Arizona
|
27-1288581
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Title of each class
to be so registered
|
Name of each exchange on which
each class is to be registered
|
|
Common Stock, no par value
|
NYSE MKT
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
|
Smaller reporting company þ
|
Item 1.
|
Business.
|
The Elio – Target 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:
|
Standard 5 speed manual or available automatic
|
Dimensions
|
|
Wheelbase:
|
110 inches
|
Length:
|
160.5 inches
|
Track Width:
|
66.8 inches
|
Height:
|
54.2 inches
|
Target Curb Weight:
|
1350 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:
|
Up to 672 miles
|
Other
|
|
Fuel:
|
Unleaded gasoline
|
Fuel Capacity:
|
8 gallons
|
|
·
|
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.
|
|
·
|
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 created a sustainable brand loyalty through the manner in which we treat our customers. The Elio is being deliberately priced low 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 at our base price.
|
|
·
|
“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.
|
·
|
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
|
Item 1A.
|
Risk Factors.
|
|
·
|
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.
|
|
·
|
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.
|
Item 2.
|
Financial Information.
|
|
•
|
$16.0 million, net proceeds at the close of the Regulation A offering
|
|
•
|
E1 Engineering drawing release
|
|
•
|
E1 Builds begin
|
|
•
|
E1 Testing
|
|
•
|
S1 Production drawing release & tooling kickoff
|
|
•
|
Order long lead equipment
|
|
•
|
Shreveport plant integration
|
|
•
|
Initial 10 retail locations selected
|
|
•
|
Retail lease agreements signed
|
|
•
|
Service partner agreements signed
|
|
•
|
S1 Builds and production validation
|
|
•
|
Initial 10 retail stores build out complete
|
|
•
|
EPA/CARB certification complete
|
|
•
|
Start of Production V1
|
Uses (amounts in thousands)
|
Amount
|
Prototype Build
|
5,542
|
Engineering Design & Development
|
46,874
|
Advertsing
|
11,553
|
Other Expenses/Working Capital
|
25,495
|
Production Tooling
|
99,836
|
Plant Equipment & Setup
|
127,604
|
Total Uses
|
316,904
|
Reservations
|
25,524
|
Sales Margin
|
18,222
|
Funds Needed
|
273,158
|
|
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
|
Item 3.
|
Properties.
|
Item 4.
|
Security Ownership of Certain Beneficial Owners and Management.
|
Name and address of beneficial owner (1)
|
Amount of nature of
beneficial ownership (2) |
Percent of class (3)
|
||||||
Paul Elio
|
17,995,000 | (4) | 67.7 | % | ||||
Elio Engineering, Inc.
|
12,750,000 | 48.0 | % | |||||
Stuart Lichter
|
7,273,301 | 25.2 | % | |||||
Kenneth Way
|
160,000 | 0.6 | % | |||||
James Holden
|
117,500 | 0.4 | % | |||||
Connie Grennan
|
0 | -- | ||||||
Hari Iyer
|
0 | -- | ||||||
David Schembri
|
0 | -- | ||||||
All directors and officers as a group (7 persons)
|
25,575,801 | (4) | 88.5 | % |
(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 26,591,998 shares outstanding as of June 30, 2016. Shares of common stock subject to convertible securities currently exercisable or exercisable within 60 days of June 30, 2016 are deemed outstanding for purposes of computing the percentage ownership of the person holding such convertible securities, 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 $1,955,000 into 326,923 shares of common stock and the right to exercise immediately exercisable options to purchase 1,946,378 shares. See Item 7 “Certain Relationships and Related Transactions, and Director Independence.”
|
Item 5.
|
Directors and Executive Officers.
|
Name
|
Position
|
Age
|
Term of Office
|
Executive Officers:
|
|||
Paul Elio
|
Chairman and Chief Executive Officer
|
52
|
October 2009
|
Connie Grennan
|
Chief Financial Officer
|
68
|
March 2013
|
Directors:
|
|||
Paul Elio
|
Director
|
52
|
October 2009
|
James Holden
|
Director
|
65
|
November 2012
|
Hari Iyer
|
Director
|
51
|
November 2012
|
Stuart Lichter
|
Director
|
67
|
November 2012
|
David C. Schembri
|
Director
|
63
|
November 2012
|
Kenneth L. Way
|
Director
|
77
|
November 2012
|
Significant Employees:
|
|||
Gino Raffin
|
VP of Manufacturing and Product Launches
|
72
|
March 2013
|
Steven Semansky
|
VP of Supply Chain Management
|
52
|
March 2013
|
Jeff Johnston
|
VP of Engineering
|
54
|
February 2016
|
Tim Andrews
|
Senior Vice President of Marketing
|
50
|
November 2013
|
Chip Stempeck
|
Vice President of Customer Experience
|
51
|
March 2013
|
Jerome Vassallo
|
Vice President of Sales
|
51
|
April 2013
|
Joel Sheltrown | Vice President of Governmental Affairs | 69 | March 2013 |
Don Harris
|
Vice President of Retail Operations
|
60
|
April 2014
|
Item 6.
|
Executive Compensation.
|
Name and principal
position
|
Year
|
Salary ($)
|
All other
compensation ($)
|
Total ($)
|
Paul Elio, Chief
Executive Officer
|
2015
|
250,000
|
0
|
250,000
|
2014
|
250,000
|
0
|
250,000
|
|
Hari Iyer, Chief
Operating Officer
|
2015
|
250,000
|
0
|
250,000
|
2014
|
250,000
|
0
|
250,000
|
|
Connie Grennan,
Chief Financial
Officer
|
2015
2014
|
150,000
150,000
|
0
0
|
150,000
150,000
|
Item 7.
|
Certain Relationships and Related Transactions, and Director Independence
|
Date
|
Amount
|
Maturity
|
Payment Terms
|
Interest
Expense
for 2015
|
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
|
$ | 101,440 | $ | 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
|
$ | 30,416 | $ | 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
|
$ | 60,834 | $ | 34,111 |
Item 8.
|
Legal Proceedings.
|
Item 9.
|
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.
|
Bid Prices ($)
|
||
High
|
Low
|
|
2016 Fiscal Year:
|
||
March 31, 2016
|
$75.00
|
$14.00
|
June 30, 2016
|
$24.82
|
$13.01
|
Item 10.
|
Recent Sales of Unregistered Securities.
|
Date
|
Persons or Class
of Persons |
Securities
|
Consideration
|
December
2013
|
Stuart Lichter
|
5,000,000 shares of common stock provided by existing shareholder
|
$7,422,506
|
February
2014
|
Holders of convertible notes (1)
|
412,500 shares of common stock provided by existing shareholder
|
Conversion of $342,563 in principal and interest of convertible notes
|
July 2014
|
Principals of Black Swan, LLC (1)
|
62,500 shares of common stock
|
Services valued at $375,000
|
December
2014
|
Kenneth Way and James Holden
|
15,000 shares of common stock
|
$150,000
|
December
2014
|
Stuart Lichter (1)
|
Option to purchase shares equal to 5% ownership for $7,500,000 (the “5% Option”)
|
Making loans to Company
|
June 2015
|
Stuart Lichter (1)
|
Option to purchase shares equal to 2% ownership for $3,000,000 (the “2% Option)
|
Making loan to Company
|
March 2015 to
December
2015
|
Accredited investors (2)
|
Convertible subordinated secured promissory notes due September 30, 2022 (the “Convertible Notes”)
|
$5,341,560
|
December
2015
|
Designees of Network 1 Financial Securities, Inc. (1)
|
Warrants to purchase a total of 83,621 shares of common stock at $7.18 per share and 3,534 shares at $11.58 per share.
|
Placement agent services in connection with the offering of Convertible Notes
|
November
2015 to
February
2016
|
Accredited and non-accredited investors (3)
|
1,410,048 shares of common stock
|
$16,920,576
|
December
2015 to
February
2016
|
StartEngine CrowdFunding Inc., WhoYouKnow, LLC and Benjamin Bakshi (1)
|
Warrants to purchase a total of 21,400 shares of common stock at $12.00 per share
|
Services provided in connection with Regulation A offering
|
March 2016 to
June 2016
|
Holders of the Convertible Notes (2)
|
33,438 shares of common stock
|
Conversion of $197,947 in principal and interest of the Convertible Notes
|
March to June
2016
|
StartEngine Crowdfunding Inc. and WhoYouKnow, LLC (1)
|
8,012 shares of common stock
|
Cashless exercise of warrants
|
May 2016
|
Stuart Lichter (1)
|
Option to purchase 58,824 shares of common stock at $17.00 per share
|
Providing guaranty to PayPal
|
May 2016
|
Stuart Lichter (1)
|
Option to purchase 1,887,554 shares of common stock at $5.56 per share
|
Replaces 5% and 2% Options
|
May and June
2016
|
3 accredited investors (1)
|
63,000 shares of common stock
|
$1,071,000
|
|
(1)
|
We relied upon the exemption from registration contained in Section 4(2) of the Securities Act, as all of the investors were deemed to be sophisticated with respect to the investment in the securities due to their financial condition and involvement in the registrant’s business and had access to the kind of information which registration would disclose.
|
|
(2)
|
We relied upon the exemption from registration contained in Rule 506(c) of Regulation D under the Securities Act, as the securities were sold only to accredited investors.
|
|
(3)
|
We relied upon the exemption from registration contained Regulation A under the Securities Act and filed an offering statement which was qualified on November 20, 2015.
|
Item 11.
|
Description of Registrant’s Securities to be Registered.
|
|
·
|
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.
|
Item 12.
|
Indemnification of Directors and Officers.
|
Item 13.
|
Financial Statements and Supplementary Data.
|
Item 14.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Item 15.
|
Financial Statements and Exhibits.
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
Balance Sheets at December 31, 2015 and 2014
|
F-2
|
Statements of Operations for the years ended December 31, 2015, 2014 and 2013
|
F-3
|
Statement of Stockholders’ Deficit for the three years ended December 31, 2015
|
F-4
|
Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
|
F-5
|
Notes to Financial Statements December 31, 2015 and 2014
|
F-6
|
Balance Sheets at March 31, 2016 and December 31, 2015
|
FF-1
|
Statements of Operations for the three months ended March 31, 2016 and 2015
|
FF-2
|
Statements of Cash Flows for the three months ended March 31, 2016 and 2015
|
FF-3
|
Notes to Financial Statements March 31, 2016
|
FF-4
|
Exhibit
Number |
Description
|
Incorporated by Reference to
|
3.1
|
Articles of Incorporation, as amended
|
Exhibit 2.1 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
3.2
|
Amended and Restated Bylaws
|
Exhibit 2.2 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
4.1
|
Form of Convertible Subordinated Secured Note due September 30, 2022
|
Exhibit 3.1 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
4.2
|
Form of Registration Rights Agreement
|
Exhibit 3.2 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
4.3
|
Form of Pledge and Security Agreement
|
Exhibit 3.3 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
4.4
|
Form of StartEngine Warrant
|
Exhibit 3.4 to Offering Statement filed October 21, 2015 (File No. 024-10473)
|
Exhibit
Number |
Description
|
Incorporated by Reference to
|
10.1
|
Loan and Security Agreement with GemCap Lending I, LLC dated February 28, 2013
|
Exhibit 6.1 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.2
|
Loan Agreement Schedule with GemCap Lending I, LLC dated February 28, 2013
|
Exhibit 6.2 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.3
|
Continuing Guarantee from Stuart Lichter dated February 28, 2013
|
Exhibit 6.3 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.4(i)
|
Amendment Number 4 to the Loan and Security Agreement and Loan Agreement Schedule with CH Capital Lending, LLC dated August 1, 2014
|
Exhibit 6.4(i) to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.4(ii)
|
Fourth Amended and Restated Secured Promissory Note (Term Loan) to CH Capital Lending, LLC dated August 1, 2014
|
Exhibit 6.4(ii) to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.5
|
Forbearance Agreement with CH Capital Lending, LLC dated July 31, 2015
|
Exhibit 6.5 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.6
|
Promissory Note to Racer Trust dated February 28, 2013
|
Exhibit 6.6 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.7
|
Security Agreement with Racer Trust dated February 28, 2013
|
Exhibit 6.7 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.8
|
First Amendment to Promissory Note with Racer Trust dated March 17, 2015
|
Exhibit 6.8 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.9
|
Lease with Shreveport Business Park, LLC dated December 27, 2014
|
Exhibit 6.9 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.10
|
First Amendment to Lease with Shreveport Business Park, LLC dated July 31, 2015
|
Exhibit 6.10 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.11
|
Promissory Note and Security Agreement to IAV Automotive Engineering, Inc. dated December 5, 2014
|
Exhibit 6.11 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.12
|
Installment Payment Agreement with IAV Automotive Engineering, Inc. dated March 13, 2015
|
Exhibit 6.12 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.13
|
Promissory Note to Stuart Lichter dated March 6, 2014
|
Exhibit 6.13 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.14
|
Promissory Note to Stuart Lichter dated May 30, 2014
|
Exhibit 6.14 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.15
|
Secured Promissory Note to Stuart Lichter dated June 19, 2014
|
Exhibit 6.15 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.16
|
First Amendment to Secured Promissory Note to Stuart Lichter dated July 20, 2015
|
Exhibit 6.16 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.17
|
Option Agreement with Stuart Lichter dated as of December 15, 2014
|
Exhibit 6.17 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.18
|
Option Agreement with Stuart Lichter dated as of June 29, 2015
|
Exhibit 6.18 to Offering Statement filed August 28, 2015 (File No. 024-10473)
|
10.19
|
2016 Incentive and Nonstatutory Stock Option Plan
|
|
10.20
|
Form of Personal Continuing Guaranty from Stuart Lichter
|
|
10.21
|
Option Agreement with Stuart Lichter dated as of May 10, 2016
|
|
10.22
|
Amendment to Option Agreements with Stuart Lichter dated effective as of May 2016
|
|
10.23
|
Independent Contractor Consulting Agreement with Hari Iyer dated June 1, 2016
|
SIGNATURES
|
ELIO MOTORS, INC.
