UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM 20-F





[ 
 ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g)
OF THE SECURITIES EXCHANGE
ACT OF 1934





OR





[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
OF 1934





For the
fiscal year ended December 31,
2017





OR





[  
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
OF 1934





For the
transition period from _______________ to
_______________





OR





[  
] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
OF 1934





Date of
event requiring this shell company report
_______________





Commission
file number 333-214067





ELECTRAMECCANICA VEHICLES
CORP.


(Exact
name of Registrant specified in its charter)





Not
Applicable


(Translation
of Registrant’s name into English)





British Columbia,
Canada


(Jurisdiction
of incorporation or organization)





102 East 1st Avenue


Vancouver, British
Columbia, Canada, V5T 1A4


(Address
of principal executive offices)





Kulwant Sandher; (604)
428-7656; kulwant@electrameccanica.com


(Name,
Telephone, Email and/or Facsimile number and Address of Company
Contact Person)





Securities
registered or to be registered pursuant to Section 12(b) of the
Act.





Title
of Each Class
Name of
each exchange on which registeredNone
Not applicable





Securities
registered or to be registered pursuant to Section 12(g) of the
Act. None





Securities
for which there is a reporting obligation pursuant to Section 15(d)
of the Act.





Common Shares Without Par
Value


(Title
of Class)





Number of outstanding shares of each
of the issuer’s classes of capital or common stock as of the
close of business of the period covered by the annual
report.





47,588,209 Common Shares Without Par Value





Indicate
by check mark if the Registrant is a well-known seasoned issuer as
defined in Rule 405 of the Securities Act.


Yes
[ 
 ]           
No [X]





If this
report is an annual or transition report, indicate by check mark if
the Registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities
Exchange Act of 1934


Yes
[ 
 ]           
No [X]





Indicate
by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934during the preceding 12 months (or for such
shorter period that Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.


Yes
[  
]           
No [X]





Indicate
by check mark whether Registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files).


Yes
[X]           
No [   ]





Indicate
by check mark whether the Registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or an emerging
growth company. See definition of “accelerated filer,”
“large accelerated filer,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.





Large
Accelerated Filer [   ]
Accelerated
Filer [   ]Non
Accelerated Filer  [   ]
Emerging
Growth Company [X]





If an
emerging growth company that prepares its financial statements in
accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards pursuant to
Section 13(a) of the Exchange Act.  [  
]





Indicate
by check mark which basis of accounting the registrant has used to
prepare the financial statements included in this
filing:





U.S.
GAAP [   ]
International
Financial Reporting Standards as issued
Other
[   ]by the
International Accounting Standards Board [X]





If
“Other” has been checked in response to the previous
question, indicate by check mark which financial statement item the
registrant has elected to follow: Item 17[ ] Item 18 [ ] If this is
an annual report, indicate by check mark whether the Registrant is
a shell company (as defined in Rule 12b 2 of the Exchange
Act):


Yes
[ 
 ]           
No [X]





(APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS)





Indicate
by check mark whether Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of
the Securities Exchange Act
of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.





Not
applicable.




















TABLE OF CONTENTS





PagePART I
3ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
3ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
3ITEM 3.
KEY INFORMATION
3ITEM 4.
INFORMATION ON THE COMPANY
15ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
28ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
32ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
53ITEM 8.
FINANCIAL INFORMATION
56ITEM 9.
THE OFFER AND LISTING
56ITEM
10. ADDITIONAL INFORMATION
57ITEM
11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
70ITEM
12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES
72PART II
73ITEM
13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
73ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND
USE OF PROCEEDS
73ITEM
15. CONTROLS AND PROCEDURES
73ITEM
16. [RESERVED]
74ITEM
16A. AUDIT COMMITTEE FINANCIAL EXPERT
74ITEM
16B. CODE OF ETHICS
74ITEM
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
74ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
75ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
75ITEM
16F. CHANGE IN REGISTRANT’S CERTIFYING
ACCOUNTANT.
75ITEM
16G. CORPORATE GOVERNANCE.
75ITEM
16H. MINE SAFETY DISCLOSURE.
75PART III
76ITEM
17. FINANCIAL STATEMENTS
76ITEM
18. FINANCIAL STATEMENTS
76ITEM
19. EXHIBITS
77





1




















FORWARD LOOKING STATEMENTS





This
Annual Report on Form 20-F contains statements that constitute
“forward-looking statements”. Any statements that are
not statements of historical facts may be deemed to be
forward-looking statements. These statements appear in a number of
different places in this Annual Report and, in some cases, can be
identified by words such as “anticipates”,
“estimates”, “projects”,
“expects”, “contemplates”,
“intends”, “believes”, “plans”,
“may”, “will”, or their negatives or other
comparable words, although not all forward-looking statements
contain these identifying words. Forward-looking statements in this
Annual Report may include, but are not limited to, statements
and/or information related to: strategy, future operations, the
size and value of the order book and the number of orders, the
number and timing of building pre-production vehicles, the
projection of timing and delivery of SOLOs in the future, projected
costs, expected production capacity, expectations regarding demand
and acceptance of our products, estimated costs of machinery to
equip a new production facility, and trends in the market in which
we operate, plans and objectives of management.





Forward-looking
statements are based on the reasonable assumptions, estimates,
analysis and opinions made in light of our experience and our
perception of trends, current conditions and expected developments,
as well as other factors that we believe to be relevant and
reasonable in the circumstances at the date that such statements
are made, but which may prove to be incorrect. Management believes
that the assumption and expectations reflected in such
forward-looking statements are reasonable. Assumptions have been
made regarding, among other things: the Company’s ability to
build pre-production SOLOs and to begin production deliveries
within certain timelines; the Company’s expected production
capacity; prices for machinery to equip a new production facility,
labor costs and material costs, remaining consistent with the
Company’s current expectations; production of SOLOs meeting
expectations and being consistent with estimates; equipment
operating as anticipated; there being no material variations in the
current regulatory environment; and the Company’s ability to
obtain financing as and when required and on reasonable terms.
Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which may have been used.





Such
risks are discussed in Item 3.D “Risk Factors”. In
particular, without limiting the generality of the foregoing
disclosure, the statements contained in Item 4.B. –
“Business Overview”, Item 5 – “Operating
and Financial Review and Prospects” and Item 11 –
“Quantitative and Qualitative Disclosures About Market
Risk” are inherently subject to a variety of risks and
uncertainties that could cause actual results, performance or
achievements to differ significantly. Such risks, uncertainties and
other factors include but are not limited to:





●
 general economic
and business conditions, including changes in interest
rates;





●
 prices of other
electric vehicles, costs associated with manufacturing electric
vehicles and other economic conditions;





●
 natural
phenomena;





●
 actions by
government authorities, including changes in government
regulation;





●
 uncertainties
associated with legal proceedings;





●
 changes in the
electric vehicle market;





●
 future decisions by
management in response to changing conditions;





●
 the Company’s
ability to execute prospective business plans;





●
 misjudgments in the
course of preparing forward-looking statements;





●
 the Company ability
to raise sufficient funds to carry out its proposed business
plan;





●
 consumers’
willingness to adopt three-wheeled single passenger electric
vehicles;





●
 declines in the
range of the Company’s electric vehicles on a single charge
over time may negatively influence potential customers’
decisions to purchase such vehicles;





●
 developments in
alternative technologies or improvements in the internal combustion
engine;





●
 inability to keep
up with advances in electric vehicle technology;





●
 inability to
design, develop, market and sell new electric vehicles and services
that address additional market opportunities;





●
 dependency on
certain key personnel and any inability to retain and attract
qualified personnel;





●
 in experience in
mass-producing electric vehicles;





●
 inability to reduce
and adequately control operating costs;





●
 failure of the
Company’s vehicles to perform as expected;





●
 inexperience in
servicing electric vehicles;





●
 inability to
succeed in establishing, maintaining and strengthening the
Electrameccanica brand;





●
 disruption of
supply or shortage of raw materials;





●
 the unavailability,
reduction or elimination of government and economic
incentives;





●
 failure to manage
future growth effectively; and





●
 labor and
employment risks.





Although
management has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking statements, there may be other factors that cause
results not to be as anticipated, estimated or intended. There is
no assurance that forward-looking statements will prove to be
accurate, as actual results and future events could differ
materially from those anticipated in such forward-looking
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. We wish to advise you that these
cautionary remarks expressly qualify, in their entirety, all
forward-looking statements attributable to our Company or persons
acting on our Company’s behalf. The Company does not
undertake to update any forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors
affecting such statements, except as, and to the extent required
by, applicable securities laws. You should carefully review the
cautionary statements and risk factors contained in this Annual
Report and other documents that the Company may file from time to
time with the securities regulators.








2























PART I





ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS





Not
Applicable.





ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE





Not
Applicable.





ITEM 3. KEY INFORMATION





A. Selected financial
data





The selected historical consolidated financial information set
forth below has been derived from our financial statements for the
fiscal years ended December 31, 2017 and 2016.





Consolidated
Statement of Comprehensive LossYear
ended
December 31,
2017
Year
ended
December 31,
2016Revenues
$109,173
-Gross
Profit
$45,223
-Net and
Comprehensive Loss
$11,366,372
$8,973,347Loss per Share
– Basic and Diluted
$(0.35)
$(0.27)





Consolidated
Statements of Financial PositionDecember 31,
2017
December 31,
2016Cash
$8,610,996
$3,916,283Current
Assets
$10,007,684
$4,437,152Total
Assets
$12,661,381
$4,787,766Current
Liabilities
$3,354,675
$881,176Total
Liabilities
$7,010,365
$881,176Shareholders’
Equity (Deficiency)
$5,651,016
$3,906,590





Selected
Pro Forma
Financial Data





On
October 18, 2017, we acquired all of the issued share capital of
Intermeccanica pursuant to a Share Purchase Agreement in exchange
for a payment of $2.5 million. Intermeccanica is a custom car manufacturer with over 50 years of
expertise.





The
unaudited pro forma condensed combined financial information gives
effect to the acquisition as if it had been completed on January 1,
2017. Our historical consolidated financial information and that of
Intermeccanica have been adjusted in the unaudited pro forma
condensed combined financial information to give effect to events
that are (1) directly attributable to the acquisition,
(2) factually supportable, and (3) expected to have a
continuing impact on the combined results. The unaudited pro forma
adjustments are based upon currently available information and
assumptions that we believe to be reasonable. The pro forma
adjustments and related assumptions are described in the notes
accompanying the unaudited pro forma condensed combined financial
information included elsewhere in this report.





You
should read this unaudited pro forma condensed combined financial
information in conjunction with our financial and the accompanying
notes, the pro forma financial statements the accompanying notes
and the section of this report entitled "Operating and Financial Review and
Prospects", each of which are included elsewhere in this
report.





3














Year
Ended December 31, 2017Intermeccanica
Electrameccanica
Adjustments
TotalRevenue
$1,179,595
$-
$(501,461)
$678,134Cost
of revenue
758,948
-
(385,971)
372,977Gross
profit
420,647
-
(115,490)
305,157Operating
expensesAmortization
26,142
122,468

148,610General and
administrative expenses
373,947
2,314,714
(95,941)
2,592,720Research and
development expenses
-
4,358,285
(19,521)
4,338,764Sales and marketing
expenses
4,432
630,999

635,431Stock-based
compensation expense
-
889,511

889,511Share-based payment
expense
-
-1,085,716

1,085,716(404,521)
(9,401,693)
(115,462)
(9,690,752)Income/(Loss)
before other items
16,126
(9,401,693)
(28)
(9,385,595)Other
itemsAccretion interest
expense
-
69,561

69,561Changes in fair
value of warrant derivative
-
186,269

186,269Finder’s fee
on convertible loan
-
258,542

258,542Impairment of
goodwill
-
-
1,342,794
1,342,794Foreign exchange
(gain)/loss
(11,806)
22,068

10,262Net
and comprehensive loss
$27,932
$(9,938,133)
$(1,342,766)
$(11,253,023)





B. Capitalization and
Indebtedness





Not
applicable.





C. Reasons for the
offer and use of proceeds





Not
applicable.





D. Risk
Factors





An investment in our common
shares carries a significant degree of
risk. You should carefully consider the following risks, as well as
the other information contained in this prospectus, including our
financial statements and related notes included elsewhere in this
prospectus, before you decide to purchase our shares. Any one of
these risks and uncertainties has the potential to cause material
adverse effects on our business, prospects, financial condition and
operating results which could cause actual results to differ
materially from any forward-looking statements expressed by us and
a significant decrease in the value of our common shares. Refer to
“Forward-Looking Statements”.





We have not be successful in preventing the material adverse
effects that any of the following risks and uncertainties may
cause. These potential risks and uncertainties may not be a
complete list of the risks and uncertainties facing us. There may
be additional risks and uncertainties that we are presently unaware
of, or presently consider immaterial, that may become material in
the future and have a material adverse effect on us. You could lose
all or a significant portion of your investment due to any of these
risks and uncertainties.





Risks Related to our Business and Industry





We have a limited operating history and have not yet generated any
revenues.





Our limited operating history makes evaluating our business and
future prospects difficult. We were formed in February 2015, and we
have not yet begun mass production or the commercial delivery of
our first vehicle. To date, we have no revenues from the sale of
electric vehicles as any amounts received from the sale of
our pre-production electric vehicles were netted off against
research and development costs as cost recovery and minimal revenue
from the sale of custom cares. We
intend in the longer term to derive revenues from the sales of our
SOLO vehicle, our Super SOLO vehicle, our Tofino vehicle and other
intended electric vehicles. The SOLO and Tofino are in development,
and we do not expect to start delivering to the SOLO customers
until the third quarter of 2018 or to the Tofino customers until
2019. Our vehicles require significant investment prior to
commercial introduction and may never be successfully developed or
commercially successful.





