – eligibility based on a manufacturer’s ability to deliver light duty vehicles or ultra efficient vehicles and financial viability over the life of the loan.  As mentioned in the revised disclosure, the specific terms and conditions of the loan are negotiated with each borrower after the first two steps of the loan application process have been completed.

Security Ownership of Management and Certain Security Holders, page 27

14. Please include in your tabular calculation of beneficial ownership by Stuart Lichter those shares which may be acquired within 60 days, including any outstanding options or convertible securities.  Refer to Item 12(b)(2) of Part II to Form 1-A and Exchange Act Rule 13d-3(d)(1).

Response:  Complied.  See the revised table on page 32.

Plan of Distribution, page 33

15. Please describe the procedures for prospective investors who have submitted non-binding indications of interest on the StartEngine.com website to subscribe in the offering.  Please also clarify whether the prospective investors may subscribe only through the StartEngine.com website and describe briefly how subscription information is transmitted from StartEngine.com to FundAmerica Securities, LLC.

Response:  Complied.  See the revised disclosure on page 38.

16. Please explain to us what compensation StartEngine.com will be paid for its services in connection with this offering.

Response:  Complied.  See the revised disclosure on page 38.

17. Please tell us whether any officer, director or employee of your company will participate in the sale of securities pursuant to this offering.  Refer to Exchange Act Rule 3a4-1.

Response:  It is not anticipated that any officer, director or employee of Elio Motors will participate in the sale of securities in a manner that would cause him or her to be deemed a broker.  If there is an insufficient amount of interest on Elio Motor’s or StartEngine.com’s websites, Elio Motors employees may contact persons who have reserved Elio vehicles to make them aware of the offering.  These employees will not be paid commissions and currently perform other duties for Elio Motors.

Justin Dobbie

Legal Branch Chief

Office of Transportation and Leisure

Division of Corporation Finance

Securities and Exchange Commission

October 21, 2015

Page 6
                               

Financial Statements

18. Please include interim financial statements for the six months ended June 30, 2015 in accordance with the instructions to Part F/S of Form 1-A if your filing is not qualified by September 30, 2015.

Response:  Interim financial statements for the six months ended June 30, 2015 are included in the amended offering statement.  See pages F-20 through F-25 in the preliminary offering circular.

Exhibit 13

19. You state that you have “$70 million raised.”  Please explain to us how you calculated this amount by reference to your disclosure in the preliminary offering circular.

Response:  “$70 million raised” refers to the approximate total of reservations ($15.8 million as of December 31, 2014), debt ($39.8 million as of December 31, 2014), and equity ($15.1 million as of December 31, 2014).  See the audited financial statements in the preliminary offering circular.

Please contact the undersigned with any additional questions or comments you may have.

Sincerely,

/s/ Fay M. Matsukage

Fay M. Matsukage

Cc:    Elio Motors, Inc.

        Ellenoff Grossman & Schole LLP