|
|||
Date: July 25, 2016
|
By:
|
/s/ Paul Elio
|
|
Paul Elio, Chief Executive Officer
|
/s/ Eide Bailly LLP
|
|
Greenwood Village, Colorado
July 14, 2016
|
2015
|
2014
|
|||||||
Assets
|
(As Restated)
|
(As Restated)
|
||||||
Current Assets
|
||||||||
Cash
|
$ | 6,870,044 | $ | 374,652 | ||||
Restricted cash held in escrow
|
3,806,378 | 476,055 | ||||||
Restricted cash held for customer deposits
|
4,000,000 | - | ||||||
Prepaid expenses
|
471,170 | 104,383 | ||||||
Other current assets
|
336,733 | 74,966 | ||||||
Assets held for sale
|
2,200,000 | 6,441,501 | ||||||
Deferred loan costs
|
170,628 | - | ||||||
Total Current Assets
|
17,854,953 | 7,471,557 | ||||||
Restricted cash held for customer deposits
|
1,816,407 | 4,855,499 | ||||||
Machinery and equipment, net
|
12,435,481 | 12,346,266 | ||||||
Facility under capital sublease, net
|
5,448,964 | 7,200,000 | ||||||
Deferred loan costs
|
981,103 | - | ||||||
Total Assets
|
$ | 38,536,908 | $ | 31,873,322 | ||||
Liabilities and Stockholders' Deficit
|
||||||||
Current Liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$ | 3,694,861 | $ | 4,475,355 | ||||
Refundable customer deposits
|
1,092,750 | 913,700 | ||||||
Advances due to related party
|
- | 164,827 | ||||||
Interest payable, current portion
|
4,959,444 | 129,661 | ||||||
Derivative liabilities - fair value of warrants
|
907,703 | - | ||||||
Note payable, net of discount
|
- | 1,600,000 | ||||||
Notes payable due to related party, net of discount
|
9,525,231 | 9,637,507 | ||||||
Total Current Liabilities
|
20,179,989 | 16,921,050 | ||||||
Nonrefundable customer deposits
|
19,587,800 | 14,852,183 | ||||||
Interest payable, net of current portion
|
6,757,983 | 4,234,415 | ||||||
Convertible notes payable, net of discount
|
401,013 | - | ||||||
Notes payable, net of current portion and discount
|
18,878,146 | 17,459,638 | ||||||
Notes payable due to related party, net of current portion and discount
|
- | 841,391 | ||||||
Capital sublease obligation
|
6,022,677 | 7,500,000 | ||||||
Total Liabilities
|
71,827,608 | 61,808,677 | ||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||
Stockholders' Deficit:
|
||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||
26,320,322 and 25,077,500 shares issued and outstanding
|
||||||||
in 2015 and 2014, respectively
|
55,133,932 | 35,895,082 | ||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||
no shares issued and outstanding
|
- | - | ||||||
Accumulated deficit
|
(88,424,632 | ) | (65,830,437 | ) | ||||
Total Stockholders' Deficit
|
(33,290,700 | ) | (29,935,355 | ) | ||||
Total Liabilities and Stockholders Deficit
|
$ | 38,536,908 | $ | 31,873,322 |
2015
|
2014
|
2013
|
||||||||||
(As Restated)
|
(As Restated)
|
(As Restated)
|
||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 2,085,590 | $ | 5,469,895 | $ | 7,174,601 | ||||||
General and administrative expenses
|
4,455,831 | 5,247,581 | 1,647,797 | |||||||||
Sales and marketing expenses
|
4,611,306 | 4,264,953 | 1,321,951 | |||||||||
Asset impairment charges
|
1,963,448 | - | - | |||||||||
Total costs and expenses
|
13,116,175 | 14,982,429 | 10,144,349 | |||||||||
Loss From Operations
|
(13,116,175 | ) | (14,982,429 | ) | (10,144,349 | ) | ||||||
Other income (expense):
|
||||||||||||
Gain on sale of machinery and equipment
|
1,365,932 | 67,030 | - | |||||||||
Gain on forgiveness of debt
|
68,399 | 180,000 | - | |||||||||
Other income
|
6,119 | 213,382 | 69,083 | |||||||||
Interest expense
|
(10,918,470 | ) | (10,068,217 | ) | (3,965,679 | ) | ||||||
Other expense
|
- | (373 | ) | (17,350 | ) | |||||||
Total other expenses, net
|
(9,478,020 | ) | (9,608,178 | ) | (3,913,946 | ) | ||||||
Net Loss
|
$ | (22,594,195 | ) | $ | (24,590,607 | ) | $ | (14,058,295 | ) | |||
Weighted-average number of common shares outstanding
|
25,127,495 | 25,040,164 | 25,000,000 | |||||||||
Basic loss per common share:
|
$ | (0.90 | ) | $ | (0.98 | ) | $ | (0.56 | ) |
Total
|
||||||||||||||||
Common Stock
|
Accumulated
|
Stockholders’
|
||||||||||||||
|
Shares
|
Amount
|
Deficit
|
Deficit
|
||||||||||||
Balance at December 31, 2012, as restated
|
25,000,000 | $ | 25,975,000 | $ | (27,181,535 | ) | $ | (1,206,535 | ) | |||||||
Net loss
|
- | (14,058,295 | ) | (14,058,295 | ) | |||||||||||
Issuance of common stock,
|
||||||||||||||||
net of issuance costs (Note 10)
|
- | 7,484,056 | - | 7,484,056 | ||||||||||||
Balance at December 31, 2013, as restated
|
25,000,000 | $ | 33,459,056 | $ | (41,239,830 | ) | $ | (7,780,774 | ) | |||||||
Net loss
|
- | - | (24,590,607 | ) | (24,590,607 | ) | ||||||||||
Convertible notes payable
|
||||||||||||||||
converted to equity (Note 6)
|
- | 336,838 | - | 336,838 | ||||||||||||
Issuance of stock warrants (Note 8)
|
- | 1,224,188 | - | 1,224,188 | ||||||||||||
Issuance of common stock (Note 10)
|
77,500 | 875,000 | - | 875,000 | ||||||||||||
Balance at December 31, 2014, as restated
|
25,077,500 | 35,895,082 | (65,830,437 | ) | (29,935,355 | ) | ||||||||||
Net loss
|
- | - | (22,594,195 | ) | (22,594,195 | ) | ||||||||||
Discount on convertible notes from
|
||||||||||||||||
beneficial conversion feature (Note 6)
|
- | 5,113,401 | 5,113,401 | |||||||||||||
Issuance of common stock,
|
||||||||||||||||
net of issuance costs (Note 10)
|
1,242,822 | 14,125,449 | - | 14,125,449 | ||||||||||||
Balance at December 31, 2015, as restated
|
26,320,322 | $ | 55,133,932 | $ | (88,424,632 | ) | $ | (33,290,700 | ) |
2015
|
2014
|
2013
|
||||||||||
(As Restated)
|
(As Restated)
|
(As Restated)
|
||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (22,594,195 | ) | $ | (24,590,607 | ) | $ | (14,058,295 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Depreciation and amortization
|
278,753 | 300,000 | - | |||||||||
Amortization of discount on notes payable
|
2,150,165 | 2,217,660 | 1,585,780 | |||||||||
Amortization of deferred financing costs
|
202,987 | 264,628 | 312,520 | |||||||||
Accrued interest on capital sublease obligation
|
2,740,795 | 2,241,134 | - | |||||||||
Asset impairment charges
|
1,963,448 | - | - | |||||||||
Gain on sale of fixed assets
|
(1,365,932 | ) | (67,030 | ) | - | |||||||
Gain on forgiveness of debt
|
(68,399 | ) | (180,000 | ) | - | |||||||
Common stock issued for services
|
- | 725,000 | - | |||||||||
Change in operating assets and liabilities:
|
||||||||||||
Prepaid expenses and other current assets
|
(375,506 | ) | 256,310 | 757,141 | ||||||||
Accounts payable and accrued liabilities
|
(780,496 | ) | 4,905,828 | 1,266,589 | ||||||||
Interest payable
|
4,612,556 | 2,088,588 | 67,354 | |||||||||
Net Cash Used in Operating Activities
|
(13,235,824 | ) | (11,838,489 | ) | (10,068,911 | ) | ||||||
Cash Flows From Investing Activities
|
||||||||||||
Purchases of machinery and equipment
|
(94,255 | ) | - | - | ||||||||
Proceeds from sale of machinery and equipment, net
|
3,643,985 | 183,739 | - | |||||||||
Net Cash Used in Investing Activities
|
3,549,730 | 183,739 | - | |||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
(4,291,231 | ) | (3,359,796 | ) | (990,510 | ) | ||||||
Customer deposits
|
4,914,667 | 12,949,433 | 2,808,100 | |||||||||
Issuance of common stock
|
14,913,864 | 150,000 | 7,500,000 | |||||||||
Common stock issuance costs
|
(714,752 | ) | - | (15,945 | ) | |||||||
Proceeds from notes payable
|
- | - | 3,700,400 | |||||||||
Repayments of notes payable
|
(1,600,000 | ) | - | (1,955,309 | ) | |||||||
Payment of deferred financing costs
|
(427,160 | ) | (363,276 | ) | (274,476 | ) | ||||||
Proceeds from convertible notes
|
5,341,560 | - | - | |||||||||
Advances received from related party
|
- | 1,900,500 | - | |||||||||
Repayments of advances from related party
|
(1,702,415 | ) | (41,600 | ) | (84,732 | ) | ||||||
Advances to related party
|
(253,048 | ) | (74,966 | ) | - | |||||||
Net Cash Provided by Financing Activities
|
16,181,485 | 11,160,294 | 10,687,529 | |||||||||
Net Change in Cash
|
6,495,392 | (494,456 | ) | 618,618 | ||||||||
Cash at Beginning of Year
|
374,652 | 869,108 | 250,490 | |||||||||
Cash at End of Year
|
$ | 6,870,044 | $ | 374,652 | $ | 869,108 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid during the year for interest
|
$ | 1,211,966 | $ | 3,256,207 | $ | 2,000,025 | ||||||
Cash paid during the year for income taxes
|
$ | 850 | $ | - | $ | - | ||||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||||||
Amendment of capital lease resulting in change in lease
|
||||||||||||
payments
|
$ | 1,477,323 | $ | - | $ | - | ||||||
Discount on Convertible Notes from Beneficial
|
||||||||||||
Conversion Feature
|
$ | 5,113,401 | ||||||||||
Issuance of warrants
|
$ | 907,703 | $ | 1,224,188 | $ | - | ||||||
Convertible notes payable converted to equity
|
$ | - | $ | 336,838 | $ | - | ||||||
Conversion of accounts payable to note payable
|
$ | - | $ | 1,600,000 | $ | - | ||||||
Expense recognized under equity grant
|
$ | - | $ | 725,000 | $ | - | ||||||
Acquisition of equipment through issuance of note payable
|
$ | - | $ | - | $ | 26,000,000 | ||||||
Acquisition of facility under capital sublease obligation
|
$ | - | $ | - | $ | 7,500,000 |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Facility under capital sublease
|
25 years
|
|
Machinery and equipment
|
3-10 years
|
|
Vehicles
|
3-5 years
|
|
Computer equipment and software
|
2-5 years
|
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 1 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
NOTE 2 | RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS |
BALANCE SHEET
|
DECEMBER 31, 2015
|
As Previously
Reported
|
||||||||||||
Assets
|
Adjustment
|
As Restated
|
||||||||||
Current Assets
|
||||||||||||
Cash
|
$ | 6,870,044 | $ | - | $ | 6,870,044 | ||||||
Restricted cash held in escrow
|
3,806,378 | - | 3,806,378 | |||||||||
Restricted cash held for customer deposits
|
- | 4,000,000 | 4,000,000 | |||||||||
Prepaid expenses
|
471,170 | - | 471,170 | |||||||||
Other current assets
|
336,733 | - | 336,733 | |||||||||
Assets held for sale
|
2,100,000 | 100,000 | 2,200,000 | |||||||||
Deferred loan costs
|
- | 170,628 | 170,628 | |||||||||
Total Current Assets
|
13,584,325 | 4,270,628 | 17,854,953 | |||||||||
Restricted cash held for customer deposits
|
5,816,407 | (4,000,000 | ) | 1,816,407 | ||||||||
Machinery and equipment, net
|
14,499,340 | (2,063,859 | ) | 12,435,481 | ||||||||
Facility under capital sublease, net
|
5,448,964 | - | 5,448,964 | |||||||||
Deferred loan costs
|
- | 981,103 | 981,103 | |||||||||
Total Assets
|
$ | 39,349,036 | $ | (812,128 | ) | $ | 38,536,908 | |||||
Liabilities and Stockholders' Deficit
|
||||||||||||
Current Liabilities
|
||||||||||||
Accounts payable and accrued liabilities
|
$ | 3,618,403 | $ | 76,458 | $ | 3,694,861 | ||||||
Refundable customer deposits
|
1,092,750 | - | 1,092,750 | |||||||||
Interest payable, current portion
|
4,959,444 | - | 4,959,444 | |||||||||
Derivative liabilities - fair value of warrants
|
655,244 | 252,459 | 907,703 | |||||||||
Notes payable due to related party, net of discount
|
9,701,983 | (176,752 | ) | 9,525,231 | ||||||||
Total Current Liabilities
|
20,027,824 | 152,165 | 20,179,989 | |||||||||
Nonrefundable customer deposits
|
19,587,800 | - | 19,587,800 | |||||||||
Interest payable, net of current portion
|
6,757,983 | - | 6,757,983 | |||||||||
Convertible notes payable, net of discount
|
2,504,346 | (2,103,333 | ) | 401,013 | ||||||||
Notes payable, net of current portion and discount
|
19,565,099 | (686,953 | ) | 18,878,146 | ||||||||
Capital sublease obligation
|
6,022,677 | - | 6,022,677 | |||||||||
Total Liabilities
|
74,465,729 | (2,638,121 | ) | 71,827,608 | ||||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||||||
Stockholders' Deficit:
|
||||||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||||||
26,320,322 and 25,077,500 shares issued and outstanding
|
||||||||||||
in 2015 and 2014, respectively
|
31,135,932 | 23,998,000 | 55,133,932 | |||||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||||||
no shares issued and outstanding
|
- | - | ||||||||||
Accumulated deficit
|
(66,252,625 | ) | (22,172,007 | ) | (88,424,632 | ) | ||||||
Total Stockholders' Deficit
|
(35,116,693 | ) | 1,825,993 | (33,290,700 | ) | |||||||
Total Liabilities and Stockholders Deficit
|
$ | 39,349,036 | $ | (812,128 | ) | $ | 38,536,908 |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
BALANCE SHEET
|
DECEMBER 31, 2014
|
As Previously
Reported
|
||||||||||||
Assets
|
Adjustment
|
As Restated
|
||||||||||
Current Assets
|
||||||||||||
Cash
|
$ | 374,652 | $ | - | $ | 374,652 | ||||||
Restricted cash held in escrow
|
476,055 | - | 476,055 | |||||||||
Prepaid expenses
|
104,383 | - | 104,383 | |||||||||
Other current assets
|
74,966 | - | 74,966 | |||||||||
Assets held for sale
|
- | 6,441,501 | 6,441,501 | |||||||||
Total Current Assets
|
1,030,056 | 6,441,501 | 7,471,557 | |||||||||
Restricted cash held for customer deposits
|
4,855,499 | - | 4,855,499 | |||||||||
Machinery and equipment, net
|
20,124,788 | (7,778,522 | ) | 12,346,266 | ||||||||
Facility under capital sublease, net
|
7,200,000 | - | 7,200,000 | |||||||||
Total Assets
|
$ | 33,210,343 | $ | (1,337,021 | ) | $ | 31,873,322 | |||||
Liabilities and Stockholders' Deficit
|
||||||||||||
Current Liabilities
|
||||||||||||
Accounts payable and accrued liabilities
|
$ | 4,420,104 | $ | 55,251 | $ | 4,475,355 | ||||||
Refundable customer deposits
|
913,700 | - | 913,700 | |||||||||
Advances due to related party
|
164,827 | - | 164,827 | |||||||||
Interest payable, current portion
|
2,122,942 | (1,993,281 | ) | 129,661 | ||||||||
Note payable, net of discount
|
1,600,000 | - | 1,600,000 | |||||||||
Notes payable due to related party, net of discount
|
- | 9,637,507 | 9,637,507 | |||||||||
Total Current Liabilities
|
9,221,573 | 7,699,477 | 16,921,050 | |||||||||
Nonrefundable customer deposits
|
14,852,183 | - | 14,852,183 | |||||||||
Interest payable, net of current portion
|
2,241,134 | 1,993,281 | 4,234,415 | |||||||||
Notes payable, net of current portion and discount
|
18,546,911 | (1,087,273 | ) | 17,459,638 | ||||||||
Notes payable due to related party, net of current portion and discount
|
10,549,348 | (9,707,957 | ) | 841,391 | ||||||||
Capital sublease obligation
|
7,500,000 | - | 7,500,000 | |||||||||
Total Liabilities
|
62,911,149 | (1,102,472 | ) | 61,808,677 | ||||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||||||
Stockholders' Deficit:
|
||||||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||||||
26,320,322 and 25,077,500 shares issued and outstanding
|
||||||||||||
in 2015 and 2014, respectively
|
15,075,433 | 20,819,649 | 35,895,082 | |||||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||||||
no shares issued and outstanding
|
- | - | - | |||||||||
Accumulated deficit
|
(44,776,239 | ) | (21,054,198 | ) | (65,830,437 | ) | ||||||
Total Stockholders' Deficit
|
(29,700,806 | ) | (234,549 | ) | (29,935,355 | ) | ||||||
Total Liabilities and Stockholders Deficit
|
$ | 33,210,343 | $ | (1,337,021 | ) | $ | 31,873,322 |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF OPERATIONS
|
FOR THE YEAR ENDED DECEMBER 31, 2015
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 2,058,566 | $ | 27,024 | $ | 2,085,590 | ||||||
General and administrative expenses
|
5,371,464 | (915,633 | ) | 4,455,831 | ||||||||
Sales and marketing expenses
|
3,701,493 | 909,813 | 4,611,306 | |||||||||
Asset impairment charges
|
- | 1,963,448 | 1,963,448 | |||||||||
Total costs and expenses
|
11,131,523 | 1,984,652 | 13,116,175 | |||||||||
Loss From Operations
|
(11,131,523 | ) | (1,984,652 | ) | (13,116,175 | ) | ||||||
Other income (expense):
|
||||||||||||
Gain on sale of machinery and equipment
|
- | 1,365,932 | 1,365,932 | |||||||||
Gain on forgiveness of debt
|
68,399 | 68,399 | ||||||||||
Other income
|
35,441 | (29,322 | ) | 6,119 | ||||||||
Interest expense
|
(10,448,703 | ) | (469,767 | ) | (10,918,470 | ) | ||||||
Other expense
|
- | - | ||||||||||
Total other expenses, net
|
(10,344,863 | ) | 866,843 | (9,478,020 | ) | |||||||
Net Loss
|
$ | (21,476,386 | ) | $ | (1,117,809 | ) | $ | (22,594,195 | ) | |||
Weighted-average number of common shares outstanding
|
25,127,495 | - | 25,127,495 | |||||||||
Basic loss per common share:
|
$ | (0.85 | ) | $ | - | $ | (0.90 | ) |
STATEMENT OF OPERATIONS
|
FOR THE YEAR ENDED DECEMBER 31, 2014
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 5,715,716 | $ | (245,821 | ) | $ | 5,469,895 | |||||
General and administrative expenses
|
5,148,108 | 99,473 | 5,247,581 | |||||||||
Sales and marketing expenses
|
3,800,353 | 464,600 | 4,264,953 | |||||||||
Total costs and expenses
|
14,664,177 | 318,252 | 14,982,429 | |||||||||
Loss From Operations
|
(14,664,177 | ) | (318,252 | ) | (14,982,429 | ) | ||||||
Other income (expense):
|
||||||||||||
Gain on sale of machinery and equipment
|
- | 67,030 | 67,030 | |||||||||
Gain on forgiveness of debt
|
- | 180,000 | 180,000 | |||||||||
Other income
|
213,382 | - | 213,382 | |||||||||
Interest expense
|
(9,998,630 | ) | (69,587 | ) | (10,068,217 | ) | ||||||
Other expense
|
(32,016 | ) | 31,643 | (373 | ) | |||||||
Total other expenses, net
|
(9,817,264 | ) | 209,086 | (9,608,178 | ) | |||||||
Net Loss
|
$ | (24,481,441 | ) | $ | (109,166 | ) | $ | (24,590,607 | ) | |||
Weighted-average number of common shares outstanding
|
25,040,164 | - | 25,040,164 | |||||||||
Basic loss per common share:
|
$ | (0.98 | ) | $ | - | $ | (0.98 | ) |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF OPERATIONS
|
FOR THE YEAR ENDED DECEMBER 31, 2013
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 6,903,023 | $ | 271,578 | $ | 7,174,601 | ||||||
General and administrative expenses
|
1,777,971 | (130,174 | ) | 1,647,797 | ||||||||
Sales and marketing expenses
|
1,269,987 | 51,964 | 1,321,951 | |||||||||
Total costs and expenses
|
9,950,981 | 193,368 | 10,144,349 | |||||||||
Loss From Operations
|
(9,950,981 | ) | (193,368 | ) | (10,144,349 | ) | ||||||
Other income (expense):
|
||||||||||||
Other income
|
69,083 | - | 69,083 | |||||||||
Interest expense
|
(3,465,980 | ) | (499,699 | ) | (3,965,679 | ) | ||||||
Other expense
|
(17,350 | ) | - | (17,350 | ) | |||||||
Total other expenses, net
|
(3,414,247 | ) | (499,699 | ) | (3,913,946 | ) | ||||||
Net Loss
|
$ | (13,365,228 | ) | $ | (693,067 | ) | $ | (14,058,295 | ) | |||
Weighted-average number of common shares outstanding
|
25,127,495 | 25,040,164 | 25,000,000 | |||||||||
Basic loss per common share:
|
$ | (0.53 | ) | $ | (0.03 | ) | $ | (0.56 | ) |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF CASH FLOWS
|
DECEMBER 31, 2015
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (21,476,386 | ) | $ | (1,117,809 | ) | $ | (22,594,195 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Depreciation and amortization
|
278,753 | - | 278,753 | |||||||||
Amortization of discount on notes payable
|
712,200 | 1,437,965 | 2,150,165 | |||||||||