4














We expect that we will experience an increase in losses prior to
the launch of the SOLO, the Super SOLO or the Tofino.





For the fiscal year ended December 31, 2017, we generated a net and
comprehensive loss of $11,366,372, bringing our accumulated deficit
to $21,335,552. We anticipate
generating a significant loss for the current fiscal year. The
independent auditor’s report on our financial statements
includes an explanatory paragraph relating to our ability to
continue as a going concern.





We have minimal revenues, are currently in debt and expect
significant increases in costs and expenses to forestall profits
for the foreseeable future, even if we generate revenues in the
near term. Even if we are able to successfully develop the SOLO,
the Super SOLO or the Tofino, they might not become commercially
successful. If we are to ever achieve profitability we must have a
successful commercial introduction and acceptance of our vehicles,
which may not occur.





We expect the rate at which we will incur losses to increase
significantly in future periods from current levels as
we:





●
design,
develop and manufacture our vehicles and their
components;●
develop
and equip our manufacturing facility;●
build
up inventories of parts and components for the SOLO, the Super SOLO
and the Tofino;●
open
Electrameccanica stores;●
expand
our design, development, maintenance and repair
capabilities;●
develop
and increase our sales and marketing activities; and●
develop
and increase our general and administrative functions to support
our growing operations.





Because we will incur the costs and expenses from these efforts
before we receive any revenues with respect thereto, our losses in
future periods will be significantly greater than the losses we
would incur if we developed the business more slowly. In addition,
we may find that these efforts are more expensive than we currently
anticipate or that these efforts may not result in profits or even
revenues, which would further increase our losses.





We currently have negative operating cash flows, and if we are
unable to generate positive operating cash flows in the future our
viability as an operating business will be adversely
affected.





We have made significant up-front investments in research and
development, sales and marketing, and general and administrative
expenses to rapidly develop and expand our business. We are
currently incurring expenditures related to our operations that
have generated a negative operating cash flow. Operating cash flow
may decline in certain circumstances, many of which are beyond our
control. We might not generate sufficient revenues in the near
future. Because we continue to incur such significant future
expenditures for research and development, sales and marketing, and
general and administrative expenses, we may continue to experience
negative cash flow until we reach a sufficient level of sales with
positive gross margins to cover operating expenses. An inability to
generate positive cash flow until we reach a sufficient level of
sales with positive gross margins to cover operating expenses or
raise additional capital on reasonable terms will adversely affect
our viability as an operating business.





To carry out our proposed business plan to develop, manufacture,
sell and service electric vehicles, we will require a significant
amount of capital.





To carry out our proposed business plan for the next twelve months,
we estimate that we will need approximately $4.8 million at our
current burn rate and an additional $22.7 million. We intend to
raise our cash requirements for the next 12 months through the sale
of our equity securities and, if needed, shareholder loans. If we
are unsuccessful in raising enough funds through such
capital-raising efforts, we may review other financing
possibilities such as bank loans. Financing might not be available
to us or, if available, only on terms that are not acceptable to
us.





Our ability to obtain the necessary financing to carry out our
business plan is subject to a number of factors, including general
market conditions and investor acceptance of our business plan.
These factors may make the timing, amount, terms and conditions of
such financing unattractive or unavailable to us. If we are unable
to raise sufficient funds, we will have to significantly reduce our
spending, delay or cancel our planned activities or substantially
change our current corporate structure. We might not be able to
obtain any funding, and we might not have sufficient resources to
conduct our business as projected, both of which could mean that we
would be forced to curtail or discontinue our
operations.





5














Terms of subsequent financings may adversely impact your
investment.





We may have to engage in common equity, debt, or preferred stock
financing in the future. Your rights and the value of your
investment in the units could be reduced. Interest on debt
securities could increase costs and negatively impacts operating
results. Preferred stock could be issued in series from time to
time with such designation, rights, preferences, and limitations as
needed to raise capital. The terms of preferred stock could be more
advantageous to those investors than to the holders of common
shares. Likewise, if we issue warrants as part of any future
financing, the terms of those warrants could be more advantageous
to those investors than to the holders of warrants purchase in the
units. In addition, if we need to raise more equity capital from
the sale of common shares, institutional or other investors may
negotiate terms at least as, and possibly more, favorable than the
terms of your investment. Common shares which we sell could be sold into any market
which develops, which could adversely affect the market
price.





Our future growth depends upon consumers’ willingness to
adopt three-wheeled single passenger electric
vehicles.





Our growth highly depends upon the adoption by consumers of, and we
are subject to an elevated risk of any reduced demand for,
alternative fuel vehicles in general and electric vehicles in
particular. If the market for three-wheeled single passenger
electric vehicles does not develop as we expect or develops more
slowly than we expect, our business, prospects, financial condition
and operating results will be negatively impacted. The market for
alternative fuel vehicles is relatively new, rapidly evolving,
characterized by rapidly changing technologies, price competition,
additional competitors, evolving government regulation and industry
standards, frequent new vehicle announcements and changing consumer
demands and behaviors. Factors that may influence the adoption of
alternative fuel vehicles, and specifically electric vehicles,
include:





●
perceptions
about electric vehicle quality, safety (in particular with respect
to lithium-ion battery packs), design, performance and cost,
especially if adverse events or accidents occur that are linked to
the quality or safety of electric vehicles;●
perceptions
about vehicle safety in general, in particular safety issues that
may be attributed to the use of advanced technology, including
vehicle electronics and braking systems;●
the
limited range over which electric vehicles may be driven on a
single battery charge;●
the
decline of an electric vehicle’s range resulting from
deterioration over time in the battery’s ability to hold a
charge;●
concerns
about electric grid capacity and reliability, which could derail
our efforts to promote electric vehicles as a practical solution to
vehicles which require gasoline;●
the
availability of alternative fuel vehicles, including plug-in hybrid
electric vehicles;●
improvements
in the fuel economy of the internal combustion engine;●
the
availability of service for electric vehicles;●
the
environmental consciousness of consumers;●
volatility
in the cost of oil and gasoline;●
government
regulations and economic incentives promoting fuel efficiency and
alternate forms of energy;●
access
to charging stations, standardization of electric vehicle charging
systems and consumers’ perceptions about convenience and cost
to charge an electric vehicle;●
the
availability of tax and other governmental incentives to purchase
and operate electric vehicles or future regulation requiring
increased use of nonpolluting vehicles; and●
perceptions
about and the actual cost of alternative fuel.





The influence of any of the factors described above may cause
current or potential customers not to purchase our electric
vehicles, which would materially adversely affect our business,
operating results, financial condition and prospects.





6














The range of our electric vehicles on a single charge declines over
time which may negatively influence potential customers’
decisions whether to purchase our vehicles.





The range of our electric vehicles on a single charge declines
principally as a function of usage, time and charging patterns. For
example, a customer’s use of their vehicle as well as the
frequency with which they charge the battery of their vehicle can
result in additional deterioration of the battery’s ability
to hold a charge. We currently expect that our battery pack will
retain approximately 85% of its ability to hold its initial charge
after approximately 3,000 charge cycles and 8 years, which will
result in a decrease to the vehicle’s initial range. Such
battery deterioration and the related decrease in range may
negatively influence potential customer decisions whether to
purchase our vehicles, which may harm our ability to market and
sell our vehicles.





Developments in alternative technologies or improvements in the
internal combustion engine may materially adversely affect the
demand for our electric vehicles.





Significant developments in alternative technologies, such as
advanced diesel, ethanol, fuel cells or compressed natural gas, or
improvements in the fuel economy of the internal combustion engine,
may materially and adversely affect our business and prospects in
ways we do not currently anticipate. For example, fuel which is
abundant and relatively inexpensive in North America, such as
compressed natural gas, may emerge as consumers’ preferred
alternative to petroleum based propulsion. Any failure by us to
develop new or enhanced technologies or processes, or to react to
changes in existing technologies, could materially delay our
development and introduction of new and enhanced electric vehicles,
which could result in the loss of competitiveness of our vehicles,
decreased revenue and a loss of market share to
competitors.





If we are unable to keep up with advances in electric vehicle
technology, we may suffer a decline in our competitive
position.





We may be unable to keep up with changes in electric vehicle
technology and, as a result, may suffer a decline in our
competitive position. Any failure to keep up with advances in
electric vehicle technology would result in a decline in our
competitive position which would materially and adversely affect
our business, prospects, operating results and financial condition.
Our research and development efforts may not be sufficient to adapt
to changes in electric vehicle technology. As technologies change
we plan to upgrade or adapt our vehicles and introduce new models
to continue to provide vehicles with the latest technology, in
particular battery cell technology. However, our vehicles may not
compete effectively with alternative vehicles if we are not able to
source and integrate the latest technology into our vehicles. For
example, we do not manufacture battery cells which makes us depend
upon other suppliers of battery cell technology for our battery
packs.





If we are unable to design, develop, market and sell new electric
vehicles and services that address additional market opportunities,
our business, prospects and operating results will
suffer.





We may not be able to successfully develop new electric vehicles
and services, address new market segments or develop a
significantly broader customer base. To date, we have focused our
business on the sale of the SOLO, a three-wheeled single passenger
electric vehicle and have targeted mainly urban residents of modest
means. We will need to address additional markets and expand our
customer demographic to further grow our business. Our failure to
address additional market opportunities would harm our business,
financial condition, operating results and prospects.





Demand in the vehicle industry is highly volatile.





Volatility of demand in the vehicle industry may materially and
adversely affect our business, prospects, operating results and
financial condition. The markets in which we will be competing have
been subject to considerable volatility in demand in recent
periods. Demand for automobile sales depends to a large extent on
general, economic, political and social conditions in a given
market and the introduction of new vehicles and technologies. As a
new start-up manufacturer, we will have fewer financial resources
than more established vehicle manufacturers to withstand changes in
the market and disruptions in demand.





We depend on a third-party for our near-term manufacturing
needs.





In October 2017, we entered into a manufacturing agreement with
Zongshen, a company located in the People’s Republic of
China, to produce 75,000 SOLO vehicles over the next three years.
The delivery of SOLO vehicles to our future customers and the
revenue derived therefrom depends on Zongshen’s ability to
fulfill its obligations under that manufacturing agreement.
Zongshen’s ability to fulfill its obligations is outside of
our control and depends on a variety of factors including
Zongshen’s operations, Zongshen’s financial condition
and geopolitical and economic risks that could affect China. If
Zongshen is unable to fulfill its obligations or is only able to
partially fulfill its obligations, we will not be able to sell our
SOLO vehicle in the volumes anticipated on the timetable that we
anticipate, if at all.





7














We do not currently have arrangements in place that will allow us
to fully execute our business plan.





To sell our vehicles as envisioned, we will need to enter into
agreements and arrangements that are not currently in place. These
include, entering into agreements with dealerships, arranging for
the transportation of SOLOs delivered pursuant to our manufacturing
agreement with Zongshen, obtaining battery and other essential
supplies in the quantities that we require, entering into
manufacturing agreements for the Super SOLO and the Tofino and
acquiring additional manufacturing capability. If we are unable to
enter into such agreements or are only able to do so on terms that
are unfavorable to us, we may not be able to fully carry out our
business plans.





We depend on certain key personnel, and our success will depend on
our continued ability to retain and attract such qualified
personnel.





Our success depends on the efforts, abilities and continued service
of Jerry Kroll - Chief Executive Officer, Henry Reisner - Chief
Operating Officer, Kulwant Sandher - Chief Financial Officer, and
Ed Theobald – General Manager. A number of these key
employees and consultants have significant experience in the
automobile manufacturing industry. A loss of service from any one
of these individuals may adversely affect our operations, and we
may have difficulty or may not be able to locate and hire a
suitable replacement. We have not obtained any “key
person” insurance on certain key personnel.





Since we have little experience in mass-producing electric
vehicles, any delays or difficulties in transitioning from
producing custom vehicles to mass-producing vehicles may have a
material adverse effect on our business, prospects and operating
results.





Our management team has experience in producing custom designed
vehicles and is now switching focus to mass producing electric
vehicles in a rapidly evolving and competitive market. If we are
unable to implement our business plans in the timeframe estimated
by management and successfully transition into a mass-producing
electric vehicle manufacturing business, then our business,
prospects, operating results and financial condition will be
negatively impacted and our ability to grow our business will be
harmed.





We are subject to numerous environmental and health and safety laws
and any breach of such laws may have a material adverse effect on
our business and operating results.





We are subject to numerous environmental and health and safety
laws, including statutes, regulations, bylaws and other legal
requirements. These laws relate to the generation, use, handling,
storage, transportation and disposal of regulated substances,
including hazardous substances (such as batteries), dangerous goods
and waste, emissions or discharges into soil, water and air,
including noise and odors (which could result in remediation
obligations), and occupational health and safety matters, including
indoor air quality. These legal requirements vary by location and
can arise under federal, provincial, state or municipal laws. Any
breach of such laws and/or requirements would have a material
adverse effect on our company and its operating
results.





Our vehicles are subject to motor vehicle standards and the failure
to satisfy such mandated safety standards would have a material
adverse effect on our business and operating results.





All vehicles sold must comply with federal, state and provincial
motor vehicle safety standards. In both Canada and the United
States vehicles that meet or exceed all federally mandated safety
standards are certified under the federal regulations. In this
regard, Canadian and U.S. motor vehicle safety standards are
substantially the same. Rigorous testing and the use of approved
materials and equipment are among the requirements for achieving
federal certification. Failure by us to have the SOLO, the Super
Solo, the Tofino or any future model electric vehicle satisfy motor
vehicle standards would have a material adverse effect on our
business and operating results.