Amortization of deferred financing costs
|
202,987 | - | 202,987 | |||||||||
Accrued interest on capital sublease obligation
|
4,374,766 | (1,633,971 | ) | 2,740,795 | ||||||||
Asset impairment charges
|
- | 1,963,448 | 1,963,448 | |||||||||
Gain on sale of fixed assets
|
- | (1,365,932 | ) | (1,365,932 | ) | |||||||
Gain on forgiveness of debt
|
(68,399 | ) | - | (68,399 | ) | |||||||
Change in operating assets and liabilities:
|
- | |||||||||||
Prepaid expenses and other current assets
|
(375,506 | ) | - | (375,506 | ) | |||||||
Accounts payable and accrued liabilities
|
(801,701 | ) | 21,205 | (780,496 | ) | |||||||
Interest payable
|
3,946,784 | 665,772 | 4,612,556 | |||||||||
Net Cash Used in Operating Activities
|
(13,206,502 | ) | (29,322 | ) | (13,235,824 | ) | ||||||
Cash Flows From Investing Activities
|
||||||||||||
Purchases of machinery and equipment
|
(94,255 | ) | - | (94,255 | ) | |||||||
Proceeds from sale of machinery and equipment
|
3,614,663 | 29,322 | 3,643,985 | |||||||||
Net Cash Used in Investing Activities
|
3,520,408 | 29,322 | 3,549,730 | |||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
(4,291,231 | ) | - | (4,291,231 | ) | |||||||
Customer deposits
|
4,914,667 | 4,914,667 | ||||||||||
Issuance of common stock
|
14,913,864 | - | 14,913,864 | |||||||||
Common stock issuance costs
|
(714,752 | ) | - | (714,752 | ) | |||||||
Repayments of notes payable
|
(1,600,000 | ) | - | (1,600,000 | ) | |||||||
Payment of deferred financing costs
|
(427,159 | ) | - | (427,159 | ) | |||||||
Proceeds from convertible notes
|
5,341,560 | - | 5,341,560 | |||||||||
Repayments of advances from related party
|
(1,702,415 | ) | - | (1,702,415 | ) | |||||||
Advances to related party
|
(253,048 | ) | - | (253,048 | ) | |||||||
Net Cash Provided by Financing Activities
|
16,181,486 | - | 16,181,486 | |||||||||
Net Change in Cash
|
6,495,392 | - | 6,495,392 | |||||||||
Cash at Beginning of Year
|
374,652 | - | 374,652 | |||||||||
Cash at End of Year
|
$ | 6,870,044 | $ | - | $ | 6,870,044 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid during the year for interest
|
$ | 1,615,417 | $ | (403,451 | ) | $ | 1,211,966 | |||||
Cash paid during the year for income taxes
|
$ | 850 | $ | - | $ | 850 | ||||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||||||
Amendment of capital lease resulting in change in lease
|
||||||||||||
payments
|
$ | 1,477,323 | $ | - | $ | 1,477,323 | ||||||
Discount on Convertible Notes from Beneficial
|
||||||||||||
Conversion Feature
|
$ | - | $ | 5,113,401 | $ | 5,113,401 | ||||||
Issuance of warrants
|
$ | 655,244 | $ | 252,459 | $ | 907,703 |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF CASH FLOWS
|
DECEMBER 31, 2014
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (24,481,441 | ) | $ | (109,166 | ) | $ | (24,590,607 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Depreciation and amortization
|
300,000 | - | 300,000 | |||||||||
Amortization of discount on notes payable
|
2,107,366 | 110,294 | 2,217,660 | |||||||||
Amortization of deferred financing costs
|
264,628 | - | 264,628 | |||||||||
Accrued interest on capital sublease obligation
|
2,241,134 | - | 2,241,134 | |||||||||
Gain on sale of fixed assets
|
- | (67,030 | ) | (67,030 | ) | |||||||
Gain on forgiveness of debt
|
- | (180,000 | ) | (180,000 | ) | |||||||
Common stock issued for services
|
- | 725,000 | 725,000 | |||||||||
Change in operating assets and liabilities:
|
||||||||||||
Prepaid expenses and other current assets
|
256,310 | - | 256,310 | |||||||||
Accounts payable and accrued liabilities
|
5,495,653 | (589,825 | ) | 4,905,828 | ||||||||
Interest payable
|
2,127,217 | (38,629 | ) | 2,088,588 | ||||||||
Net Cash Used in Operating Activities
|
(11,689,133 | ) | (149,356 | ) | (11,838,489 | ) | ||||||
Cash Flows From Investing Activities
|
||||||||||||
Proceeds from sale of machinery and equipment
|
215,381 | (31,642 | ) | 183,739 | ||||||||
Net Cash Used in Investing Activities
|
215,381 | (31,642 | ) | 183,739 | ||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
(3,359,796 | ) | - | (3,359,796 | ) | |||||||
Customer deposits
|
12,949,433 | - | 12,949,433 | |||||||||
Issuance of common stock
|
150,000 | - | 150,000 | |||||||||
Repayments of notes payable
|
(9,850,000 | ) | 9,850,000 | - | ||||||||
Payment of deferred financing costs
|
(364,274 | ) | 998 | (363,276 | ) | |||||||
Proceeds from convertible notes
|
- | - | - | |||||||||
Advances received from related party
|
11,750,500 | (9,850,000 | ) | 1,900,500 | ||||||||
Repayments of advances from related party
|
(221,600 | ) | 180,000 | (41,600 | ) | |||||||
Advances to related party
|
(74,966 | ) | - | (74,966 | ) | |||||||
Net Cash Provided by Financing Activities
|
10,979,297 | 180,998 | 11,160,295 | |||||||||
Net Change in Cash
|
(494,454 | ) | - | (494,455 | ) | |||||||
Cash at Beginning of Year
|
869,107 | - | 869,107 | |||||||||
Cash at End of Year
|
$ | 374,652 | $ | - | $ | 374,652 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid during the year for interest
|
$ | 5,561,257 | $ | (2,305,050 | ) | $ | 3,256,207 | |||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||||||
Issuance of warrants
|
$ | - | $ | 1,224,188 | $ | 1,224,188 | ||||||
Convertible notes payable converted to equity
|
$ | 336,838 | $ | - | $ | 336,838 | ||||||
Conversion of accounts payable to note payable
|
$ | 1,600,000 | $ | - | $ | 1,600,000 | ||||||
Expense recognized under equity grant
|
$ | 375,000 | $ | 350,000 | $ | 725,000 |
NOTE 2
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF CASH FLOWS
|
DECEMBER 31, 2013
|
As Previously
Reported
|
||||||||||||
Adjustment
|
As Restated
|
|||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (13,365,228 | ) | $ | (693,067 | ) | $ | (14,058,295 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Amortization of discount on notes payable
|
1,189,335 | 396,445 | 1,585,780 | |||||||||
Amortization of deferred financing costs
|
312,520 | - | 312,520 | |||||||||
Change in operating assets and liabilities:
|
- | |||||||||||
Prepaid expenses and other current assets
|
(354,693 | ) | 1,111,834 | 757,141 | ||||||||
Accounts payable and accrued liabilities
|
889,451 | 377,138 | 1,266,589 | |||||||||
Interest payable
|
25,650 | 41,704 | 67,354 | |||||||||
Net Cash Used in Operating Activities
|
(11,302,965 | ) | 1,234,054 | (10,068,911 | ) | |||||||
Cash Flows From Investing Activities
|
||||||||||||
Purchases of machinery and equipment
|
(3,000,000 | ) | 3,000,000 | - | ||||||||
Proceeds from sale of machinery and equipment
|
- | - | - | |||||||||
Net Cash Used in Investing Activities
|
(3,000,000 | ) | 3,000,000 | - | ||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
(1,866,740 | ) | 876,230 | (990,510 | ) | |||||||
Customer deposits
|
2,808,100 | - | 2,808,100 | |||||||||
Issuance of common stock
|
7,422,506 | 77,494 | 7,500,000 | |||||||||
Common stock issuance costs
|
- | (15,945 | ) | (15,945 | ) | |||||||
Proceeds from notes payable
|
9,850,000 | (6,149,600 | ) | 3,700,400 | ||||||||
Repayments of notes payable
|
(2,678,509 | ) | 723,200 | (1,955,309 | ) | |||||||
Payment of deferred financing costs
|
(529,043 | ) | 254,567 | (274,476 | ) | |||||||
Repayments of advances from related party
|
(84,732 | ) | - | (84,732 | ) | |||||||
Net Cash Provided by Financing Activities
|
14,921,582 | (4,234,054 | ) | 10,687,528 | ||||||||
Net Change in Cash
|
618,618 | - | 618,618 | |||||||||
Cash at Beginning of Year
|
250,490 | - | 250,490 | |||||||||
Cash at End of Year
|
$ | 869,107 | $ | - | $ | 869,107 | ||||||
Supplemental disclosures of cash flow information:
|
||||||||||||
Cash paid during the year for interest
|
$ | 1,938,475 | $ | 61,550 | $ | 2,000,025 | ||||||
Supplemental disclosures of non-cash investing and financing activities:
|
||||||||||||
Convertible notes payable converted to equity
|
$ | 26,000,000 | $ | (26,000,000 | ) | $ | - | |||||
Conversion of accounts payable to note payable
|
$ | 7,500,000 | $ | (7,500,000 | ) | $ | - | |||||
Expense recognized under equity grant
|
$ | 5,659,831 | $ | (5,659,831 | ) | $ | - | |||||
Acquisition of equipment through issuance of note payable
|
$ | - | $ | 26,000,000 | $ | 26,000,000 | ||||||
Acquisition of facility under capital sublease obligation
|
$ | - | $ | 7,500,000 | $ | 7,500,000 |
NOTE 3 | PROPERTY AND EQUIPMENT |
2015
|
2014
|
|||||||
Facility under capital sublease
|
$ | 6,022,677 | $ | 7,500,000 | ||||
Machinery and equipment
|
12,346,266 | 12,346,266 | ||||||
Vehicles
|
39,500 | - | ||||||
Computer equipment and software
|
54,755 | - | ||||||
Total property and equipment
|
18,463,198 | 19,846,266 | ||||||
Less: accumulated depreciation and amortization
|
(578,753 | ) | (300,000 | ) | ||||
Machinery and equipment, net
|
$ | 12,435,481 | $ | 12,346,266 | ||||
Facility under capital sublease, net
|
$ | 5,448,964 | $ | 7,200,000 |
NOTE 4 | CUSTOMER DEPOSITS |
NOTE 5 | FAIR VALUES OF ASSETS AND LIABILITIES |
NOTE 5 | FAIR VALUES OF ASSETS AND LIABILITIES (Continued) |
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Warrant liabilities
|
$ | - | $ | - | $ | 907,703 | $ | 907,703 | ||||||||
Assets held for sale
|
$ | - | $ | - | $ | 2,200,000 | $ | 2,200,000 |
Fair Value at
December 31,
2015
|
Valuation
Techniques
|
Unobservable Input
|
Weighted
Average
|
|||||||||||||
Warrant liabilities
|
$ | 907,703 |
Monte Carlo option pricing method
|
Risk-free rate
Time to liquidity event
|
1.69%
4.84
yrs.
|
|||||||||||
Dividend
yield
|
0.00%
|
|||||||||||||||
Volatility
|
80.16%
|
NOTE 5 | FAIR VALUES OF ASSETS AND LIABILITIES (Continued) |
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Assets held for sale
|
$ | - | $ | - | $ | 6,441,501 | $ | 6,441,501 |
NOTE 6 | LONG-TERM DEBT |
NOTE 6 | LONG-TERM DEBT (Continued) |
NOTE 6 | LONG-TERM DEBT (Continued) |
NOTE 6 | LONG-TERM DEBT (Continued) |
NOTE 6 | LONG-TERM DEBT (Continued) |
Years ending December 31,
|
||||
2016
|
$ | 10,144,512 | ||
2017
|
21,126,147 | |||
2018
|
- | |||
2019
|
- | |||
2020
|
- | |||
Thereafter
|
5,341,560 | |||
Total
|
36,612,219 | |||
Less: amount representing imputed interest
|
(2,195,310 | ) | ||
Less: amount representing deferred issuance costs
|
(221,655 | ) | ||
Less: amounts representing discount on debt
|
(540,994 | ) | ||
Less: amount representing beneficial conversion feature
|
(4,849,870 | ) | ||
28,804,390 | ||||
Less: current portion notes payable due to related party, net of discount
|
(9,525,231 | ) | ||
Long-term portion convertible notes payable, net of discounts
|
401,013 | |||
Long-term portion notes payable, net of current portion and discounts
|
$ | 18,878,146 |
NOTE 7 | CAPITAL SUBLEASE OBLIGATION |
NOTE 7 | CAPITAL SUBLEASE OBLIGATION (Continued) |
Years ending December 31,
|
||||
2016
|
$ | 2,742,773 | ||
2017
|
2,992,116 | |||
2018
|
2,992,116 | |||
2019
|
2,992,116 | |||
2020
|
2,992,116 | |||
Thereafter
|
55,849,042 | |||
Total minimum sublease payments
|
70,560,279 | |||
Less: amount representing interest
|
(64,537,602 | ) | ||
$ | 6,022,677 |
NOTE 8 | WARRANTS AND WARRANTS LIABILITY |
NOTE 8 | WARRANTS AND WARRANTS LIABILITY (Continued) |
Dividend yield
|
0.00%
|
Volatility
|
82.00%
|
Risk free interest rate
|
1.30% - 1.34%
|
Expected life
|
3 years
|
Dividend yield
|
0.00%
|
Volatility
|
80.00%
|
Risk free interest rate
|
1.72%
|
Expected life
|
5 years
|
Dividend yield
|
0.00%
|
Volatility
|
87.00%
|
Risk free interest rate
|
0.40%
|
Expected life
|
10.5 years
|
NOTE 9 | INCOME TAXES |
2015
|
2014
|
|||||||
Federal statutory rate
|
34.0 | % | 34.0 | % | ||||
State income taxes, net of federal tax benefit
|
1.5 | 1.5 | ||||||
Permanent differences
|
(1.5 | ) | 0.0 | |||||
Valuation allowance adjustments
|
(28.4 | ) | (35.5 | ) | ||||
Others
|
(5.6 | ) | - | |||||
Effective tax rate
|
0.0 | % | 0.0 | % |
2015
|
2014
|
|||||||
Non-current deferred tax assets:
|
||||||||
Property and equipment
|
$ | 2,869,000 | $ | 2,100,000 | ||||
Nonrefundable customer deposits
|
5,405,000 | 5,401,000 | ||||||
Net operating losses
|
14,257,000 | 7,452,000 | ||||||
Others
|
- | 84,000 | ||||||
Total non-current deferred tax assets
|
22,531,000 | 15,037,000 | ||||||
Valuation allowance
|
(22,531,000 | ) | (13,776,000 | ) | ||||
Non-current deferred tax liabilities:
|
||||||||
Imputed interest
|
(548,000 | ) | (901,000 | ) | ||||
Deferred state taxes
|
(533,000 | ) | (360,000 | ) | ||||
Total non-current deferred tax liabilities
|
(1,081,000 | ) | (1,261,000 | ) | ||||
Total non-current deferred tax assets
|
$ | - | $ | - | ||||
Net deferred income taxes
|
$ | - | $ | - |
NOTE 9 | INCOME TAXES (Continued) |
NOTE 10 | COMMON STOCK |
NOTE 10 | COMMON STOCK (Continued) |
NOTE 11 | COMMITMENTS AND CONTINGENCIES |
NOTE 12 | RELATED PARTY TRANSACTIONS |
NOTE 13
|
SUBSEQUENT EVENTS |
March 31, 2016
|
December 31, 2015
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
Assets
|
(As Restated)
|
(As Restated)
|
||||||
Current Assets
|
||||||||
Cash
|
$ | 2,909,373 | $ | 6,870,044 | ||||
Restricted cash held in escrow
|
2,626,334 | 3,806,378 | ||||||
Restricted cash held in customer deposits
|
4,000,000 | 4,000,000 | ||||||
Prepaid expenses
|
2,104,154 | 471,170 | ||||||
Other current assets
|
429,022 | 336,733 | ||||||
Assets held for sale
|
1,576,798 | 2,200,000 | ||||||
Deferred loan costs
|
170,627 | 170,628 | ||||||
Total Current Assets
|
13,816,308 | 17,854,953 | ||||||
Restricted cash held for customer deposits
|
1,956,937 | 1,816,407 | ||||||
Machinery and equipment, net
|
12,435,831 | 12,435,481 | ||||||
Facility under capital sublease, net
|
5,389,736 | 5,448,964 | ||||||
Deferred loan costs
|
938,446 | 981,103 | ||||||
Total Assets
|
$ | 34,537,258 | $ | 38,536,908 | ||||
Liabilities and Stockholders' Deficit
|
||||||||
Current Liabilities
|
||||||||
Accounts payable and accrued liabilities
|
$ | 4,071,374 | $ | 3,694,861 | ||||
Refundable customer deposits
|
1,114,900 | 1,092,750 | ||||||
Interest payable, current portion
|
5,222,353 | 4,959,444 | ||||||
Derivative liabilities - fair value of warrants
|
1,768,824 | 907,703 | ||||||
Notes payable due to related party, net of discount
|
9,762,888 | 9,525,231 | ||||||
Total Current Liabilities
|
21,940,339 | 20,179,989 | ||||||
Nonrefundable customer deposits
|
20,961,900 | 19,587,800 | ||||||
Interest payable, net of current portion
|
6,869,657 | 6,757,983 | ||||||
Convertible notes payable, net of discount
|
436,795 | 401,013 | ||||||
Notes payable, net of current portion and discount
|
19,242,135 | 18,878,146 | ||||||
Capital sublease obligation
|
6,022,677 | 6,022,677 | ||||||
Total Liabilities
|
75,473,503 | 71,827,608 | ||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||
Stockholders' Deficit:
|
||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||
26,512,893 and 26,320,322 shares issued and outstanding
|
||||||||
on March 31, 2016 and December 31, 2015, respectively
|
56,982,659 | 55,133,932 | ||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||
no shares issued and outstanding
|
- | - | ||||||
Accumulated deficit
|
(97,918,904 | ) | (88,424,632 | ) | ||||
Total Stockholders' Deficit
|
(40,936,245 | ) | (33,290,700 | ) | ||||
Total Liabilities and Stockholders Deficit
|
$ | 34,537,258 | $ | 38,536,908 |
Three Months Ended
|
Three Months Ended
|
|||||||
March 31, 2016
|
March 31, 2015
|
|||||||
(As Restated)
|
(As Restated)
|
|||||||
Costs and Expenses:
|
||||||||
Engineering, research and development costs
|
$ | 3,700,641 | $ | 23,646 | ||||
General and administrative expenses
|
1,819,354 | 1,095,371 | ||||||
Sales and marketing expenses
|
1,354,878 | 941,873 | ||||||
Total costs and expenses
|
6,874,873 | 2,060,890 | ||||||
Loss from operations
|
(6,874,873 | ) | (2,060,890 | ) | ||||
Other income (expense):
|
||||||||
Gain on sale of machinery and equipment
|
- | 161,566 | ||||||
Interest income
|
4,463 | 2 | ||||||
Interest expense
|
(1,893,159 | ) | (2,895,666 | ) | ||||
Loss on change in fair value of derivative liability
|
(730,703 | ) | - | |||||
Total other income and expenses
|
(2,619,399 | ) | (2,734,098 | ) | ||||
Net Loss
|
$ | (9,494,272 | ) | $ | (4,794,988 | ) | ||
Weighted-average number of common shares outstanding
|
26,410,717 | 25,077,500 | ||||||
Basic loss per share:
|
$ | (0.36 | ) | $ | (0.19 | ) |
Three Months Ended
|
Three Months Ended
|
|||||||
March 31, 2016
|
March 31, 2015
|
|||||||
(As Restated)
|
(As Restated)
|
|||||||
Cash Flows From Operating Activities
|
||||||||
Net Loss
|
$ | (9,494,272 | ) | $ | (4,794,988 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
61,833 | 75,000 | ||||||
Amortization of discount on notes payable
|
737,235 | 423,781 | ||||||
Amortization of deferred financing costs
|
88,348 | 49,765 | ||||||
Accrued interest on capital sublease obligation
|
743,329 | 657,986 | ||||||
Gain on sale of fixed assets
|
- | (161,566 | ) | |||||
Loss on change in fair value of derivative liability
|
730,703 | - | ||||||
Change in operating assets and liabilities:
|
||||||||
Prepaid expenses and other current assets
|
(1,624,265 | ) | 5,392 | |||||
Accounts payable and accrued liabilities
|
376,519 | 630,918 | ||||||
Interest payable
|
(363,311 | ) | 1,404,457 | |||||
Net Cash Used in Operating Activities
|
(8,743,881 | ) | (1,709,255 | ) | ||||
Cash Flows From Investing Activities
|
||||||||
Purchases of machinery and equipment
|
(2,956 | ) | - | |||||
Proceeds from sale of machinery and equipment
|
623,202 | 357,265 | ||||||
Net Cash Provided by Investing Activities
|
620,246 | 357,265 | ||||||
Cash Flows from Financing Activities
|
||||||||
Change in restricted cash
|
1,039,513 | (317,738 | ) | |||||
Customer deposits
|
1,396,250 | 1,433,048 | ||||||
Issuance of common stock
|
2,006,712 | - | ||||||
Common stock issuance costs
|
(178,503 | ) | - | |||||
Repayments of notes payable
|
- | (277,000 | ) | |||||
Payment of deferred financing costs
|
- | (19,126 | ) | |||||
Proceeds from convertible notes
|
- | 180,000 | ||||||
Repayments of advances from related party
|
- | (400 | ) | |||||
Advances to related party
|
(101,008 | ) | 12,000 | |||||
Net Cash Provided by Financing Activities
|
4,162,964 | 1,010,784 | ||||||
Net Change in Cash and Cash Equivalents
|
(3,960,671 | ) | (341,206 | ) | ||||
Cash and Cash Equivalents at Beginning of Period
|
6,870,044 | 374,652 | ||||||
Cash and Cash Equivalents at End of Period
|
$ | 2,909,373 | $ | 33,446 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid during the year for interest
|
$ | 659,694 | $ | 1,017,662 | ||||
Supplemental disclosures of non-cash investing
|
||||||||
and financing activities:
|
||||||||
Convertible notes payable converted to equity
|
$ | 150,936 | $ | - | ||||
Issuance of warrants
|
$ | 3,095 | $ | - | ||||
Exercise of warrants
|
$ | 133,512 | $ | - |
NOTE 1
|
BASIS OF PRESENTAION
|
NOTE 2
|
ORGANIZATION AND BUSINESS ACTIVITIES
|
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
|
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
BALANCE SHEET
|
||||||||||||
MARCH 31, 2016
|
||||||||||||
As Previously
|
||||||||||||
Assets
|
Reported
|
Adjustment
|
As Restated
|
|||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
Current Assets
|
||||||||||||
Cash
|
$ | 2,909,373 | $ | - | $ | 2,909,373 | ||||||
Restricted cash held in escrow
|
2,626,334 | - | 2,626,334 | |||||||||
Restricted cash held for customer deposits
|
- | 4,000,000 | 4,000,000 | |||||||||
Prepaid expenses
|
2,104,154 | - | 2,104,154 | |||||||||
Other current assets
|
429,022 | - | 429,022 | |||||||||
Assets held for sale
|
1,474,071 | 102,727 | 1,576,798 | |||||||||
Deferred loan costs
|
- | 170,627 | 170,627 | |||||||||
Total Current Assets
|
9,542,954 | 4,273,354 | 13,816,308 | |||||||||
Restricted cash held for customer deposits
|
5,956,937 | (4,000,000 | ) | 1,956,937 | ||||||||
Machinery and equipment, net
|
14,502,418 | (2,066,587 | ) | 12,435,831 | ||||||||
Facility under capital sublease, net
|
5,389,736 | - | 5,389,736 | |||||||||
Deferred loan costs
|
- | 938,446 | 938,446 | |||||||||
Total Assets
|
$ | 35,392,045 | $ | (854,787 | ) | $ | 34,537,258 | |||||
Liabilities and Stockholders' Deficit
|
||||||||||||
Current Liabilities
|
||||||||||||
Accounts payable and accrued liabilities
|
$ | 3,816,562 | $ | 254,812 | $ | 4,071,374 | ||||||
Refundable customer deposits
|
1,114,900 | - | 1,114,900 | |||||||||
Interest payable, current portion
|
2,306,080 | 2,916,273 | 5,222,353 | |||||||||
Derivative liabilities - fair value of warrants
|
1,555,766 | 213,058 | 1,768,824 | |||||||||
Notes payable due to related party, net of discount
|
9,891,638 | (128,750 | ) | 9,762,888 | ||||||||
Total Current Liabilities
|
18,684,946 | 3,255,393 | 21,940,339 | |||||||||
Nonrefundable customer deposits
|
20,961,900 | - | 20,961,900 | |||||||||
Interest payable, net of current portion
|
9,785,994 | (2,916,337 | ) | 6,869,657 | ||||||||
Convertible notes payable, net of discount
|
2,463,928 | (2,027,133 | ) | 436,795 | ||||||||
Notes payable, net of current portion and discount
|
19,736,020 | (493,885 | ) | 19,242,135 | ||||||||
Capital sublease obligation
|
6,022,677 | - | 6,022,677 | |||||||||
Total Liabilities