If we are unable to reduce and adequately control the costs
associated with operating our business, including our costs of
manufacturing, sales and materials, our business, financial
condition, operating results and prospects will
suffer.





If we are unable to reduce and/or maintain a sufficiently low level
of costs for designing, manufacturing, marketing, selling and
distributing and servicing our electric vehicles relative to their
selling prices, our operating results, gross margins, business and
prospects could be materially and adversely impacted.





If our vehicles fail to perform as expected, our ability to
develop, market and sell our electric vehicles could be
harmed.





Our vehicles may contain defects in design and manufacture that may
cause them not to perform as expected or that may require repair.
For example, our vehicles use a substantial amount of software code
to operate. Software products are inherently complex and often
contain defects and errors when first introduced. While we have
performed extensive internal testing, we currently have a very
limited frame of reference by which to evaluate the performance of
our SOLO in the hands of our customers and currently have no frame
of reference by which to evaluate the performance of our vehicles
after several years of customer driving. A similar evaluation of
the Super SOLO and the Tofino is further behind.





8














We have very limited experience servicing our vehicles. If we are
unable to address the service requirements of our future customers
our business will be materially and adversely
affected.





If we are unable to successfully address the service requirements
of our future customers our business and prospects will be
materially and adversely affected. In addition, we anticipate the
level and quality of the service we will provide our customers will
have a direct impact on the success of our future vehicles. If we
are unable to satisfactorily service our customers, our ability to
generate customer loyalty, grow our business and sell additional
vehicles could be impaired.





We have very limited experience servicing our vehicles. As
of April 11, 2018, we had not
sold any vehicles and had only delivered four pre-production
vehicles to customers. We do not plan for mass production to begin
for SOLO vehicles until the end of the second quarter or during the
third quarter of 2018 or for the Tofino until 2019. The total
number of SOLOs that we have produced is 25. Throughout its
history, Intermeccanica has produced approximately 2,500 cars,
which includes, providing after sales support and servicing. We do
not have any experience servicing the SOLO or the Tofino as a
limited number of SOLOS have been produced and the Tofino has not
yet been produced. Servicing electric vehicles is different than
servicing vehicles with internal combustion engines and requires
specialized skills, including high voltage training and servicing
techniques.





We may not succeed in establishing, maintaining and strengthening
the Electrameccanica brand, which would materially and adversely
affect customer acceptance of our vehicles and components and our
business, revenues and prospects.





Our business and prospects heavily depend on our ability to
develop, maintain and strengthen the Electrameccanica brand. Any
failure to develop, maintain and strengthen our brand may
materially and adversely affect our ability to sell our planned
electric vehicles. If we are not able to establish, maintain and
strengthen our brand, we may lose the opportunity to build a
critical mass of customers. Promoting and positioning our brand
will likely depend significantly on our ability to provide high
quality electric cars and maintenance and repair services, and we
have very limited experience in these areas. In addition, we expect
that our ability to develop, maintain and strengthen the
Electrameccanica brand will also depend heavily on the success of
our marketing efforts. To date, we have limited experience with
marketing activities as we have relied primarily on the internet,
word of mouth and attendance at industry trade shows to promote our
brand. To further promote our brand, we may be required to change
our marketing practices, which could result in substantially
increased advertising expenses, including the need to use
traditional media such as television, radio and print. The
automobile industry is intensely competitive, and we may not be
successful in building, maintaining and strengthening our brand.
Many of our current and potential competitors, particularly
automobile manufacturers headquartered in Detroit, Japan and the
European Union, have greater name recognition, broader customer
relationships and substantially greater marketing resources than we
do. If we do not develop and maintain a strong brand, our business,
prospects, financial condition and operating results will be
materially and adversely impacted.





Increases in costs, disruption of supply or shortage of raw
materials, in particular lithium-ion cells, could harm our
business.





We may experience increases in the cost or a sustained interruption
in the supply or shortage of raw materials. Any such increase or
supply interruption could materially negatively impact our
business, prospects, financial condition and operating results. We
use various raw materials in our business including aluminum,
steel, carbon fiber, non-ferrous metals such as copper and cobalt.
The prices for these raw materials fluctuate depending on market
conditions and global demand for these materials and could
adversely affect our business and operating results. For instance,
we are exposed to multiple risks relating to price fluctuations for
lithium-ion cells. These risks include:





●
the
inability or unwillingness of current battery manufacturers to
build or operate battery cell manufacturing plants to supply the
numbers of lithium-ion cells required to support the growth of the
electric or plug-in hybrid vehicle industry as demand for such
cells increases;●
disruption in the
supply of cells due to quality issues or recalls by the battery
cell manufacturers; and●
an
increase in the cost of raw materials, such as cobalt, used in
lithium-ion cells.





Our business depends on the continued supply of battery cells for
our vehicles. We do not currently have any agreements for the
supply of batteries and depend upon the open market for their
procurement. Any disruption in the supply of battery cells from our
supplier could temporarily disrupt the planned production of our
vehicles until such time as a different supplier is fully
qualified. Moreover, battery cell manufacturers may choose to
refuse to supply electric vehicle manufacturers to the extent they
determine that the vehicles are not sufficiently safe. Furthermore,
current fluctuations or shortages in petroleum and other economic
conditions may cause us to experience significant increases in
freight charges and raw material costs. Substantial increases in
the prices for our raw materials would increase our operating
costs, and could reduce our margins if we cannot recoup the
increased costs through increased electric vehicle prices. We might
not be able to recoup increasing costs of raw materials by
increasing vehicle prices. We have also already announced an
estimated price for the base model of our planned SOLO, Super SOLO
and Tofino. However, any attempts to increase the announced or
expected prices in response to increased raw material costs could
be viewed negatively by our potential customers, result in
cancellations of SOLO, Super SOLO and Tofino reservations and could
materially adversely affect our brand, image, business, prospects
and operating results.





9














The unavailability, reduction or elimination of government and
economic incentives could have a material adverse effect on our
business, financial condition, operating results and
prospects.





Any reduction, elimination or discriminatory application of
government subsidies and economic incentives because of policy
changes, the reduced need for such subsidies and incentives due to
the perceived success of the electric vehicle, fiscal tightening or
other reasons may result in the diminished competitiveness of the
alternative fuel vehicle industry generally or our electric
vehicles in particular. This could materially and adversely affect
the growth of the alternative fuel automobile markets and our
business, prospects, financial condition and operating
results.





If we fail to manage future growth effectively, we may not be able
to market and sell our vehicles successfully.





Any failure to manage our growth effectively could materially and
adversely affect our business, prospects, operating results and
financial condition. We plan to expand our operations in the near
future in connection with the planned production of our vehicles.
Our future operating results depend to a large extent on our
ability to manage this expansion and growth successfully. Risks
that we face in undertaking this expansion include:





●
training new
personnel;●
forecasting
production and revenue;●
controlling
expenses and investments in anticipation of expanded
operations;●
establishing or
expanding design, manufacturing, sales and service
facilities;●
implementing and
enhancing administrative infrastructure, systems and
processes;●
addressing new
markets; and●
establishing
international operations.





We intend to continue to hire a number of additional personnel,
including design and manufacturing personnel and service
technicians for our electric vehicles. Competition for individuals
with experience designing, manufacturing and servicing electric
vehicles is intense, and we may not be able to attract, assimilate,
train or retain additional highly qualified personnel in the
future. The failure to attract, integrate, train, motivate and
retain these additional employees could seriously harm our business
and prospects.





Our business may be adversely affected by labor and union
activities.





Although none of our employees are currently represented by a labor
union, it is common throughout the automobile industry generally
for many employees at automobile companies to belong to a union,
which can result in higher employee costs and increased risk of
work stoppages. We have a manufacturing agreement with Chongqing
Zongshen Automobile Co., Ltd. to produce 75,000 SOLO vehicles over
the next three years. Zongshen’s workforce is not currently
unionized, though they may become so in the future or industrial
stoppages could occur in the absence of a union. We also directly
and indirectly depend upon other companies with unionized work
forces, such as parts suppliers and trucking and freight companies,
and work stoppages or strikes organized by such unions could have a
material adverse impact on our business, financial condition or
operating results. If a work stoppage occurs within our business,
that of Zongshen or that of our key suppliers, it could delay the
manufacture and sale of our electric vehicles and have a material
adverse effect on our business, prospects, operating results or
financial condition. Additionally, if we expand our business to
include full in-house manufacturing of our vehicles, our employees
might join or form a labor union and we may be required to become a
union signatory.





We may become subject to product liability claims, which could harm
our financial condition and liquidity if we are not able to
successfully defend or insure against such claims.





We may become subject to product liability claims, which could harm
our business, prospects, operating results and financial condition.
The automobile industry experiences significant product liability
claims and we face inherent risk of exposure to claims in the event
our vehicles do not perform as expected or malfunction resulting in
personal injury or death. Our risks in this area are particularly
pronounced given we have limited field experience of our vehicles.
A successful product liability claim against us could require us to
pay a substantial monetary award. Moreover, a product liability
claim could generate substantial negative publicity about our
vehicles and business and inhibit or prevent commercialization of
other future vehicle candidates which would have material adverse
effect on our brand, business, prospects and operating results. We
plan to maintain product liability insurance for all our vehicles
with annual limits of approximately $5 million on a claims-made
basis, but any such insurance might not be sufficient to cover all
potential product liability claims. Any lawsuit seeking significant
monetary damages either in excess of our coverage, or outside of
our coverage, may have a material adverse effect on our reputation,
business and financial condition. We may not be able to secure
additional product liability insurance coverage on commercially
acceptable terms or at reasonable costs when needed, particularly
if we do face liability for our products and are forced to make a
claim under our policy.





10














Our patent applications may not result in issued patents, which may
have a material adverse effect on our ability to prevent others
from interfering with our commercialization of our
products.





The status of patents involves complex legal and factual questions
and the breadth and effectiveness of patented claims is uncertain.
We cannot be certain that we are the first creator of inventions
covered by pending patent applications or the first to file patent
applications on these inventions, nor can we be certain that our
pending patent applications will result in issued patents or that
any of our issued patents will afford sufficient protection against
someone creating a knockoff of our products, or as a defensive
portfolio against a competitor who claims that we are infringing
its patents. In addition, patent applications filed in foreign
countries are subject to laws, rules and procedures that differ
from those of the United States, and thus we cannot be certain that
foreign patent applications, if any, will result in issued patents
in those foreign jurisdictions or that such patents can be
effectively enforced, even if they relate to patents issued in the
U.S. In addition, others may obtain patents that we need to take a
license to or design around, either of which would increase costs
and may adversely affect our business, prospects, financial
condition and operating results.





We may need to defend ourselves against patent or trademark
infringement claims, which may be time-consuming and would cause us
to incur substantial costs.





Companies, organizations or individuals, including our competitors,
may hold or obtain patents, trademarks or other proprietary rights
that would prevent, limit or interfere with our ability to make,
use, develop, sell or market our vehicles or components, which
could make it more difficult for us to operate our business. From
time to time, we may receive communications from holders of patents
or trademarks regarding their proprietary rights. Companies holding
patents or other intellectual property rights may bring suits
alleging infringement of such rights or otherwise assert their
rights and urge us to take licenses. In addition, if we are
determined to have infringed upon a third party’s
intellectual property rights, we may be required to do one or more
of the following:





●
cease
selling, incorporating certain components into, or using vehicles
or offering goods or services that incorporate or use the
challenged intellectual property;●
pay
substantial damages;●
seek a
license from the holder of the infringed intellectual property
right, which license may not be available on reasonable terms or at
all;●
redesign our
vehicles or other goods or services; or●
establish and
maintain alternative branding for our products and
services.





In the event of a successful claim of infringement against us and
our failure or inability to obtain a license to the infringed
technology or other intellectual property right, our business,
prospects, operating results and financial condition could be
materially adversely affected. In addition, any litigation or
claims, whether or not valid, could result in substantial costs,
negative publicity and diversion of resources and management
attention.





You may face difficulties in protecting your interests, and your
ability to protect your rights through the U.S. federal courts may
be limited because we are incorporated under the laws of the
Province of British Columbia, a substantial portion of our assets
are in Canada and all of our directors and executive officers
reside outside the United States





We are organized under the laws of theBusiness Corporations
Act(British Columbia)
(the “Business Corporation Act”) and our executive
offices are located outside of the United States in Vancouver,
British Columbia. All of our officers, our auditor and all but one
of our directors reside outside the United States. In addition, a
substantial portion of their assets and our assets are located
outside of the United States. As a result, you may have difficulty
serving legal process within the United States upon us or any of
these persons. You may also have difficulty enforcing, both in and
outside of the United States, judgments you may obtain in U.S.
courts against us or these persons in any action, including actions
based upon the civil liability provisions of U.S. Federal or state
securities laws. Furthermore, there is substantial doubt as to the
enforceability in Canada against us or against any of our
directors, officers and the expert named in this prospectus who are
not residents of the United States, in original actions or in
actions for enforcement of judgments of U.S. courts, of liabilities
based solely upon the civil liability provisions of the U.S.
federal securities laws. In addition, shareholders in British
Columbia companies may not have standing to initiate a shareholder
derivative action in U.S. federal courts.





As a result, our public shareholders may have more difficulty in
protecting their interests through actions against us, our
management, our directors or our major shareholders than would
shareholders of a corporation incorporated in a jurisdiction in the
United States.





11














Risks Related to Our Common Shares





Our executive officers and directors beneficially own 70.8% of our
common shares.