|
77,655,465 | (2,181,962 | ) | 75,473,503 | ||||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||||||
Stockholders' Deficit:
|
||||||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||||||
26,320,322 and 25,077,500 shares issued and outstanding
|
||||||||||||
in 2015 and 2014, respectively
|
33,039,884 | 23,942,775 | 56,982,659 | |||||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||||||
no shares issued and outstanding
|
- | - | ||||||||||
Accumulated deficit
|
(75,303,304 | ) | (22,615,600 | ) | (97,918,904 | ) | ||||||
Total Stockholders' Deficit
|
(42,263,420 | ) | 1,327,175 | (40,936,245 | ) | |||||||
Total Liabilities and Stockholders Deficit
|
$ | 35,392,045 | $ | (854,787 | ) | $ | 34,537,258 |
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
BALANCE SHEET
|
||||||||||||
DECEMBER 31, 2015
|
||||||||||||
As Previously
|
||||||||||||
Assets
|
Reported
|
Adjustment
|
As Restated
|
|||||||||
Current Assets
|
||||||||||||
Cash
|
$ | 6,870,044 | $ | - | $ | 6,870,044 | ||||||
Restricted cash held in escrow
|
3,806,378 | - | 3,806,378 | |||||||||
Restricted cash held for customer deposits
|
- | 4,000,000 | 4,000,000 | |||||||||
Prepaid expenses
|
471,170 | - | 471,170 | |||||||||
Other current assets
|
336,733 | - | 336,733 | |||||||||
Assets held for sale
|
2,100,000 | 100,000 | 2,200,000 | |||||||||
Deferred loan costs
|
- | 170,628 | 170,628 | |||||||||
Total Current Assets
|
13,584,325 | 4,270,628 | 17,854,953 | |||||||||
Restricted cash held for customer deposits
|
5,816,407 | (4,000,000 | ) | 1,816,407 | ||||||||
Machinery and equipment, net
|
14,499,340 | (2,063,859 | ) | 12,435,481 | ||||||||
Facility under capital sublease, net
|
5,448,964 | - | 5,448,964 | |||||||||
Deferred loan costs
|
- | 981,103 | 981,103 | |||||||||
Total Assets
|
$ | 39,349,036 | $ | (812,128 | ) | $ | 38,536,908 | |||||
Liabilities and Stockholders' Deficit
|
||||||||||||
Current Liabilities
|
||||||||||||
Accounts payable and accrued liabilities
|
$ | 3,618,403 | $ | 76,458 | $ | 3,694,861 | ||||||
Refundable customer deposits
|
1,092,750 | - | 1,092,750 | |||||||||
Interest payable, current portion
|
4,959,444 | - | 4,959,444 | |||||||||
Derivative liabilities - fair value of warrants
|
655,244 | 252,459 | 907,703 | |||||||||
Notes payable due to related party, net of discount
|
9,701,983 | (176,752 | ) | 9,525,231 | ||||||||
Total Current Liabilities
|
20,027,824 | 152,165 | 20,179,989 | |||||||||
Nonrefundable customer deposits
|
19,587,800 | - | 19,587,800 | |||||||||
Interest payable, net of current portion
|
6,757,983 | - | 6,757,983 | |||||||||
Convertible notes payable, net of discount
|
2,504,346 | (2,103,333 | ) | 401,013 | ||||||||
Notes payable, net of current portion and discount
|
19,565,099 | (686,953 | ) | 18,878,146 | ||||||||
Capital sublease obligation
|
6,022,677 | - | 6,022,677 | |||||||||
Total Liabilities
|
74,465,729 | (2,638,121 | ) | 71,827,608 | ||||||||
Commitments and contingencies (see notes to financial statements)
|
||||||||||||
Stockholders' Deficit:
|
||||||||||||
Common stock, no par value, 100,000,000 shares authorized,
|
||||||||||||
26,320,322 and 25,077,500 shares issued and outstanding
|
||||||||||||
in 2015 and 2014, respectively
|
31,135,932 | 23,998,000 | 55,133,932 | |||||||||
Preferred stock, no par value, 10,000,000 shares authorized,
|
||||||||||||
no shares issued and outstanding
|
- | - | ||||||||||
Accumulated deficit
|
(66,252,625 | ) | (22,172,007 | ) | (88,424,632 | ) | ||||||
Total Stockholders' Deficit
|
(35,116,693 | ) | 1,825,993 | (33,290,700 | ) | |||||||
Total Liabilities and Stockholders Deficit
|
$ | 39,349,036 | $ | (812,128 | ) | $ | 38,536,908 |
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF OPERATIONS
|
||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2016
|
||||||||||||
As Previously
|
||||||||||||
Reported
|
Adjustment
|
As Restated
|
||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 3,598,364 | $ | 102,277 | $ | 3,700,641 | ||||||
General and administrative expenses
|
1,539,136 | 280,218 | 1,819,354 | |||||||||
Sales and marketing expenses
|
1,557,720 | (202,842 | ) | 1,354,878 | ||||||||
Total costs and expenses
|
6,695,220 | 179,653 | 6,874,873 | |||||||||
Loss From Operations
|
(6,695,220 | ) | (179,653 | ) | (6,874,873 | ) | ||||||
Other income (expense):
|
||||||||||||
Interest income
|
4,463 | 4,463 | ||||||||||
Interest expense
|
(1,533,299 | ) | (359,860 | ) | (1,893,159 | ) | ||||||
Loss on change in fair value of derivative liability
|
(826,623 | ) | 95,920 | (730,703 | ) | |||||||
Total other expenses, net
|
(2,355,459 | ) | (263,940 | ) | (2,619,399 | ) | ||||||
Net Loss
|
$ | (9,050,679 | ) | $ | (443,593 | ) | $ | (9,494,272 | ) | |||
Weighted-average number of common shares outstanding
|
26,410,717 | - | 26,410,717 | |||||||||
Basic loss per common share:
|
$ | (0.34 | ) | $ | - | $ | (0.36 | ) |
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF OPERATIONS
|
||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2015
|
||||||||||||
As Previously
|
||||||||||||
Reported
|
Adjustment
|
As Restated
|
||||||||||
Costs and Expenses:
|
||||||||||||
Engineering, research and development costs
|
$ | 20,529 | $ | 3,117 | $ | 23,646 | ||||||
General and administrative expenses
|
1,115,274 | (19,903 | ) | 1,095,371 | ||||||||
Sales and marketing expenses
|
925,088 | 16,786 | 941,874 | |||||||||
Total costs and expenses
|
2,060,890 | - | 2,060,890 | |||||||||
Loss From Operations
|
(2,060,890 | ) | - | (2,060,890 | ) | |||||||
Other income (expense):
|
||||||||||||
Gain on sale of machinery and equipment
|
- | 161,566 | 161,566 | |||||||||
Interest income
|
2 | - | 2 | |||||||||
Interest expense
|
(2,207,476 | ) | (688,190 | ) | (2,895,666 | ) | ||||||
Total other expenses, net
|
(2,207,474 | ) | (526,624 | ) | (2,734,098 | ) | ||||||
Net Loss
|
$ | (4,268,364 | ) | $ | (526,624 | ) | $ | (4,794,988 | ) | |||
Weighted-average number of common shares outstanding
|
26,410,717 | - | 26,410,717 | |||||||||
Basic loss per common share:
|
$ | (0.16 | ) | - | $ | (0.18 | ) |
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF CASH FLOWS
|
||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2016
|
||||||||||||
As Previously
|
||||||||||||
Reported
|
Adjustment
|
As Restated
|
||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (9,050,679 | ) | $ | (443,593 | ) | $ | (9,494,272 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Depreciation and amortization
|
61,833 | - | 61,833 | |||||||||
Amortization of discount on notes payable
|
388,317 | 348,918 | 737,235 | |||||||||
Amortization of deferred financing costs
|
77,343 | 11,005 | 88,348 | |||||||||
Accrued interest on capital sublease obligation
|
743,329 | - | 743,329 | |||||||||
Loss on change in fair value of derivative liability
|
826,623 | (95,920 | ) | 730,703 | ||||||||
Change in operating assets and liabilities:
|
||||||||||||
Prepaid expenses and other current assets
|
(1,624,265 | ) | - | (1,624,265 | ) | |||||||
Accounts payable and accrued liabilities
|
198,158 | 178,361 | 376,519 | |||||||||
Interest payable
|
(363,247 | ) | (64 | ) | (363,311 | ) | ||||||
Net Cash Used in Operating Activities
|
(8,742,588 | ) | (1,293 | ) | (8,743,881 | ) | ||||||
Cash Flows From Investing Activities
|
||||||||||||
Purchases of machinery and equipment
|
(5,683 | ) | 2,727 | (2,956 | ) | |||||||
Proceeds from sale of machinery and equipment
|
625,929 | (2,727 | ) | 623,202 | ||||||||
Net Cash Used in Investing Activities
|
620,246 | - | 620,246 | |||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
1,039,513 | - | 1,039,513 | |||||||||
Customer deposits
|
1,396,250 | 1,396,250 | ||||||||||
Issuance of common stock
|
2,006,712 | - | 2,006,712 | |||||||||
Common stock issuance costs
|
(179,796 | ) | 1,293 | (178,503 | ) | |||||||
Advances to related party
|
(101,008 | ) | - | (101,008 | ) | |||||||
Net Cash Provided by Financing Activities
|
4,161,671 | 1,293 | 4,162,964 | |||||||||
Net Change in Cash
|
(3,960,671 | ) | - | (3,960,671 | ) | |||||||
Cash at Beginning of Year
|
6,870,044 | - | 6,870,044 | |||||||||
Cash at End of Year
|
$ | 2,909,373 | $ | - | $ | 2,909,373 |
NOTE 3
|
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (Continued)
|
STATEMENT OF CASH FLOWS
|
||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2015
|
||||||||||||
As Previously
|
||||||||||||
Reported
|
Adjustment
|
As Restated
|
||||||||||
Cash Flows From Operating Activities
|
||||||||||||
Net Loss
|
$ | (4,268,365 | ) | $ | (526,623 | ) | $ | (4,794,988 | ) | |||
Adjustments to reconcile net loss to net cash
|
||||||||||||
used in operating activities:
|
||||||||||||
Depreciation and amortization
|
75,000 | - | 75,000 | |||||||||
Amortization of discount on notes payable
|
393,579 | 30,202 | 423,781 | |||||||||
Amortization of deferred financing costs
|
49,881 | (116 | ) | 49,765 | ||||||||
Accrued interest on capital sublease obligation
|
- | 657,986 | 657,986 | |||||||||
Gain on sale of fixed assets
|
- | (161,566 | ) | (161,566 | ) | |||||||
Change in operating assets and liabilities:
|
- | |||||||||||
Prepaid expenses and other current assets
|
5,392 | - | 5,392 | |||||||||
Accounts payable and accrued liabilities
|
630,918 | - | 630,918 | |||||||||
Interest payable
|
1,404,457 | - | 1,404,457 | |||||||||
Net Cash Used in Operating Activities
|
(1,709,138 | ) | (117 | ) | (1,709,255 | ) | ||||||
Cash Flows From Investing Activities
|
||||||||||||
Purchases of machinery and equipment
|
- | - | - | |||||||||
Proceeds from sale of machinery and equipment
|
357,265 | - | 357,265 | |||||||||
Net Cash Used in Investing Activities
|
357,265 | - | 357,265 | |||||||||
Cash Flows From Financing Activities
|
||||||||||||
Change in restricted cash
|
(317,738 | ) | - | (317,738 | ) | |||||||
Customer deposits
|
1,433,048 | - | 1,433,048 | |||||||||
Issuance of common stock
|
- | - | - | |||||||||
Common stock issuance costs
|
- | - | - | |||||||||
Repayments of notes payable
|
(277,000 | ) | - | (277,000 | ) | |||||||
Payment of deferred financing costs
|
(19,243 | ) | 117 | (19,126 | ) | |||||||
Proceeds from convertible notes
|
180,000 | - | 180,000 | |||||||||
Repayments of advances from related party
|
(400 | ) | - | (400 | ) | |||||||
Advances to related party
|
12,000 | - | 12,000 | |||||||||
Net Cash Provided by Financing Activities
|
1,010,667 | 117 | 1,010,784 | |||||||||
Net Change in Cash
|
(341,206 | ) | - | (341,206 | ) | |||||||
Cash at Beginning of Year
|
374,652 | - | 374,652 | |||||||||
Cash at End of Year
|
$ | 33,446 | $ | - | $ | 33,446 |
NOTE 4
|
BASIC AND DILUTED LOSS PER COMMON SHARE
|
NOTE 5
|
FAIR VALUES OF ASSETS AND LIABILITIES
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Warrant liabilities
|
$ | - | $ | - | $ | 1,768,824 | $ | 1,768,824 | ||||||||
Assets held for sale
|
$ | - | $ | - | $ | 1,576,798 | $ | 1,576,798 |
NOTE 5
|
FAIR VALUES OF ASSETS AND LIABILITIES (Continued)
|
Fair Value
at March 31,
2016
|
Valuation
Techniques
|
Unobservable Input
|
Weighted
Average
|
|||||||||
Warrant liabilities
|
$ | 1,768,824 |
Black-Scholes
|
Risk-free rate
Time to liquidity
Dividend yield
Volatility
|
1.69%
4.79 yrs.
0.00%
80.16%
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Warrant liabilities
|
$ | - | $ | - | $ | 907,703 | $ | 907,703 | ||||||||
Assets held for sale
|
$ | - | $ | - | $ | 2,200,000 | $ | 2,200,000 |
Fair Value at December 31, 2015 |
Valuation
Techniques
|
Unobservable Input
|
Weighted
Average
|
|||||||||
Warrant liabilities
|
$
|
907,703
|
Monte Carlo option pricing method
|
Risk-free rate
Time to liquidity
Dividend yield
Volatility
|
1.69%
4.84 yrs.
0.00%
80.16%
|
NOTE 5
|
FAIR VALUES OF ASSETS AND LIABILITIES (CONTINUED)
|
Balance at January 1, 2016
|
$ | 907,703 | ||
Issuance of warrants
|
133,513 | |||
Change in fair value of warrants included in earnings
|
730,703 | |||
Exercise of warrants
|
(3,095 | ) | ||
Balance at March 31, 2016
|
$ | 1,768,824 |
NOTE 6
|
PROPERTY AND EQUIPMENT
|
NOTE 7
|
CUSTOMER DEPOSITS
|
NOTE 8
|
LONG TERM DEBT
|
NOTE 8
|
LONG TERM DEBT (Continued)
|
NOTE 9
|
COMMON STOCK
|
NOTE 10
|
COMMITMENTS AND CONTINGENCIES
|
NOTE 11
|
RELATED PARTY TRANSACTIONS
|
NOTE 12
|
SUBSEQUENT EVENTS
|
1.
|
Purposes of the Plan. The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.
|
2.
|
Definitions. The following definitions shall apply as used herein and in the individual Option Agreements except as defined otherwise in an individual Option Agreement. In the event a term is separately defined in an individual Option Agreement, such definition shall supersede the definition contained in this Section 2.
|
|
(a)
|
“Administrator” means the Board or any of the Committees appointed to administer the Plan.
|
|
(b)
|
“Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
|
|
(c)
|
“Applicable Laws” means the legal requirements relating to the Plan and the Options under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Options granted to residents therein.
|
|
(d)
|
“Assumed” means that pursuant to a Corporate Transaction either (i) the Option continues to be maintained by the Company or (ii) the contractual obligations represented by the Option are assumed by the successor entity or its Parent in connection with the Corporate Transaction with equitable and appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Option and the exercise price thereof which preserves the intrinsic value of the Option existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Option.
|
|
(f)
|
“Change in Control” means a change in ownership or control of the Company effected through either of the following transactions:
|
|
(i)
|
the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such stockholders accept, or
|
|
(ii)
|
a change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.
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(h)
|
“Committee” means any committee composed of members of the Board appointed by the Board to administer the Plan.
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(i)
|
“Common Stock” means the common stock of the Company, no par value per share.
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(j)
|
“Company” means Elio Motors, Inc., an Arizona corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.
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(k)
|
“Consultant” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.
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(l)
|
“Continuing Directors” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.
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(m)
|
“Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in an individual Option Agreement). An approved leave of absence shall include sick leave, military leave or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Nonstatutory Stock Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.
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(n)
|
“Corporate Transaction” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:
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(i)
|
a merger or consolidation of the Company in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;
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(ii)
|
the sale, transfer or other disposition of all or substantially all of the assets of the Company;
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(iii)
|
the complete liquidation or dissolution of the Company;
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(iv)
|
any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger; or
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(v)
|
acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.
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(o)
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“Director” means a member of the Board or the board of directors of any Related Entity.
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(p)
|
“Disability” means such term (or word of like import) as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.
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(q)
|
“Employee” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.
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(r)
|
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor thereto.
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(s)
|
“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
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(i)
|
If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation the New York Stock Exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
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(ii)
|
If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
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(iii)
|
In the absence of an established market for the Common Stock of the type described in (i) and (ii) above, the Fair Market Value thereof shall be determined by the Administrator in good faith.
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(t)
|
“Grantee” means an Employee, Director or Consultant who receives an Option under the Plan.
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(u)
|
“Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
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(v)
|
“Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
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(w)
|
“Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
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(x)
|
“Option” means an option to purchase Shares pursuant to an Option Agreement granted under the Plan.
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(y)
|
“Option Agreement” means the written agreement or other instrument evidencing the grant of an Option, including any amendments thereto. An Option Agreement may be in the form of an agreement to be executed by both the Grantee and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments.
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(z)
|
“Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.
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(aa)
|
“Plan” means this Elio Motors, Inc. 2016 Incentive and Nonstatutory Stock Option Plan.
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(bb)
|
“Related Entity” means any Parent or Subsidiary of the Company.
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(cc)
|
“Replaced” means that pursuant to a Corporate Transaction the Option is replaced with a comparable stock award or a cash incentive award or program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the intrinsic value of such Option existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Option. The determination of Option comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.
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(dd)
|
“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.
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(ee)
|
“Share” means a share of the Common Stock.
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|
(ff)
|
“Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.
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(a)
|
Subject to the provisions of Section 10, below, the maximum aggregate number of Shares which may be issued pursuant to all Options is 2,000,000 Shares. The Shares to be issued pursuant to Options may be authorized, but unissued, or reacquired Common Stock.
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(b)
|
Shares that actually have been issued under the Plan pursuant to an Option shall not be returned to the Plan and shall not become available for future issuance under the Plan. To the extent an Option (or portion thereof) is forfeited, canceled or expires (whether voluntarily or involuntarily), the Shares subject to the forfeited, canceled or expired portion thereof shall also not be returned to the Plan and shall not become available for future issuance under the Plan. Any Shares covered by an Option which are surrendered (i) in payment of the Option exercise price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Option shall be deemed to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Options under the Plan.
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(a)
|
Plan Administrator.
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(i)
|
Administration with Respect to Directors and Officers. With respect to grants of Options to Directors or Officers, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.
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(ii)
|
Administration With Respect to Consultants and Other Employees. With respect to grants of Options to Employees or Consultants who are neither Directors nor Officers, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board or Committee may also authorize one or more Officers to administer the Plan with respect to Options to Employees or Consultants who are neither Directors nor Officers (and to grant such Options) and may limit such authority as the Board or Committee, as applicable, determines from time to time.
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(iii)
|
Administration Errors. In the event an Option is granted in a manner inconsistent with the provisions of this subsection (a), such Option shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.
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(b)
|
Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board or any Committee, the Administrator shall have the authority, in its discretion to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan, including, without limitation:
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(i)
|
to select the Employees, Directors and Consultants to whom Options may be granted from time to time hereunder;
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|
(ii)
|
to determine whether, when and to what extent Options are granted hereunder;
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|
(iii)
|
to determine the number of Shares to be covered by each Option granted hereunder;
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|
(iv)
|
to approve forms of Option Agreements for use under the Plan;
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|
(v)
|
to determine the terms and conditions of any Option granted hereunder;
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|
(vi)
|
to amend the terms of any outstanding Option granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Option shall not be made without the Grantee’s written consent; provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Nonstatutory Stock Option shall not be treated as adversely affecting the rights of the Grantee. The reduction of the exercise price of any Option awarded under the Plan and canceling an Option at a time when its exercise price exceeds the Fair Market Value of the underlying Shares, in exchange for another Option or for cash, in each case, shall not be subject to stockholder approval;
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|
(vii)
|
to prescribe, amend and rescind rules and regulations relating to the Plan and to define terms not otherwise defined herein;
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|
(viii)
|
to construe and interpret the terms of the Plan, any rules and regulations under the Plan and Options, including without limitation, any notice of award or Option Agreement, granted pursuant to the Plan;
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|
(ix)
|
to approve corrections in the documentation or administration of any Option;
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(x)
|
to grant Options to Employees, Directors and Consultants employed outside the United States or to otherwise adopt or administer such procedures or subplans that the Administrator deems appropriate or necessary on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and
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|
(xi)
|
to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.
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|
(c)
|
Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees, members of the Board and any Officers or Employees to whom authority to act for the Board is delegated by the Administrator or the Company shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Option granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.
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5.
|
Eligibility. Nonstatutory Stock Options may be granted to Employees, Directors and Consultants as the Administrator may determine from time to time. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company as the Administrator may determine from time to time. An Employee, Director or Consultant who has been granted an Option may, if otherwise eligible, be granted additional Options. Options may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.
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(a)
|
Designation of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
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|
(b)
|
Conditions of Option. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Option including, but not limited to, the Option vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon exercise of the Option, payment contingencies, and satisfaction of any performance criteria.
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(c)
|
Term of Option. The term of each Option shall be the term stated in the Option Agreement, provided, however, that the term of an Option shall be no more than ten (10) years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.
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|
(d)
|
Transferability of Options. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Nonstatutory Stock Options shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator, but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee. Unless otherwise agreed to by the Administrator, all vesting, exercisability and forfeiture provisions that are conditioned on the Grantee’s continued employment or service shall continue to be determined with reference to the Grantee’s employment or service (and not to the status of the transferee) after any transfer of a Nonstatutory Stock Option pursuant to this Section 6(d), and the responsibility to pay any taxes in connection with a Nonstatutory Stock Option shall remain with the Grantee notwithstanding any transfer other than by will or the laws of descent and distribution. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Option in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.
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|
(e)
|
Time of Granting Options. The date of grant of an Option shall for all purposes be the date on which the Administrator makes the determination to grant such Option, or such other later date as is determined by the Administrator.
|
|
(a)
|
Exercise Price. The exercise price for an Option shall be as follows:
|
|
(i)
|
In the case of an Incentive Stock Option:
|
|
(A)
|
granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or
|
|
(B)
|
granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
|
|
(ii)
|
In the case of a Nonstatutory Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
|
|
(b)
|
Consideration. Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise of an Option including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant). In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following:
|
|
(i)
|
cash;
|
|
(ii)
|
check;
|
|
(iii)
|
surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;
|
|
(iv)
|
payment through a broker-assisted cashless exercise program made available by the Company;
|
|
(v)
|
payment through a “net exercise” procedure established by the Company such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares; or
|
|
(vi)
|
any combination of the foregoing methods of payment.
|
|
(c)
|
Taxes. Upon exercise of an Option, if required by Applicable Law, the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Option, if applicable, sufficient to satisfy the applicable tax withholding obligations incident to the exercise or vesting of an Option (calculated at the statutory minimum amount for such withholding).
|
|
(a)
|
Procedure for Exercise; Rights as a Stockholder.
|
|
(i)
|
Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Option Agreement.
|
|
(ii)
|
An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(v).
|
|
(b)
|
Exercise of Option Following Termination of Continuous Service.
|
|
(i)
|
An Option may not be exercised after the termination date of such Option set forth in the Option Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Option Agreement.
|
|
(ii)
|
Where the Option Agreement permits a Grantee to exercise an Option following the termination of the Grantee’s Continuous Service for a specified period, the Option shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Option, whichever occurs first.
|
|
(iii)
|
Any Option designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Service shall convert automatically to a Nonstatutory Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Option Agreement.
|
|
(a)
|
If at any time the Administrator determines that the delivery of Shares pursuant to the exercise of an Option is or may be unlawful under Applicable Laws, the vesting or right to exercise an Option or to otherwise receive Shares pursuant to the terms of an Option shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.
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|
(b)
|
The Administrator may provide that the Shares issued upon exercise of an Option shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its discretion may specify prior to the exercise of such Option, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise of such Option (including the actual or constructive surrender of Shares already owned by the Grantee) or payment of taxes arising in connection with an Option. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Grantee or other subsequent transfers by the Grantee of any Shares issued under an Option, including without limitation (i) restrictions under an insider trading policy or pursuant to applicable law, (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by the Grantee and holders of other Company equity compensation arrangements, (iii) restrictions as to the use of a specified brokerage firm for such resales or other transfers, and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations.