Our executive officers and directors beneficially own, in the
aggregate, 70.8% of our common shares, which includes shares that
our executive officers and directors have the right to acquire
pursuant to warrants and stock options which have vested. As a
result, they will be able to exercise a significant level of
control over all matters requiring shareholder approval, including
the election of directors, amendments to our Articles and approval
of significant corporate transactions. This control could have the
effect of delaying or preventing a change of control of our company
or changes in management and will make the approval of certain
transactions difficult or impossible without the support of these
shareholders.





The continued sale of our equity securities will dilute the
ownership percentage of our existing stockholders and may decrease
the market price for our common shares.





Our Notice of Articles authorize the issuance of an unlimited
number of common shares and the
issuance of preferred shares. The Board of Directors has the
authority to issue additional shares of our capital stock to
provide additional financing in the future and designate the rights
of the preferred shares, which may include voting, dividend,
distribution or other rights that are preferential to those held by
the common shareholders. The issuance of any such common or
preferred shares may result in a reduction of the book value or
market price, if one exists at the time, of the outstanding common
shares. Given our lack of revenues, we will likely have to issue
additional equity securities to obtain working capital we require
for the next 12 months. Our efforts to fund our intended business
plans will therefore result in dilution to our existing
stockholders. If we do issue any such additional common shares,
such issuance also will cause a reduction in the proportionate
ownership and voting power of all other stockholders. As a result
of such dilution, if you acquire common shares, your proportionate
ownership interest and voting power could be decreased. Further,
any such issuances could result in a change of control or a
reduction in the market price for our common
shares.





Additionally, we have approximately 35,244,271 vested options and
23,713,716 warrants outstanding as of December 31, 2017. The
exercise price of the majority of these options and warrants is
significantly below our current market price. If the holders of
these options and warrants elect to exercise them, your ownership
position will be diluted as may be the per share value at which you
purchased our shares. As a result, the market value of our shares
could significantly decrease as well.





Issuances of our preferred stock may adversely affect the rights of
the holders of our common shares and reduce the value of our common
shares.





Our Notice of Articles authorize the issuance of an unlimited
number of shares of preferred stock. Our Board of Directors has the
authority to create one or more series of preferred stock and,
without shareholder approval, issue shares of preferred stock with
rights superior to the rights of the holders of common
shares. As a result, shares of
preferred stock could be issued quickly and easily, adversely
affecting the rights of holder of common shares and could be issued with terms calculated
to delay or prevent a change in control or make removal of
management more difficult. Although we currently have no plans to
create any series of preferred stock and have no present plans to
issue any shares of preferred stock, any creation and issuance of
preferred stock in the future could adversely affect the rights of
the holders of common shares and reduce the value of our common
shares.





The market price of our common shares may be volatile and may
fluctuate in a way that is disproportionate to our operating
performance.





Our common shares began trading
on the OTCQB in September 2017. The volume of trading has been low
and the share price has fluctuated significantly. Although we have
applied to list our common shares on the Nasdaq Capital Market,
such listing might not be approved or, if approved, affect the
volume or price volatility of our common shares. The value of your
investment could decline due to the impact of any of the following
factors upon the market price of our common
shares:





●
sales
or potential sales of substantial amounts of our common
shares;●

announcements
about us or about our competitors;●

litigation
and other developments relating to our patents or other proprietary
rights or those of our competitors;●

conditions
in the automobileindustry;●

governmental
regulation and legislation;●

variations
in our anticipated or actual operating results;●

change
in securities analysts’ estimates of our performance, or our
failure to meet analysts’ expectations;●

change
in general economic trends; and●

investor
perception of our industry or our prospects.





Many of these factors are beyond our control. The stock markets in
general, and the market for automobile companies in
particular, have historically experienced extreme price and volume
fluctuations. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies.
These broad market and industry factors could reduce the market
price of our common shares, regardless of our actual operating
performance.





12














We do not intend to pay dividends and there will thus be fewer ways
in which you are able to make a gain on your
investment.





We have never paid any cash or stock dividends and we do not intend
to pay any dividends for the foreseeable future. To the extent that
we require additional funding currently not provided for in our
financing plan, our funding sources may prohibit the payment of any
dividends. Because we do not intend to declare dividends, any gain
on your investment will need to result from an appreciation in the
price of our common shares. There will therefore be fewer ways in
which you are able to make a gain on your investment.





Because the SEC imposes additional sales practice requirements on
brokers who deal in securities that are deemed penny stocks, some
brokers may be unwilling to trade our securities. This means that
you may have difficulty reselling your shares, which may cause the
value of your investment to decline.





Our shares are classified as penny stocks and are covered by
section 15(g) of the Exchange Act, which imposes additional sales
practice requirements on broker-dealers who sell our securities in
the aftermarket. For sales of our securities, broker-dealers must
make a special suitability determination and receive a written
agreement from you prior to making a sale on your behalf. Because
of the imposition of the foregoing additional sales practices, it
is possible that broker-dealers will not want to make a market in
our shares. This could prevent you from reselling your shares and
may cause the value of your investment to decline.





FINRA sales practice requirements may limit your ability to buy and
sell our common shares, which could depress the price of our
shares.





FINRA rules require broker-dealers to have reasonable grounds for
believing that an investment is suitable for a customer before
recommending that investment to the customer. Prior to recommending
speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain
information about the customer’s financial status, tax status
and investment objectives, among other things. Under
interpretations of these rules, FINRA believes that there is a high
probability such speculative low-priced securities will not be
suitable for at least some customers. Thus, FINRA requirements may
make it more difficult for broker-dealers to recommend that their
customers buy our common shares, which may limit your ability to
buy and sell our shares, have an adverse effect on the market for
our shares and, thereby, depress their market prices.





You may face significant restrictions on the resale of your shares
due to state “blue sky” laws.





Each state has its own securities laws, often called “blue
sky” laws, which: (1) limit sales of securities to a
state’s residents unless the securities are registered in
that state or qualify for an exemption from registration; and (2)
govern the reporting requirements for broker-dealers doing business
directly or indirectly in the state. Before a security is sold in a
state, there must be a registration in place to cover the
transaction, or it must be exempt from registration. The applicable
broker must also be registered in that state.





We do not know whether our securities will be registered or exempt
from registration under the laws of any state. A determination
regarding registration will be made by the broker-dealers, if any,
who agree to serve as market makers for our common shares. There
may be significant state blue sky law restrictions on the ability
of investors to sell, and on purchasers to buy, our securities. You
should therefore consider the resale market for our common shares
to be limited, as you may be unable to resell your shares without
the significant expense of state registration or
qualification.





Our common shares are thinly traded, and you may be unable to sell
at or near ask prices or at all if you need to sell your shares to
raise money or otherwise desire to liquidate your
shares.





Our common shares are currently quoted on the OTC Market Group
Inc.’s Venture Market (the “OTCQB”) under the
symbol “ECCTF”. In the first three months of 2018, our
average daily trading volume was approximately 1,670 shares.
Although we have applied to list our shares on the Nasdaq Capital
Market, we might not be approved and, even if approved, our common
shares may continue to be “thinly-traded” after that
listing, meaning that the number of persons interested in
purchasing our common shares at or near bid prices at any given
time may be relatively small or non-existent. This situation may be
attributable to a number of factors, including that we are
relatively unknown to stock analysts, stock brokers, institutional
investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention
of such persons, they tend to be risk-averse and might be reluctant
to follow an unproven company such as ours or purchase or recommend
the purchase of our shares until such time as we became more
seasoned.  As a consequence, there may be periods of
several days or more when trading activity in our shares is minimal
or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support
continuous sales without an adverse effect on share
price.  Broad or active public trading market for our
common shares may not develop or be sustained.





Volatility in our common shares or warrant price may subject us to
securities litigation.





The market for our common shares may have, when compared to
seasoned issuers, significant price volatility, and we expect that
our share or warrant price may continue to be more volatile than
that of a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation
against a company following periods of volatility in the market
price of its securities. We may, in the future, be the target of
similar litigation. Securities litigation could result in
substantial costs and liabilities and could divert
management’s attention and resources.





13

















We are a foreign private issuer within the meaning of the rules
under the Exchange Act, and as such we are exempt from certain
provisions applicable to United States domestic public
companies.








We are a foreign private issuer within the meaning of the rules
under the Exchange Act. As such, we are exempt from certain
provisions applicable to United States domestic public companies.
For example:





●
 we
are not required to provide as many Exchange Act reports, or as
frequently, as a domestic public company;


●
 for
interim reporting, we are permitted to comply solely with our home
country requirements, which are less rigorous than the rules that
apply to domestic public companies;


●
 we
are not required to provide the same level of disclosure on certain
issues, such as executive compensation;


●
 we
are exempt from provisions of Regulation FD aimed at preventing
issuers from making selective disclosures of material
information;


●
 we
are not required to comply with the sections of the Exchange Act
regulating the solicitation of proxies, consents or authorizations
in respect of a security registered under the Exchange Act;
and


●
 we
are not required to comply with Section 16 of the Exchange Act
requiring insiders to file public reports of their share ownership
and trading activities and establishing insider liability for
profits realized from any “short-swing” trading
transaction.





Our shareholders may not have access to certain information they
may deem important and are accustomed to receive from US reporting
companies.





As an “emerging growth company” under applicable law,
we will be subject to lessened disclosure requirements. Such
reduced disclosure may make our common shares less attractive
to investors.





For as long as we remain an “emerging growth company”,
as defined in the JOBS Act, we will elect to take advantage of
certain exemptions from various reporting requirements that are
applicable to other public companies that are not “emerging
growth companies”, including, but not limited to, not being
required to comply with the auditor attestation requirements of
Section 404 of the Sarbanes-Oxley Act, reduced disclosure
obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements
of holding a non-binding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not
previously approved.  Because of these lessened
regulatory requirements, our shareholders would be left without
information or rights available to shareholders of more mature
companies. If some investors find our common shares less attractive
as a result, there may be a less active trading market for such
securities and their market prices may be more
volatile.





We incur significant costs as a result of being a public company,
which costs will grow after we cease to qualify as an
“emerging growth company.”





We incur significant legal, accounting and other expenses as a
public company that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as rules subsequently
implemented by the SEC and NASDAQ Capital Market, impose various
requirements on the corporate governance practices of public
companies. We are an “emerging growth company,” as
defined in the JOBS Act and will remain an emerging growth company
until the earlier of (1) the last day of the fiscal year (a)
following May 23, 2022, (b) in which we have total annual gross
revenue of at least $1.07 billion, or (c) in which we are deemed to
be a large accelerated filer, which means the market value of our
common shares that is held by non-affiliates exceeds $700 million
as of the prior June 30th, and (2) the date on which we have issued
more than $1.0 billion in non-convertible debt during the prior
three-year period.  An emerging growth company may take
advantage of specified reduced reporting and other requirements
that are otherwise applicable generally to public companies. These
provisions include exemption from the auditor attestation
requirement under Section 404 in the assessment of the
emerging growth company’s internal control over financial
reporting and permission to delay adopting new or revised
accounting standards until such time as those standards apply to
private companies.





Compliance with these rules and regulations increases our legal and
financial compliance costs and makes some corporate activities more
time-consuming and costly. After we are no longer an emerging
growth company, we expect to incur significant expenses and devote
substantial management effort toward ensuring compliance with the
requirements of Section 404 and the other rules and
regulations of the SEC. For example, as a public company, we have
been required to increase the number of independent directors and
adopt policies regarding internal controls and disclosure controls
and procedures. We have incurred additional costs in obtaining
director and officer liability insurance. In addition, we incur
additional costs associated with our public company reporting
requirements. It may also be more difficult for us to find
qualified persons to serve on our board of directors or as
executive officers. We are currently evaluating and monitoring
developments with respect to these rules and regulations, and we
cannot predict or estimate with any degree of certainty the amount
of additional costs we may incur or the timing of such
costs.





14

















ITEM 4. INFORMATION ON THE COMPANY





Summary





We were
incorporated on February 16, 2015 under the laws of British
Columbia, Canada, and have a December 31, fiscal year end. We are
engaged in the planning, development and manufacturing of single
person electric vehicles.





Our
principal executive offices are located at 102 East 1st Avenue,
Vancouver, British Columbia, Canada, V5T 1A4. Our telephone number
is (604) 428-7656. Our website address is www.electrameccanica.com.
Information on our website does not constitute part of this Annual
Report. Our registered and records office is located at Suite 1500,
1055 West Georgia Street, P.O. Box 11117, Vancouver, British
Columbia, Canada, V6E 4N7.





A. History and
development of the Company





Electrameccanica Vehicles Corp. is a development-stage electric
vehicle (“EV”) production company incorporated on
February 16, 2015 under the laws of British Columbia, Canada. The
concept for our company was developed by Jerry Kroll after years of
research and development on advanced EVs.





Upon returning to Vancouver in 2011, Mr. Kroll decided that new
electric drive systems could revolutionize car assembly and the
concept for our company’s flagship EV called the
“SOLO” was born. With the help of long time automotive
expert and friend, Henry Reisner, President of Intermeccanica
International Inc. (“Intermeccanica”), and
Intermeccanica’s vast experience in automotive craftsmanship,
our company’s first prototype was finished in January 2015.
To solidify our presence and branding in the EV market, we
incorporated in February of 2015 under the name Electrameccanica
Vehicles Corp. For the past 10 years, Mr. Kroll has been
researching and developing technologies for autonomous drive
systems and dynamic induction charging. We have plans for ongoing
refinements to performance, style, value and efficiency as drive
systems, computerization and materials are developed.





In 2015, we entered into an arrangement with Intermeccanica to
leverage Intermeccanica’s over 50 years of experience.
Pursuant to a Joint Operating Agreement entered into between us,
Intermeccanica and Mr. Reisner, dated July 15, 2015, and as amended
on September 19, 2016, we agreed on an arrangement dealing with
leased premises, production assembly and an option to acquire
Intermeccanica. We exercised this option in October 2017 to further
enhance the combination of our proprietary SOLO design with
Intermeccanica’s manufacturing expertise.





We currently have a modern furnished showroom near the downtown
core of Vancouver, British Columbia where interested consumers may
receive more information on the SOLO, review its specs and
technical design, and even test-drive one of the existing
prototypes.





As of April 6, 2018, we have a
number of marketing efforts that have succeeded in helping us
achieve a non-binding order book of approximately $2.4 billion,
including 824 private and 59,900 corporate pre-sales. Interested
individuals are able to place reservations for the SOLO and the
Tofino with a refundable deposit of $250 and $1,000 respectively.
We have private orders for 700 SOLOs, each with a refundable
deposit of $250, 14 Super SOLOs; each with a refundable deposit of
$1,000 and 110 Tofinos, each with a refundable deposit of $1,000.
The 59,900 corporate orders are from entities that have provided
non-binding letters of interest and are comprised of 20,330 orders
for the SOLO and 39,570 orders for the Tofino.





We have been funding operations to date through equity financings
by our founders and through private placements of
$25,165,436 from investors. Our
management maintains a majority control of our company. As
our April 11, 2018, our
directors and executive officers beneficially owned 70.8% of our
outstanding shares, including shares that our executive officers
and directors have the right to acquire within the next 60 days
pursuant to warrants and stock options which have
vested.





Our principal executive offices are located at 102 East
1st Avenue, Vancouver, British Columbia, Canada, V5T 1A4. Our
phone number is (604) 428-7656.





15

















B. Business
Overview





General





We are a development-stage EV company focusing on the market demand
for EVs that are efficient, cost-effective and environmentally
friendly methods for urban residents to commute. We believe that
our flagship EV called the SOLO is the answer to such market
demand. In addition, we have two other EV candidates in an advanced
stage of development, the Super SOLO and the Tofino.





SOLO











We created the SOLO’s first prototype in January of 2015.
Since the completion of the prototype, our engineers and designers
have devoted efforts to provide the SOLO with an appealing design,
and have engaged in proprietary research and development leading to
a high performance electric rear drive motor.





The SOLO features a lightweight aerospace composite chassis to
allow for a top speed of 130km/h, an attainable cruise speed of
110km/h and is able to go from 0 km/h to 100 km/h in approximately
eight seconds. Our SOLO features a lithium ion battery system that
requires only three hours of charging time on a 220-volt charging
station or six hours from a 110-volt outlet. The lithium battery
system utilizes approximately 8.64 kW/h for up to 160 km in range.
We also offer a comprehensive warranty package for two years of
unlimited mileage which is included in the price of the SOLO.
Standard equipment in the SOLO includes, but is not limited to the
following:





●
LCD
Digital Instrument Cluster;●
Power
Windows;●
AM/FM
stereo with Bluetooth/ CD/USB;●
Remote
keyless entry system;●
Rear
view backup camera;●
285
liters of cargo space; and●
Heater
and defogger.





Optional equipment will include air conditioning at an additional
cost.





The purchase price for our SOLO is $19,888.





Our production department has completed twenty five pre-production
SOLOs as of April 6, 2018, and we intend to produce up to six
further pre-production SOLOs by the end of June 30, 2018. Producing
the pre-production SOLOs allows us to determine and assess the
entire production process. Currently, we have increased our
production space, organized a production line, ordered components
and are in the process of fine tuning the production process
through the pre-production SOLOs. We have entered into a
manufacturing agreement with Zongshen and expect to begin mass
production of the SOLO in the third quarter of 2018. We anticipate
our production costs to be $15,000 per SOLO, providing a gross
margin of 25% based on a sale price of $19,888.





16














Super Solo














We also plan on launching the Super SOLO, which is a sports car
model within our EV product line. The Super SOLO is intended to
boast a longer range and a higher top speed, sleek, aerodynamic
design and features that will rival existing super sports cars such
as the Ferrari 488 and Lamborghini Gallardo.





Refundable deposits have been accepted for the planned Super SOLO
and such deposits are able to be returned at any time. Mechanical
development on the Super SOLO has begun and progress will determine
when this and any other variants can be launched. No set date has
been declared at this time. The Super SOLO is intended to be a
high-performance version of the SOLO.





The Tofino











We announced on March 28, 2017, at the Vancouver International Auto
Show that we intend to build the Tofino, an all-electric,
two-seater roadster representing an evolution of the Intermeccanica
Roadster. We are designing the Tofino to be equipped with a
high-performance, all-electric motor with a top speed of 200 kph
(125 mph) and a 0-100 kph (0-60 mph) in less than seven seconds.
The chassis and body are expected to be made of a lightweight
aerospace-grade composite with the car expected to be capable of up
to 400 km (250 miles) of range on a full charge. We are accepting a
refundable deposit of $1,000 to reserve the Tofino.





17














Future EV candidates





We have identified other vehicles that we would like to add to our
candidate list such as the “Cargo” and the
“Twinn”, although no timeline has been set for their
development and production. We have plans in the future to release
the “Cargo,” a larger vehicle than the SOLO that is
designed for use as a fleet vehicle with ample storage space which
would be best suited for delivery companies such as FedEx, the
United States Postal Service and Canada Post. We expect that the
Cargo will offer the appropriate compartment space for fleet
vehicle uses such as delivery, while offering long range capability
and cleaner technology. We envision the Twinn featuring two seats,
suitable for urban families, young commuters, empty nesters, and
environmentally-conscious consumers.





Sources and Availability of Raw Materials





We continue to source duplicate suppliers for all of our
components, and in particular, we are currently sourcing our
lithium batteries from Panasonic, Samsung and LT Chem. Lithium is
subject to commodity price volatility which is not under our
control and could have a significant impact on the price of lithium
batteries.





At present, we are subject to the supply of our chassis from one
supplier for the production of the SOLO, the Super SOLO and the
Tofino. We are exploring adding additional suppliers of the chassis
to mitigate the risk of depending on only one
supplier.





Patents and Licenses





We have filed patents on items that our legal counsel deem
necessary to protect our products. We do not rely on any licenses
from third-party vendors at this time.





Our success depends, at least in part, on our ability to protect
our core technology and intellectual property. To accomplish this,
we rely on a combination of patent and design applications, trade
secrets, including know-how, employee and third party
non-disclosure agreements, copyright laws, trademarks and other
contractual rights to establish and protect our proprietary rights
in our technology. As at April 11, 2018, we had one issued design registration, two
allowed design application and six pending patent and design
applications with various countries which we consider core to our
business in a broad range of areas related to the design of the
SOLO and its powertrain. We intend to continue to file additional
patent applications with respect to our technology. We do not know
whether any of our pending patent applications will result in the
issuance of patents or whether the examination process will require
us to narrow our claims. Even if granted, these pending patent
applications might not provide us with adequate
protection.





Trademarks





We operate under the trademark “ELECTRA MECCANICA
SOLO”, which is registered under applicable intellectual
property laws. We have also registered the trademark for the name
“Tofino” in Japan and applied to register the trademark
in Canada, the United States, the European Union and China. This
prospectus contains references to our trademarks and service marks
and to those belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this prospectus may
appear without the ® or TM symbols, but
such references are not intended to indicate, in any way, that we
will not assert, to the fullest extent possible under applicable
law, our rights or the rights of the applicable licensor to these
trademarks and trade names. We do not intend our use or display of
other companies’ trade names, trademarks or service marks to
imply a relationship with, or endorsement or sponsorship of us by,
any other companies.





Market Overview





Investment in clean technology has been trending for several years
as nations, governments, and society overall become more aware of
the damaging effects pollution and greenhouse gas emissions
(“GHG”) have on the environment. In an attempt to
prevent and/or slow-down these damaging effects and create a more
sustainable environment, nations and government agencies have
announced their proposals to reduce GHGs, contribute funding into
research and development in clean technology, and offer
incentives/rebates for clean technology investments by businesses
and consumers.





Electric vehicle (“EV”) is a broad term for vehicles
that do not solely operate on gas or diesel. Within this
alternative vehicle group, there are more categories that further
segment into alternative vehicles that embrace different innovative
technologies such as: (i) battery electric vehicles
(“BEV”); (ii) fuel-cell electric vehicles
(“FCV”); or (iii) plug-in hybrid electric vehicles
(“PHEV”).





18














BEVs draw on power from battery management systems to power
electric motors instead of from an internal combustion engine, a
fuel cell, or a fuel tank. The Nissan Leaf, Tesla Model S, and our
SOLO are BEVs.





FCVs typically utilize a hydrogen fuel cell that, along with oxygen
from the air, converts chemical energy into electricity which
powers the vehicle’s motor. Emissions from a FCV are water
and heat, hence making FCVs true zero-emission vehicles. The
Honda Clarity, Hyundai Tucson and
Toyota Mirai are FCVs.





PHEVs are the hybrid vehicles that have both an electric motor and
an internal combustion engine. A PHEV can alternate between using
electricity while in its all-electric range and relying on its
gas-powered engine. The Chevrolet Volt and the Toyota Prius are
examples of PHEVs.





The popularity of EVs have also been met with difficulties in
charging convenience. There are far more gas stations available
than public EV charging stations: a search on Yellow Pages reveals
that there are 439 gas stations alone in the City of Vancouver
whereas the entire Province of British Columbia has approximately
500 public EV charging stations. The convenience and availability
of public EV charging stations may prove to be an obstacle of mass
adoption of EVs.





Consumers may be afraid that their EVs may run out of charge while
they are out on the road and this fear is recognized by the public
and has been popularized with the term “range anxiety”.
Despite this fear, the distance travelled by most urban commuters
is a lot lower than the typical range of an EV. Data from
Statistics Canada’s National Household Survey in 2011
reported the average Canadian takes 25 minutes to commute to
work.





There currently exists different categories of charging stations
depending on the voltage they provide. EV owners can often charge
at home on a regular 110-volt outlet which may take between 10
hours to 20 hours depending on the model and make of the EV. This
type of outlet and charging is termed level 1 charging. Level 2
charging means the voltage at the charging station is typically
around 240 volts and this type of outlet is usually available at
public charging stations, shopping malls and big box retailer
parking lots, and even located in certain residential hi-rises.
Charging at a level 2 station typically cuts down the level 1
charge time in half and may require a small fee for the service
which may vary depending on the provider and the
location.





Electric Vehicles/Automotive – Global Market





EVs have been around for a number of years, but have only recently
gained mass adoption and public interest due to open discussions of
GHG emission levels, government and international policies on
climate change and pollution, increased literature on EVs,
fluctuating fuel costs, and improved battery management systems and
EV range. According to Navigant Research, the global light duty EV
market is estimated to grow from 2.6 million vehicle sales in 2015
to over 6.0 million vehicle sales in 2024.





EVs in the global market are gaining adoption by the general public
and these efforts have also been aided by traditional automotive
manufacturers’ entry into the market. The majority of growth
in the EV industry has been led by the following top five EV
models: (1) Nissan Leaf; (2) Chevrolet Volt (PHEV); (3) Toyota
Prius (PHEV); (4) Tesla Model S; and, (5) Mitsubishi Outlander
(PHEV). There are few manufacturers that are solely devoted to
the manufacturing of EVs, the most well-known and popular one being
Tesla Motors.





On a global scale, EVs are gaining popularity, particularly in
countries where there is high population density, narrow roads, and
limited urban space. According to an April 2016 article from
Pedestrian Observations, an online website dedicated to
transit-oriented developments, several European countries are
formulating programs that ban cars fueled by petrol or diesel. This
initiative was introduced by Norway’s Minister for the
Environment and co-spokesperson for the Green Party, which expects
to implement the ban completely by 2025.





In France, the Paris region has been calling for a phase-out of the
internal combustion engine due to rising levels of particulate
pollution from diesel vehicles and the local government is looking
into implement more battery charging stations to help commuters
refuel along the way. The German government is expecting
German automakers to spend more money on research and development
for improved battery range and charging stations.





In Belgium, Switzerland, and the Netherlands, such governments
would like a similar phase-out program akin to that of
Norway’s. These countries expect the phase-out to be
complete by 2030. In some of these countries, however, there
remain opposing parties to the phase-out program and it is
uncertain as to how it will ultimately play out.





We believe that the aforementioned initiatives show that there is
significant demand for EVs and with government support, adoption of
EVs and changes to the industry can be made more rapidly. Our
management believes that these initiatives will materialize and are
optimistic at the prospects of an overall cleaner environment and
bigger market for EVs.





19














Electric Vehicles/Automotive – Canadian Market





Data from FleetCarma.com (“FleetCarma”), a clean
technology information and communications technology website,
reported 2015 EV sales in Canada to be 6,933. Although this
number pales in comparison to the total 1.898 million internal
combustion vehicles sold in Canada in 2015, the 2015 EV sales
numbers represent an approximate 32% increase in sales over 2014.
The graph below from FleetCarma further breaks down the number of
vehicles sold by each EV automaker in Canada in 2014 and
2015.








As can be seen from the graph above, Tesla Motor’s Model S
made huge strides in sales, recording a 137% increase in 2015 over
2014. Nissan Leaf sales also increased by 23% in 2015 while
Chevrolet Volt sales were down 8% in 2015 as compared to the
previous year.





FleetCarma also states the total number of EVs on the road in
Canada at 18,451. 54% of Canada’s total EVs are BEVs
with the rest being PHEVs. FleetCarma’s data also highlights
that the Province of Quebec currently leads the rest of Canada with
the most registered EVs at 8,500 vehicles, representing 46% of the
entire Canadian EV population. The bar chart below from FleetCarma
indicates the provinces and their respective number of registered
EVs as at December 31, 2015.