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10.
|
Adjustments Upon Changes in Capitalization. Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Option, and the number of Shares which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Option, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, (iii) any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration” or (iv) any distribution of cash or other assets to stockholders other than a normal cash dividend (collectively “adjustments”). Any such adjustments to outstanding Options will be effected in a manner that precludes the enlargement of rights and benefits under such Options and shall be designed to comply with Sections 409A and 424 of the Code (to the extent applicable). In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Options during certain periods of time. Such adjustments shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Option.
|
|
(a)
|
Termination of Option to Extent Not Assumed in Corporate Transaction. Effective upon the consummation of a Corporate Transaction, all outstanding Options under the Plan shall terminate. However, all such Options shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.
|
|
(b)
|
Acceleration of Option Upon Corporate Transaction or Change in Control.
|
|
(i)
|
Corporate Transaction. Except as provided otherwise in an individual Option Agreement, in the event of a Corporate Transaction, for the portion of each Option that is neither Assumed nor Replaced, such portion of the Option shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares at the time represented by such portion of the Option, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date.
|
|
(ii)
|
Change in Control. Except as provided otherwise in an individual Option Agreement, in the event of a Change in Control (other than a Change in Control which also is a Corporate Transaction), each Option which is at the time outstanding under the Plan automatically shall become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value), immediately prior to the specified effective date of such Change in Control, for all of the Shares at the time represented by such Option, provided that the Grantee’s Continuous Service has not terminated prior to such date.
|
|
(c)
|
Effect of Acceleration on Incentive Stock Options. Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.
|
12.
|
Effective Date and Term of Plan. Subject to approval of the Plan by the stockholders of the Corporation prior to 12 months following the date of grant of the first Option hereunder, this Plan shall be deemed effective as of the date it is adopted by the Board. It shall continue in effect for a term of ten (10) years unless sooner terminated. Subject to Applicable Laws, Options may be granted under the Plan upon its becoming effective.
|
|
(a)
|
The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s stockholders to the extent such approval is required by Applicable Laws.
|
|
(b)
|
No Option may be granted during any suspension of the Plan or after termination of the Plan.
|
|
(c)
|
No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Options already granted to a Grantee.
|
14.
|
Limitation of Liability. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
|
15.
|
No Effect on Terms of Employment/Consulting Relationship. The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or a Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause including, but not limited to, Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.
|
16.
|
No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Options shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan”, “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.
|
17.
|
Unfunded Obligation. Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
|
18.
|
Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
|
19.
|
Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
|
20.
|
Governing Law. This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of Arizona to the extent not preempted by federal law. Any reference in this Plan or in the agreement or other document evidencing any Options to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability.
|
/s/ Connie Grennan
|
|
Connie Grennan,
|
|
Secretary
|
Date of Award:
|
||
Exercise Price per Share:
|
||
Total Number of Shares
|
||
Subject to the Option (the “Shares”):
|
||
Total Exercise Price:
|
||
Type of Option:
|
¨ Incentive Stock Option
|
|
¨ Nonstatutory Stock Option
|
||
Expiration Date:
|
ELIO MOTORS, INC.
|
|||||
Date:
|
By:
|
||||
Name:
|
|||||
Title:
|
GRANTEE
|
|||||
Date:
|
Signature:
|
||||
Name:
|
1.
|
Grant of Option. Elio Motors, Inc., an Arizona corporation (the “Company”), hereby grants to the Grantee (the “Grantee”) named in the Notice of Stock Option Award (the “Notice”), an option (the “Option”) to purchase the Total Number of Shares of Common Stock subject to the Option (the “Shares”) set forth in the Notice, at the Exercise Price per Share set forth in the Notice (the “Exercise Price”) subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the “Option Agreement”) and the Company’s 2016 Incentive and Nonstatutory Stock Option Plan, as amended from time to time (the “Plan”), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement.
|
|
(a)
|
Right to Exercise. The Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or termination of the Option in the event of a Corporate Transaction or Change in Control. The Grantee shall be subject to reasonable limitations on the number of requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares.
|
|
(b)
|
Method of Exercise. The Option shall be exercisable by delivery of an exercise notice (a form of which is attached as Exhibit A) or by such other procedure as specified from time to time by the Administrator which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, and such other provisions as may be required by the Administrator. The exercise notice shall be delivered in person, by certified mail, or by such other method (including electronic transmission) as determined from time to time by the Administrator to the Company accompanied by payment of the Exercise Price and, if required, all applicable income and employment taxes required to be withheld. The Option shall be deemed to be exercised upon receipt by the Company of such notice accompanied by the Exercise Price, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) below to the extent such procedure is available to the Grantee at the time of exercise and such an exercise would not violate any Applicable Law.
|
|
(c)
|
Taxes. To the extent required by Applicable Law, upon exercise of the Option, the Company or the Grantee’s employer may offset or (from any amount owed by the Company or the Grantee’s employer to the Grantee) or collect from the Grantee or other person an amount sufficient to satisfy such tax obligations. Furthermore, in the event of any determination that the Company has failed to collect a sum sufficient to pay all taxes due in connection with the Option, the Grantee agrees to pay the Company the amount of such deficiency in cash within five (5) days after receiving a written demand from the Company to do so, whether or not the Grantee is an employee of the Company at that time.
|
3.
|
Method of Payment. Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law:
|
|
(a)
|
cash;
|
|
(b)
|
check;
|
|
(c)
|
surrender of Shares held for the requisite period, if any, necessary to avoid a charge to the Company’s earnings for financial reporting purposes, or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is being exercised;
|
|
(d)
|
if permitted by the Administrator, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the Exercise Price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or
|
|
(e)
|
if permitted by the Administrator, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company-designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction.
|
4.
|
Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares subject to the Option upon such exercise would constitute a violation of any Applicable Laws. If the exercise of the Option within the applicable time periods set forth in Section 5, 6 and 7 of this Option Agreement is prevented by the provisions of this Section 4, the Option shall remain exercisable until one (1) month after the date the Grantee is notified by the Company that the Option is exercisable, but in any event no later than the Expiration Date set forth in the Notice.
|
5.
|
Termination or Change of Continuous Service.
|
|
(a)
|
In the event of the Grantee’s change in status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and the Option shall continue to vest in accordance with the Vesting Schedule set forth in the Notice; provided, however, that with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Nonstatutory Stock Option on the day three (3) months and one (1) day following such change in status.
|
|
(b)
|
In the event the Grantee’s Continuous Service is terminated by the Company or a Related Entity for Cause (other than pursuant to clause (iv) or (v) of the definition of Cause), the Grantee may, but only within thirty (30) days commencing on the date of Grantee’s termination (“Termination Date”) but in no event later than the Expiration Date, exercise the portion of the Option that was vested on the Termination Date.
|
|
(c)
|
In the event the Grantee’s Continuous Service is terminated by the Company or a Related Entity for Cause pursuant to clause (iv) or (v) of the definition of Cause or terminated by the Grantee for any reason, the Grantee may, but only within ninety (90) days commencing on the Termination Date but in no event later than the Expiration Date, exercise the portion of the Option that was vested on the Termination Date.
|
|
(d)
|
In the event the Grantee’s Continuous Service is terminated by the Company or a Related Entity without Cause the Grantee may, but only within ninety (90) days commencing on the Termination Date but in no event later than the Expiration Date, exercise the portion of the Option that was vested on the Termination Date.
|
|
(e)
|
The post-termination exercise periods described in this Section 5 shall commence on the Termination Date. In no event shall the Option be exercised later than the Expiration Date set forth in the Notice.
|
|
(f)
|
If the Grantee does not exercise the Option within the applicable post-termination exercise period, the Option shall terminate.
|
6.
|
Disability of Grantee. In the event the Grantee’s Continuous Service terminates as a result of his or her Disability, the Grantee may, but only within one hundred eighty (180) days commencing on the Termination Date (but in no event later than the Expiration Date), exercise the portion of the Option that was vested on the Termination Date. If the Grantee does not exercise the Option within the time specified herein, the Option shall terminate.
|
7.
|
Death of Grantee. In the event of the termination of the Grantee’s Continuous Service as a result of his or her death, the person who acquired the right to exercise the Option pursuant to Section 8 may exercise the portion of the Option that was vested at the date of termination within one hundred eighty (180) days commencing on the date of death (but in no event later than the Expiration Date). If the Option is not exercised within the time specified herein, the Option shall terminate.
|
8.
|
Transferability of Option. The Option, if an Incentive Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee. The Option, if a Nonstatutory Stock Option, may not be transferred in any manner other than by will or by the laws of descent and distribution; provided, however, that a Nonstatutory Stock Option may be transferred during the lifetime of the Grantee to the extent and in the manner authorized by the Administrator. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Incentive Stock Option or Nonstatutory Stock Option in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator. Following the death of the Grantee, the Option, to the extent provided in Section 7, may be exercised (a) by the person or persons designated under the deceased Grantee’s beneficiary designation or (b) in the absence of an effectively designated beneficiary, by the Grantee’s legal representative or by any person empowered to do so under the deceased Grantee’s will or under the then applicable laws of descent and distribution. The terms of the Option shall be binding upon the executors, administrators, heirs, successors and transferees of the Grantee.
|
9.
|
Term of Option. The Option must be exercised no later than the Expiration Date set forth in the Notice or such earlier date as otherwise provided herein. After the Expiration Date or such earlier date, the Option shall be of no further force or effect and may not be exercised.
|
10.
|
Tax Consequences. The Grantee may incur tax liability as a result of the Grantee’s purchase or disposition of the Shares. THE GRANTEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.
|
11.
|
Entire Agreement: Governing Law. The Notice, the Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this Option Agreement (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with and governed by the internal laws of the State of Arizona without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Arizona to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
|
12.
|
Construction. The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be deemed a part of the Option for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
|
13.
|
Administration and Interpretation. Any question or dispute regarding the administration or interpretation of the Notice, the Plan or this Option Agreement shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.
|
14.
|
Venue and Waiver of Jury Trial. The Company, the Grantee, and the Grantee’s assignees pursuant to Section 8 (the “parties”) agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the District of Arizona (or should such court lack jurisdiction to hear such action, suit or proceeding, in an Arizona state court in the County of Maricopa) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 14 shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable.
|
15.
|
Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown in these instruments, or to such other address as such party may designate in writing from time to time to the other party.
|
Submitted by Grantee:
|
Accepted by:
|
|||
ELIO MOTORS, INC.
|
||||
an Arizona corporation
|
||||
By:
|
By:
|
|||
Name:
|
Name:
|
|||
Its:
|
||||
Date:
|
Date:
|
|||
Address:
|
Address: 2942 North 24th Street, Suite 114-700
|
|||
Phoenix, AZ 85016
|
||||
1.
|
Exercise of Option. Effective as of today, ______________, 20___ the undersigned (the “Grantee”) hereby elects to exercise the Grantee’s option to purchase _____________ shares of the Common Stock (the “Shares”) of Elio Motors, Inc. (the “Company”) under and pursuant to the Company’s 2016 Incentive and Nonstatutory Stock Option Plan, as amended from time to time (the “Plan”) and the [ ] Incentive [ ] Nonstatutory Stock Option Award Agreement (the “Option Agreement”) and Notice of Stock Option Award (the “Notice”) dated _____________, 20___.
|
2.
|
Representations of the Grantee. The Grantee acknowledges that the Grantee has received, read and understood the Notice, the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
|
3.
|
Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan.
|
4.
|
Delivery of Payment. The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(e) of the Option Agreement.
|
5.
|
Tax Consultation. The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the Grantee’s purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or disposition of the Shares and that the Grantee is not relying on the Company for any tax advice.
|
6.
|
Taxes. The Grantee agrees to satisfy all applicable foreign, federal, state and local income and employment tax withholding obligations and has made arrangements to satisfy such obligations. In the case of an Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty (30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from the date the Shares were transferred to the Grantee.
|
7.
|
Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors, administrators, successors and assigns.
|
8.
|
Construction. The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of this agreement for construction or interpretation. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
|
9.
|
Administration and Interpretation. The Grantee hereby agrees that any question or dispute regarding the administration or interpretation of this Exercise Notice shall be submitted by the Grantee or by the Company to the Administrator. The resolution of such question or dispute by the Administrator shall be final and binding on all persons.
|
10.
|
Governing Law; Severability. This Exercise Notice is to be construed in accordance with and governed by the internal laws of the State of Arizona without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Arizona to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable.
|
11.
|
Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, upon deposit for delivery by an internationally recognized express mail courier service or upon deposit in the United States mail by certified mail (if the parties are within the United States), with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party.
|
12.
|
Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this agreement.
|
13.
|
Entire Agreement. The Notice, the Plan and the Option Agreement are incorporated herein by reference and together with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee’s interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties.
|
Submitted by Grantee:
|
Accepted by:
|
|||
ELIO MOTORS, INC.
|
||||
an Arizona corporation
|
||||
By:
|
By:
|
|||
Name:
|
Name:
|
|||
Its:
|
||||
Date:
|
Date:
|
|||
Address:
|
Address: 2942 North 24th St, Suite 114-700
|
|||
Phoenix, AZ 85016
|
||||
Merchant:
|
Elio Motors, Inc.
|
Merchant Account No.:
|
1164460101181859796
|
Account Open date:
|
Oct 18, 2012
|
Guarantor Name:
|
Stuart Lichter
|
Guarantor Address:
|
|
Guarantor Date of Birth:
|
|
Guarantor Social Security Number:
|
Date:
|
||||
Acknowledged:
|
||||
Date:
|
||||
Witnessed and Notarized:
|
COMPANY:
|
||
Elio Motors, Inc.
|
||
By:
|
/s/ Paul Elio
|
|
Paul Elio, CEO
|
||
OPTIONEE:
|
||
/s/ Stuart Lichter
|
||
Stuart Lichter
|
“Company”
|
“Optionee”
|
|
ELIO MOTORS, INC.
|
||
By: /s/ Paul Elio
|
/s/ Stuart Lichter
|
|
Paul Elio, CEO
|
Stuart Lichter
|
Independent Contractor Consulting Agreement –page 1 of 6
|
Independent Contractor Consulting Agreement –page 2 of 6
|
Independent Contractor Consulting Agreement –page 3 of 6
|
Independent Contractor Consulting Agreement –page 4 of 6
|
Independent Contractor Consulting Agreement –page 5 of 6
|
“Company”
|
“Contractor”
|
|
ELIO MOTORS, INC.
|
||
By: /s/ Paul Elio
|
/s/ Hari Iyer
|
|
Paul Elio
|
Hari Iyer
|
|
President and CEO
|
Independent Contractor Consulting Agreement –page 6 of 6
|
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