20














Data from British Columbia Air Quality, a government division
focused on transportation emissions, indicates that pollutant
emissions from conventional gasoline vehicles produce almost five
times as much volatile organic compounds (“VOCs”) than
gasoline/electric hybrid vehicles.











* NOx refers to Nitrogen Oxides | PM2.5refers to particles in
air pollutants that are 2.5 micrometers or less in
size





Data from Environment and Climate Change Canada indicates that
Canada is one of the top countries with large ratios of emissions
to GDP. Canada has been working towards reducing its air pollutant
emissions alongside other member countries of the Organisation for
Economic Co-operation and Development (“OECD”). As can
be seen in the bar chart and table below, Canada’s nitrogen
levels in 2014 were reduced by 23.3% from 2004 levels.














Countries
2004 nitrogen oxide emissions
(kilotonnes)
2014 nitrogen oxide emissions
(kilotonnes)
2004 nitrogen oxide emissions intensity (tonnes per million US
dollars of gross domestic product)
2014 nitrogen oxide emissions intensity (tonnes per million US
dollars of gross domestic product)United States
19,248
11,092
1.38
0.69Canada
2,506
1,923
2.01
1.28





21














The below bar chart and table also illustrates the 23.6% decrease
in VOC emissions in 2014 from 2004 levels. The table compares
Canada’s VOC emission levels with that of the United
States.














Countries
2004 VOC emissions
(kilotonnes)
2014 VOC emissions
(kilotonnes)
2004 VOC emissions intensity (tonnes per million US dollars of
gross domestic product)
2014 VOC emissions intensity (tonnes per million US dollars of
gross domestic product)United States
14,787
12,917
1.06
0.80Canada
2,823
2,157
2.26
1.44





The above presented data also points out opportunities for EV
markets in countries that have difficulties reducing the air
pollution. From the bar charts above, it appears that Australia,
Turkey and the United Kingdom will also be ideal markets for EVs
which allow for substantial reduction in VOC and
NOXemissions.





A February 2016 article from the Globe and Mail provides more
insights on the expected levels of emissions in the coming years.
According to the article, in 2020, emissions will hit 768 megatons
of carbon dioxide – way above Canada’s target of 622
megatons. By 2030, they will have jumped to 815 megatons, compared
with a target for that year of 524 megatons. As a result,
provincial governments in Canada are carefully monitoring GHG
emissions and providing funding and incentives to help reduce these
emission levels.





Another reason EVs have become popular is due to variable fuel
costs and vehicle maintenance costs that have become a burden for
conventional gasoline automobile owners. According to the American
Automobile Association, the owner of an average sedan would incur
US$8,876 a year in driving costs and an average cost per mile of
US$0.592 cents (US$0.367 cents per km). In comparison to the
above statistic, an October 2015 Globe and Mail article reports
electric vehicles typically cost owners $0.016 per km to
drive.





Canada is seen as a leader in many industries, but clean-tech and
EVs seems not to be one of them. However, research and data reveals
significant interest in EVs from Canadians. According to a 2015
study completed by Ipsos, a market research firm, 80% of Canadians
believe electric cars are the way of the future and 75% would like
to drive a car not powered by gasoline.





Normally, it is difficult for innovative breakthrough technology to
be rapidly adopted by the mass public unless they are well-educated
on the technology and the technology is affordable and sufficiently
promoted via incentives from the government. In the case of Canada,
government incentives and initiatives allow for affordable EVs and
convenient free or low-cost charging stations, further promoting
the benefits of clean-tech to the general public. Below is an
overview of current and prospective provincial government
incentives that encourage consumers to embrace EVs. As Ontario,
Quebec and British Columbia are the top three most populous
provinces in Canada, the overview will focus on these
provinces.





22














In Ontario, 35% of GHGs are created from transportation
emissions. In an effort to reduce GHGS, the Province of
Ontario has established government rebates for consumers purchasing
EVs. The government of Ontario has plans to allocate $325 million
for investments in green technology, a portion of it will be
devoted to EV programs.





The Province of British Columbia has allotted $7.5 million funding
for the Clean Energy Vehicle Program (the “CEVforBC
Program”) which provides a $5,000 rebate to consumers of a
qualifying battery electric, fuel-cell electric, or plug-in hybrid
electric vehicle. The SOLO qualifies for such funding. A
further $1.59 million in funding will be invested by the Province
of British Columbia into charging infrastructure and hydrogen
fueling infrastructure.





In British Columbia, there are over 500 public electric vehicle
charging stations to allow for convenient charging. The City of
Vancouver alone boasts over 90 public electric charging stations.
According to the City of Vancouver website, the municipality now
has the biggest municipal EV fleet in Canada, consisting of 26
Mitsubishi iMiEVS and one Nissan Leaf.





British Columbia is not the only province in Canada offering
incentives for EVs. According to a February 2016 article from CBC
News, the Province of Ontario has announced, effective as of
February 10, 2016, a boost to its incentives from the current range
of $5,000 to $8,500 per vehicle up to $6,000 to $10,000 for
the purchase or lease of eligible plug-in EVs. Additional
incentives are available for EVs with larger battery capacity or a
five-seater vehicle. CBC News reports there are currently 5,800 EVs
in Ontario alone.





According
to a CBC News article in December 2015, the Ontario government is
expected to allot $20 million in grants to encourage public and
private sector partners to construct a network of public EV
charging stations which will be available in cities, offices,
residential high-rises, and along commuter highways. The EV
rebates, along with the EV charging station network, are expected
to help reduce Ontario GHGs by 80% of
1990 levels by the year 2050.





The Province of Quebec announced plans to allocate $420 million to
promote EVs over the five years between 2015 to 2020. Denis
Coderre, the former Mayor of Montreal expected the city to have a
total of 1,000 charging stations by 2020. Curbside charging
stations will allow EV owners easier access compared to current
charging stations that are often located in underground parking
lots. The proposed charging stations will primarily be level 2
chargers (which have 240 volts and typically 16 to 30 amps), with
approximately six stations being level 3 chargers (which can
provide up to 80% of a full charge in 30 minutes). Costs of
utilizing the stations are $1 per hour for the level 2 stations
(parking costs extra) and $10 per hour for level 3
stations.





Manufacturing Plan





As of April 11, 2018, we have
built 25 pre-production vehicles. We have used some of these
pre-production vehicles as prototypes, have delivered four to
customers upon payment of the purchase price, and have used others
as test drive models in our two showrooms. At our facilities
located in British Colombia, we can manufacture approximately two
to four vehicles per month. Our ability to build EVs at our own
facilities has been enhanced by our recent acquisition of
Intermeccanica which has over 50 years of custom car manufacturing
expertise. Intermeccanica commenced operations during 1959
in Turin, Italy selling speed equipment kits. This led to the
production of a Formula Junior racer and eventually to the first
unique bodied, hand assembled road car called the InterMeccanica
Puch or IMP (21). The car competed at the Nurburgring, a 13.75 mile
race circuit in Germany, where it won its 500 cc class. The success
of the IMP led Intermeccanica to build the Apollo (101), Griffith
(14), Italia (500) and Indra (125) during the period 1959 to 1975.
Thereafter, Intermeccanica moved to North America where it started
to construct the Porsche 356 Speedster replica and later
Intermeccanica moved to Vancouver, Canada, where it developed the
tooling to produce the Roadster RS based on the 1959 Porsche 356 D,
Intermeccanica incorporated its own tubular chassis in 1986 and
offered various powertrains from the original VW air-cooled engine
to a six-cylinder engine from a Porsche 911. Intermeccanica,
throughout its operating history, has built approximately 2,500
vehicles.





To enable us to mass produce our EVs, we have entered into a
manufacturing agreement with Zongshen located in Chongqing, China.
Under the agreement, Zongshen has begun the process of establishing
tooling and has contracted to produce 75,000 SOLO vehicles.
Zongshen, through its subsidiary, Chongqing Zongshen Engine
Manufacturing Co., Ltd. is a subsidiary of Zongshen Power. Since
its establishment in 1992, Zongshen Power has grown into a
large-scale scientific and technical enterprise capable of
researching, developing, manufacturing and selling a diverse range
of motorcycles and motorcycle engines in China. Its products
include over 130 models of two-wheeled motorcycles, electric
motorcycles, three-wheeled motorcycles, cross-country vehicles and
ATVs with motors ranging from 35CC to 500CC. Zongshen Power has
been an industry leader for many successive years. Zongshen has
purchased $1,017,532 of our common shares from us and beneficially
owns approximately 11.1% of our common shares. If we complete this
offering, we expect to begin placing orders with Zongshen in the
first or second quarter of 2018 and to begin sales of SOLOs in
August 2018. We anticipate that Zongshen will produce up to 5,000
of our cars in 2018, 20,000 of our cars in 2019 and 50,000 of our
cars in 2020.





23














Marketing Plan





We recognize that marketing efforts must be focused on customer
education and establishing brand presence and visibility which is
expected to allow our vehicles to gain traction and subsequently
gain increases in orders. Marketing and promotional efforts must
emphasize the SOLO’s image as an efficient, clean, and
affordable EV for the masses to commute on a daily basis. If we can
successfully promote the SOLO on these points, we expect growth in
sales and customer base to occur rapidly.





A key point to the marketing plan is to target metropolitan cities
with high population density, expensive real estate, high commuter
traffic load, and pollution levels which are becoming an enormous
concern. Accordingly, our management has identified cities in
Canada and the United States that fit the aforementioned criteria
and have plans to seek out suitable locations in the following
cities for additional showrooms in the second and third quarters of
2018: Toronto; Seattle; Los Angeles; San Francisco; and
Manhattan.





Key aspects of our marketing plan are highlighted below. We plan to
develop a marketing strategy that will generate interest and media
buzz based on the SOLO’s selling points.





●
Organic
engagement on social media with engaging posts aimed to educate the
public about EVs and develop interest in our SOLO, which to date
has had positive traction.●
Earned
media – we have already received press coverage from several
traditional media sources and expect these features and news
stories to continue as we embark on our commercial
launch.●
Investor Relations/
Press Releases – our in-house investor relations team will
provide media releases/kits for updates and news on our
progress.●
Industry shows and
events – we displayed the SOLO at the Vancouver International
Autoshow in March 2017 and at the Consumer Electronics Show in Las
Vegas in January 2018. Promotional merchandise giveaways will
enhance and further solidify our branding in consumer minds.
Computer stations and payment processing software will be readily
on hand at to accept SOLO reservations.●
First-hand
experience - Test-drives and public viewings are available at our
existing showrooms in and near the Vancouver downtown
core.





We anticipate that our marketing strategy and tactics will evolve
over time as our SOLO gains momentum and we identify appropriate
channels and media that align with our long-term objectives. In all
of our efforts, we plan to focus on the features that differentiate
our SOLO from the existing EVs on the market.





Reservation System





We have an online reservation system which allows a potential
customer to reserve a SOLO by paying a refundable $250 deposit, a
Super SOLO by paying a refundable $1,000 deposit and a Tofino by
paying a refundable $1,000 deposit. Once reserved, the potential
customer is allocated a reservation number and the reservation will
be fulfilled as the respective vehicles are produced. As of
April 11, 2018, we have received
deposits for 700 SOLOs, 14 Super SOLOs and 110 Tofinos. In
addition, we have received non-binding letters of intent for 59,900
vehicles from corporate entities that are not required to make a
deposit.





We will earn revenue once a vehicle has been delivered to the
customer who has pre-ordered their vehicle. Each order is placed in
line as received and fulfilled once the vehicle becomes available.
The customer may, at any time, for any reason, cancel their order
and have their deposit returned. We do not consider any order as
being secured until the vehicle has been delivered and full receipt
of the remaining balance of the vehicle purchase price has been
received.





Sales and Service Model





Sales Model





We sell our vehicles online via our website
(www.electrameccanica.com), while we develop our planned corporate
owned dealerships in key markets and franchise dealer network in
other market areas. As each franchise dealer is established, any
vehicles sold within such dealers designated territory will be
delivered to such dealer to fulfill online orders as well as such
franchise dealer’s orders.





We are unable to identify where we hope to establish franchise
dealers as opposed to corporate owned dealerships. The
establishment of franchise dealers will depend on regional demand,
available candidates and local regulations. We are currently
accepting expressions of interest and applications for franchised
dealerships from individuals, and do not have any franchise or
dealer agreements. Our vehicles will initially be available
directly from Electrameccanica.





We plan to only establish and operate corporate owned dealerships
in those states in the U.S. that do not restrict or prohibit
certain retail sales models by vehicle manufacturers. In all other
instances, we plan to establish franchise dealerships to comply
with local regulations.





24














Service Model





We plan to have our vehicles serviced through our corporate and
franchised dealerships.





Government Regulation





As a vehicle manufacturer established in Canada, we are required to
ensure that all vehicle production meets applicable safety and
environmental standards. Issuance of the National Safety Mark (the
“NSM”) by the Minister of Transport for Canada will be
our authorization to manufacture vehicles in Canada. Receipt of the
NSM is contingent on us demonstrating that our vehicles are
designed and manufactured to meet or exceed the applicable sections
of the Canadian Motor Vehicle Safety Act (C.R.C. Chapter 1038) and
that appropriate records are maintained. Unique to Canada, the SOLO
and the Super SOLO are under the three-wheeled vehicle category and
are subject to the safety standards listed in Schedule III of the
Canadian Motor Vehicle Safety Regulations (“CMVSR”),
which can be found at (http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._1038/section-sched3.html).
For sale into the United States, we and our vehicles must meet the
applicable parts of the U.S. Code of Federal Regulations
(“CFR”) Title 49 - Transportation. This includes
providing Manufacture Identification information (49 CFR Part 566),
VIN-deciphering information (49 CFR Part 565), and certifying that
our vehicles meet or exceeds the applicable sections of the Federal
Motor Vehicle Safety Standards (40 CFR Part 571) and Environmental
Protection Agency noise emission standards (40 CFR 205). Since the
U.S. regulations do not have a specific class for three-wheeled
‘autocycles’, the SOLO and the Super SOLO fall under
the definition of a motorcycle pursuant to Sec. 571.3 of 49 CFR
Part 571.





We obtained U.S. compliance certification for the SOLO in the first
quarter of 2018 at a testing facility in Quebec, Canada. Compliance
certification of the SOLO for Canada began in 2018, and we
estimate, depending on the weather and results, that it will be
complete in the second quarter of 2018.





Within the three wheel vehicle classification in Canada, CMVSR
Standard 305 sets out the regulation for prevention of injury to
the occupant during and after a crash as related to the
vehicle’s batteries. Under this standard, the security and
integrity of electric drive system components and their isolation
from the occupant are evaluated in the course of a frontal barrier
crash test in accordance with Technical Standard Document No. 305.
There is no such regulation applicable to the motorcycle category
under the U.S. regulations.





Although the SOLO and the Super SOLO fall under the definition of a
motorcycle under U.S. regulations, a motorcycle license is not
required to drive them in all but two U.S. states.





Competition





The worldwide automotive market, particularly for alternative fuel
vehicles, is highly competitive today and we expect it will become
even more so in the future as we move towards production of the
SOLO, the Super SOLO and the Tofino and the introduction of other
models such as the anticipated “Twinn” and the
“Cargo.” Other manufacturers have entered the electric
vehicle market and we expect additional competitors to enter this
market within the next several years. As they do, we expect that we
will experience significant competition. With respect to the SOLO,
we also face strong competition from established automobile
manufacturers, including manufacturers of EVs, such as the Tesla
Model S, the Chevrolet Volt and the Nissan Leaf.





A matrix of our SOLO compared to the top three selling EVs in
Canada is presented below (note: in the below matrix, each vehicle
may be available in different models, and only the lowest
model’s specs and prices are quoted in the matrix), which
information is readily available from each manufacturer’s
website. Information in the below matrix analyzes key
considerations of a potential purchaser of an EV.














25














We believe the primary competitive factors in our market include
but are not limited to:





●
technological
innovation;●
product
quality and safety;





●
service
options;●
product
performance;●
design
and styling;●
brand
perception;●
product
price; and●
manufacturing
efficiency.





Most of our current and potential competitors have significantly
greater financial, technical, manufacturing, marketing and other
resources than we do and may be able to devote greater resources to
the design, development, manufacturing, distribution, promotion,
sale and support of their products. Virtually all of our
competitors have more extensive customer bases and broader customer
and industry relationships than we do. In addition, almost all of
these companies have longer operating histories and greater name
recognition than we do. Our competitors may be in a stronger
position to respond quickly to new technologies and may be able to
design, develop, market and sell their products more
effectively.





Furthermore, certain large manufacturers offer financing and
leasing options on their vehicles and also have the ability to
market vehicles at a substantial discount, provided that the
vehicles are financed through their affiliated financing company.
We do not currently offer any form of direct financing on our
vehicles. The lack of our direct financing options and the absence
of customary vehicle discounts could put us at a competitive
disadvantage.





We expect competition in our industry to intensify in the future in
light of increased demand for alternative fuel vehicles, continuing
globalization and consolidation in the worldwide automotive
industry. Our ability to successfully compete in our industry will
be fundamental to our future success in the EV market and our
market share. We might not be able to compete successfully in our
market. If our competitors introduce new cars or services that
compete with or surpass the quality, price or performance of our
vehicles or services, we may be unable to satisfy existing
customers or attract new customers at the prices and levels that
would allow us to generate attractive rates of return on our
investment. Increased competition could result in price reductions
and revenue shortfalls, loss of customers and loss of market share,
which could harm our business, prospects, financial condition and
operating results.





Research and Development





We have allocated substantial resources in developing our first
vehicles. We expended $4,430,386 during the fiscal year ended
December 31, 2017 and $2,778,295 during the fiscal year ended
December 31, 2016 on research and development costs which include
labor and materials.





Employees





As of April 11, 2018, we
employed a total of 44 full-time and no part-time people at our principal executive
offices in Vancouver, British Columbia. None of our employees are
covered by a collective bargaining agreement.





The breakdown of employees by main category of activity is as
follows:





Activity
Number
of EmployeesEngineering/R&D
29Sales &
Marketing
4General &
Administration
5Executives
6





26














Legal Proceedings





We are not involved in, or aware of, any legal or administrative
proceedings contemplated or threatened by any governmental
authority or any other party. As of the date of this prospectus, no
director, officer or affiliate is a party adverse to us in any
legal proceeding, or has an adverse interest to us in any legal
proceeding.


Intermeccanica Business





In
October 2017, we acquired Intermeccanica. In addition to the
manufacturing and design experience that the acquisition provided
us, we acquired a business of custom car manufacturing.
Intermeccanica, throughout its operating history, has built
approximately 2,500 vehicles, and in in the year ended December 31,
2017, Intermeccanica sold eight vehicles. We intend to continue the
legacy business of Intermeccanica, but we do not envision that it
will be central our operations, represent a material portion of our
revenue if we develop our business as planned or account for a
material portion of our expenses.





C. Organizational
structure





We have one subsidiary, Intermeccanica International Inc., a
corporation subsisting under the laws of the Province of British
Columbia, Canada.





D. Property, plant
and equipment





Our principal office is located at 102 East 1st Avenue,
Vancouver, British Columbia, Canada, V5T 1A4. On July 25, 2015, we
together with Intermeccanica as tenants entered into a light
industrial lease agreement with Cressey (Quebec Street) Development
LLP (the “Landlord”) for the premises located at 102
East 1st Avenue, Vancouver, British Columbia. The lease
agreement is for a term of five years which commenced on November
1, 2015, with a monthly minimum rent of $3,918.86 plus additional
rent, which includes operating costs, property taxes, utilities and
a management fee of 4% of the minimum rent for the particular lease
year. The leased premises is 7,235 sq. ft. in size and we are not
allowed to assign the lease or grant a sublease of the whole or any
part of the leased premises without the written consent of the
Landlord.





Currently, our development and manufacturing facility is located at
47 Braid Street, New Westminster, British Columbia, Canada and is
capable of producing four to ten SOLOs per month. Our existing
production facilities are being used to build four pre-production
SOLOS and for the development of the Super SOLO, and they are
adequate for production of the low volume required for the Super
SOLO. We together with Intermeccanica as tenants entered into a
lease agreement with Astron Realty Group Inc. for Unit 47, which
commenced on August 1, 2016 and expires on July 31, 2020. Unit 47
is approximately 7,270 sq. ft. and the minimum rent per month is
$3,938 until July 31, 2017 and $4,089 from August 1, 2017 to July
31, 2020, and we are responsible for all associated lease costs
such as strata fees, property taxes, utility fees and other charges
associated with the occupancy of such premises. Our management has
met with several groups to discuss the possibility of a production
facility located in Canada and internationally.





Ideally, the new production facility will be 50,000 to 200,000
square feet, which will allow our company to produce 25,000 to
50,000 SOLOs per year. We have also consulted a process design
company, which will form a suitable manufacturing flow production
process and facility layout for our anticipated 10 production lines
that will maximize labor and equipment usage and minimize
manufacturing and assembly time. Our management estimates the full
assembly of a SOLO in the new production facility will take
approximately four hours. An example of the layout of the new
production facility is presented below. We estimate that the cost
of the machinery to equip a new production facility will range from
$10 million to $15 million for the assembly of vehicles. Experts in
the field of designing and equipping a manufacturing facility
presented to us that a facility of 50,000 to 200,000 square feet
will be able to produce between 25,000 to 50,000 vehicles per year.
The level of automation will determine if the equipment cost will
be on the lower-end of the range ($10 million) for a semi-automated
facility, to the upper-end of the range ($15 million) for a fully
automated facility. While it is difficult to forecast any sales, we
believe that there are enough expressions of interest to satisfy
the production capabilities of the above mentioned facility.
However, we do not anticipate building a new production facility
until sometime in 2018 or later if the demand for the SOLO
materializes.











27




















ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS








General





This report should be read in conjunction with the accompanying
financial statements and related notes. The discussion and analysis
of the financial condition and results of operations are based upon
the financial statements, which have been prepared in accordance
with International Financial Reporting Standards (IFRS), as adopted
by the International Accounting Standards Board
(IASB).





The preparation of financial statements in conformity with these
accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities,
disclosure of contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the
reporting period. On an on-going basis, we review our estimates and
assumptions. The estimates were based on historical experience and
other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those
estimates or other forward-looking statements under different
assumptions or conditions, but we do not believe such differences
will materially affect our financial position or results of
operations. Our actual results may differ materially as a result of
many factors, including those set forth under the headings entitled
“Forward-Looking
Statements” and
“Risk
Factors”.





Critical accounting policies, the policies we believe are most
important to the presentation of our financial statements and
require the most difficult, subjective and complex judgments, are
outlined below under the heading “Critical Accounting Policies
and Estimates”, and have
not changed significantly since our founding.





Overview





ElectraMeccanica
Vehicles Corp., (the “Company”) was incorporated on
February 16, 2015, under the laws of the province of British
Columbia, Canada, and our principal activity is the development and
manufacturing of single occupancy electric vehicles. Our head
office and principal address is located at 102 East 1st Avenue,
Vancouver, British Columbia, Canada, V5T 1A4.





Going Concern





The accompanying financial statements have been prepared under the
assumption that our company will continue as a going concern. We
are a development stage company and have incurred losses since our
inception. As shown in the accompanying financial statements, we
have had minimal revenues and have incurred a net loss and
comprehensive loss of $11,366,372 during the year ended December
31, 2017 and have a cash balance and a working capital surplus of
$8,610,996 and $6,653,009, respectively, as at December 31, 2017.
We raised $3,177402 subsequent to December 31, 2017, which may not
be sufficient to enable us to operate for the next 12 months and
execute our business plan.





Our ability to meet our obligations as they fall due and to
continue to operate as a going concern depends on the continued
financial support of our creditors and our shareholders. In the
past, we have relied on sales of our equity securities to meet our
cash requirements. Funding from this or other sources might not be
sufficient in the future to continue our operations. Even if we are
able to obtain new financing, it may not be on commercially
reasonable terms or terms that are acceptable to us. Failure to
obtain such financing on a timely basis could cause us to reduce or
terminate our operations. The above indicates the existence of a
material uncertainty that may cast significant doubt on our ability
to continue as a going concern.





The financial statements do not include any adjustments that might
be necessary should we be unable to continue as a going concern. If
the going concern basis was not appropriate for these financial
statements, adjustments would be necessary in the carrying value of
assets and liabilities, the reported expenses and the balance sheet
classifications used.





As at
December 31, 2017, we had not commenced commercial production, and
we are currently unable to finance day-to-day activities through
operations. Our continuation as a going concern depends upon the
successful results from our electric vehicles manufacturing
activities and our ability to attain profitable operations and
generate funds there from and/or raise equity capital or borrowings
sufficient to meet current and future obligations. These factors
indicate the existence of a material uncertainty that may cast
significant doubt about our ability to continue as a going concern.
Management intends to finance its operations over the next twelve
months through the proceeds derived from this offering. Should we
be unable to continue as a going concern, the net realizable value
of our assets may be materially less than the amounts on our
statement of financial position.





28

















A. Operating
Results





Results of Operations for the Year ended December 31, 2017 as
Compared to the Year Ended December 31, 2016





Revenues





Revenue for the year ended December 31, 2017 was $109,173 (2016:
$nil). Our revenue was derived by the sale of one roadster by
Intermeccanica during the period from acquisition to December 31,
2017. As Intermeccanica was our sole source of revenue and we
acquired Intermeccanica in October 2017, we had no revenue prior to
October 2017.


Operating Expenses





We incurred costs and expenses in the amount of $9,534,379 for the
fiscal year ended December 31, 2017, an increase from costs and
expenses of $8,942,022 for the period ended December 31,
2016.





This increase in incurred costs and expenses is primarily
attributable to the collective results of the following
factors:





●
General
and administrative expenses for year ended December 31, 2017 were
$2,373,251 compared to $1,205,835 for the period ended December 31,
2016. The following items are included in general and
administrative expenses:





-
Rent,
which increased to $269,716 for the year ended December 2017 from
$141,957 for the period ended December 31, 2016. The increase was
caused by the increase in our production premises as we expand our
production capabilities to produce the SOLO, an increase in our
retail presence and the addition of rental space on the acquisition
of Intermeccanica;-
Office
expenses, which increased to $345,986 for the year ended December
31, 2017 from $113,158 for the period ended December 31, 2016. The
increase was caused by travel costs to China and New York, an
increase in directors and officers liability insurance as we
migrated from a private company in 2016 to a public company in 2017
and a donation of our first SOLO vehicle to Loving Spoonful, a
non-profit organization;-
Legal
& Professional expenses, which increased to $912,347 for the
year ended December 31, 2017 from $643,725 for the period ended
December 31, 2016. The majority of the legal expenses was due to
the filing of our application for a ticker symbol to the Financial
Industry Regulation Authority (FINRA) in the United States of
America, other legal costs associated with contracts, together with
professional fees associated with the filing of our amended F1
registration statement, the purchase of Intermeccanica, and fees
related to the filing and receiving of our Scientific, Research and
Experimental Development (SRED) claim;-
Consulting fees,
which increased to $405,176 for the year ended December 31, 2017
from $186,437 for the period ended December 31, 2016. Consulting
fees relate to services provided for accounting, finance and
corporate advisory services. The increase in fees related to the
use of additional consultants for investor relations and executive
advisory services; and-
Salaries &
Employees related expenses, which increased to $326,770 for the
year ended December 31, 2017, from $120,558 for the corresponding
year ended December 31, 2016. Increases relate to the addition of
new employees and the addition of employees related to the
acquisition of Intermeccanica.





●
Research and
development expenses increased to $4,430,386 for the year ended
December 31, 2017, from $2,778,295 for the period ended December
31, 2016 primarily as a result of an increase in the costs of
materials to $2,763,355 from $1,266,730 over the two periods. We
continue to develop our first electric vehicles. All costs related
to pre-production vehicles are being expensed to research and
development. During the year ended December 31, 2017, the Company
received $193,534 (2016: $203,997) in government grants related to
the Industrial Research Assistance Program (“IRAP)
administered by the National Research Council. In addition, the
Company received $111,380 (2016: $nil), in Scientific Research and
Experimental Development (“SRED”) grant..●
Sales
and marketing expenses increased to $631,381 for the year ended
December 31, 2017 from $209,455 for the period ended December 31,
2015. We haveincreased our sales and
marketing efforts by opening retail stores, increasing our social
media presence and increasing our staff as our first electric
vehicle, the SOLO, nears production.●
Stock-based
compensation charges for the year ended December 31, 2017 were
$889,511 (2016: $1,461,189). We issued 1,120,000 stock options at
an exercise price of $1.00 per share during the year ended December
31, 2017. In addition, the stock-based compensation charges relate
to stock options issued during previous quarters where charges are
recognized over the stock option vesting period. We use the
Black-Scholes method of calculating the stock-based compensation
expense under the graded method.●
Share-based payment
expensedecreased to $1,085,716
for the year ended December 31, 2017 as compared to $3,264,681 for
the corresponding year ended December 31, 2016. During the year
ended December 31, 2017, the Company issued 45,045 warrants to a
consultant to provide marketing services which were fair valued at
$274,407 and shares provided for corporate advisory services were
fair valued and resulted in a non-cash amount of
$811,309.





29














Other Items





We incurred an interest accretion expense of $69,562 for the year
ended December 31, 2017 (2015: $25,908) relating to a convertible
loan (note 11 in the financial statements for the year ended
December 31, 2017). We valued our finder’s fee related to the
convertible loan at $258,542 (2016: $nil).





We incurred changes in fair values of warrant derivative of
$186,269 (2016: $Nil), caused by warrants priced in US dollars,
while our functional currency is in Canadian dollars. As a result
of this difference in currencies, the proceeds that will be
received by us are not fixed and will vary based on foreign
exchange rates and the warrants are a derivative under IFRS, and
are required to be recognized and measured at fair value at each
reporting period. Any changes in fair value from period to period
are recorded as non-cash gain or loss in the consolidated statement
of net loss and comprehensive loss.





We impaired our goodwill arising from the acquisition of
Intermeccanica, after a third-party valuation report was
commissioned to value the acquisition and apportion the purchase
price to the net assets of Intermeccanica, which amounted to
$1,342,794 (2016: $nil).





In addition, other items include a foreign exchange loss of $20,048
for the year ended December 31, 2017 (2015: $5,417). Some of our
expenses are paid to suppliers based in the United States who
invoice us in US dollars.





Net and Comprehensive Income (Loss)





As a result of the above factors, we reported a net loss and
comprehensive loss for the year ended December 31, 2017 of
$11,366,372 (2016: $8,973,347).





B. Liquidity and
Capital Resources





Our
operations consist of the designing, developing and manufacturing
of electric vehicles. Our financial success depends upon our
ability to market and sell our electric vehicles; and to raise
sufficient working capital to enable us to execute our business
plan. Our historical capital needs have been met by the sale of
common shares. Equity funding might not be possible at the times
required by us. If no funds are can be raised and sales of our
electric vehicles do not produce sufficient net cash flow, then we
may require a significant curtailing of operations to ensure our
survival.





The
financial statements have been prepared on a going concern basis
which assumes that we will be able to realize our assets and
discharge our liabilities in the normal course of business for the
foreseeable future. We incurred a net loss and comprehensive loss
of $11,366,372 during the year ended December 31, 2017 and had a
cash balance and a working capital surplus of $8,610,996 and
$6,653,009, respectively, as at December 31, 2017. Our ability to
meet our obligations as they fall due and to continue to operate as
a going concern depends on the continued financial support of the
creditors and the shareholders. In the past, we have relied on
sales of our equity securities to meet our cash requirements.
Funding from this or other sources might not be sufficient in the
future to continue our operations. Even if we are able to obtain
new financing, it may not be on commercially reasonable terms or
terms that are acceptable to us. Failure to obtain such financing
on a timely basis could cause us to reduce or terminate our
operations. The above indicates the existence of a material
uncertainty that may cast significant doubt on our ability to
continue as a going concern.





As of
December 31, 2017, we had 47,588,209 issued and outstanding shares
and 128,504,425 shares on a fully-diluted basis. We began trading
on the over the counter market on September 1, 2017.





We had
$6,653,009 of working capital surplus as at December 31, 2017
compared to $3,555,976 of working capital surplus as at December
31, 2016. The increase in working capital surplus resulted from
cash used in operations of $7,320,080 (2016: $4,162,835); cash used
in investing activities of $2,104,816 (2016: $357,372) resulting
from the additions to property, plant and equipment and the
purchase of Intermeccanica; which was offset by financing
activities generating cash of $14,119,609 (2016: $8,330,133) due to
the issuance of 3,820,499 common shares for net cash proceeds of
$10,837,902 (2016: $8,063,633); net proceeds from the issuance of a
convertible loan of $2,441,191 (2016: $300,000); and proceeds
received in fiscal 2017 from share subscriptions of $750,000 (2016:
$101,500) for shares that were issued in 2018.





As at
December 31, 2017, we had cash and cash equivalents of $8,610,996
(2016: $3,464,108).





As of
December 31, 2017, we had no outstanding commitments, other than
rent and lease commitments and $7.8 million payable to our
manufacturing partner for the production of the SOLO (see note 9 to
our financial statements for the year ended December 31, 2017). On October
16, 2017, Jerry Kroll, our President and CEO, entered into a Share
Pledge Agreement with Zongshen to guarantee our payment for the
cost of the prototype tooling and molds estimated to be $1.8
million through the pledge of 800,000 common shares of the Company
at a deemed price of USD $2.00. Apart from our agreement to
reimburse Mr. Kroll for liabilities under his Share Pledge
Agreement, we have not pledged any of our assets as security for
loans, or otherwise and are not subject to any debt
covenants.





30














As of December 31, 2017, we had total current assets of $10,007,684
and total current liabilities in the amount of $3,354,675. As a
result, we had working capital surplus of $6,653,009 as of December
31, 2017 (2016: $3,555,976).





Subsequent to December 31, 2017, we issued 1,526,669 common shares
for proceeds of $3,177,402, net of share issue costs.





Our monthly burn rate is currently $400,000 per month.





Cash Used in Operating Activities





Operating activities used $7,320,080 in cash for the fiscal year
ended December 31, 2017, compared to $4,162,835 in cash used in
operating activities for the year ended December 31, 2016. Our
negative cash flow from operating activities for the fiscal year
ended December 31, 2017 was caused by our being in development
phase of our overall business plan (which overall business plan
excludes Intermeccanica’s business), and we do not expect to
realize any revenues from our overall business plan until the third
quarter of 2018.





Cash Used in Investing Activities





Cash flows used in investing activities for the fiscal year ended
December 31, 2017 was $2,104,816 compared to $357,372 cash flows
used in investing activities for the fiscal year ended December 31,
2016. The increase in cash flows used in investing activities for
the fiscal year ended December 31, 2017, was caused primarily by
increases in expenditures in equipment to $1,264,265 (2016:
$232,027) and investment to $900,000 (2015: $100,000).





Cash flows from Financing Activities





Cash flows generated from financing activities for the fiscal year
ended December 31, 2017 were $14,119,609, compared to $8,330,133
for the fiscal year ended December 31, 2016. During the fiscal year
ended December 31, 2017, we repaid a shareholder loan of $33,155
(2016: $135,000), generated net cash proceeds from the issuance of
common shares net of share issue costs of $10,837,902 (2016:
$8,063,633), received $2,441,225 from convertible loans which
converted to equity (2016: $300,000) and generated proceeds of
$750,000 from share subscriptions (2016: $101,500).





C. Research and
Development, Patents and Licenses, etc.





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





The following table specifies the amounts spent on research and
development for the fiscal years ended December 31, 2017 and
2016:





Fiscal year ended December
31, 2017
Fiscal year ended December
31, 2016Labor
$1,971,946
$1,715,562Materials
2,763,355
1,266,730Government
grants
(304,914)
(203,997)Total
$4,430,387
$2,778,295





31

















D. Trend
Information





Due to our short operating history, we are not aware of any trends
that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
However, as of April 11, 2018,
we had an order backlog of 700 SOLOs, 14 Super SOLOs and 110
Tofinos.





E. Off-Balance Sheet
Arrangements





As of December 31, 2017, we did not have any off-balance sheet debt
nor did we have any transactions, arrangements, obligations
(including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material
current or future effect on financial conditions, changes in the
financial conditions, results of operations, liquidity, capital
expenditures, capital resources, or significant components of
revenue or expenses.





F. Tabular Disclosure
of Contractual Obligations





Payments
due by periodContractual
obligations
Total
Less than 1 year
2-3
years
4-5
years
More than 5 yearsOperating Lease
Obligations
$817,070(1)
$310,034
$507,036
Nil
NilOther Long-Term
Liabilities Reflected on the Registrant’s Balance Sheet under
IFRS
Nil
Nil
Nil
Nil
NilTotal
$817,070
$310,034
$507,036
Nil
Nil





(1)
Office
and warehouse rent, based on $17,410.68 per month October through
December 2016; $18,422.62 per month January through December 2017.
Amounts are estimated due to fluctuations in common area
maintenance charges.





G. Safe
Harbor





Not
applicable.





ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES





A. Directors and
Senior Management





Directors and Executive Officers





The following table sets forth the names and ages of all of our
directors and executive officers.





Name, Province/State and Country of Residence
Age
Position
Director/Officer
SinceJerry Kroll(1)(2)(3), British
Columbia, Canada
57
President, CEO and
director
February 16,
2015Kulwant Sandher (2)(5), British
Columbia, Canada
56
Chief Financial
Officer and Secretary
June 15,
2016Iain Ball, British Columbia,
Canada
63
Vice-President,
Finance
February 16,
2015Henry Reisner (2), British
Columbia, Canada
53
Chief Operating
Officer and director
February 16,
2015Ed Theobald, British Columbia,
Canada
65
General
Manager
February 16,
2015Shaun
Greffard(2)(3)(6)(8), British Columbia,
Canada
43
Director
August 8,
2016Louisa Ingargiola (3)(4)(6)(7)(8),
Florida, USA
50
Director
March 16,
2018Steven Sanders (4)(6)(7)(8), New York,
USA
72
Director
March 16,
2018Robert Tarzwell(2)(3)(4)(6)(7)(8),
British Columbia, Canada
47
Director
August 8,
2016Mark West British Columbia,
Canada
50
Vice-President,
Sales & Dealerships
November 1,
2016





(1)
Mr.
Kroll was appointed President, CEO and a director of the Company
effective February 16, 2015.(2)
Member
of the Social Media Committee.(3)
Member
of the Enterprise Risk Oversight Committee.(4)
Member
of the Nominating Committee(5)
Mr.
Sandher was appointed CFO of the Company on June 15, 2016. Mr.
Sandher was appointed as Secretary of the Company on August 8,
2016.(6)
Member
of the Corporate Governance and Human Resources
Committee.(7)
Member
of the Compensation Committee





32














Business Experience





The following summarizes the occupation and business experience
during the past five years or more for our directors, and executive
officers as of the date of this prospectus:





Jerry Kroll – President, Chief Executive Officer and a
director





Mr. Kroll has an extensive background working in small businesses
and start-ups. His career began when he managed the production,
strategic planning, and sales operations of Kroll Greenhouses, his
family business. From there, Mr. Kroll served in other management
roles in the floral and food services industries, overseeing the
import/export of floral products, managing employees, managing food
franchises, and establishing supplier/distributor
relationships.





In 1996, Mr. Kroll became involved in air racing as the owner of
Vancouver International Air Races and Airshow, which featured large
scale events attracting over 15,000 spectators and 31 corporate
sponsors. From then on, Mr. Kroll became increasingly involved in
air racing and motor races. He eventually became the president and
CEO of Corbin Motors Vancouver Inc. in 2001 where he organized the
sales of the firm’s three-wheeled commuter vehicle in
Canada.





In 2007, Mr. Kroll founded KleenSpeed Technologies, a firm focused
on stationary energy storage products. He began researching and
developing an EV for the everyday commuter. As an entrepreneur, Mr.
Kroll also founded Ascend Sportmanagement Inc., a sports property
and technology management firm.





Mr. Kroll’s experience and skillset in innovative technology
and start-ups, coupled with his passion for clean technology
developments, allows Mr. Kroll to coordinate, manage, and execute
strategies for our company.





Mr. Kroll is also actively involved in the Vancouver venture
capital scene and has been a member of the Vancouver Angel
Technology Network, an investing and mentoring network for new
technology start-ups, since 2003.





Kulwant Sandher, Chief Financial Officer and Secretary





Kulwant Sandher is a Chartered Professional Accountant with over 25
years of experience in business and finance. Mr. Sandher graduated
from Queen Mary, University of London (formerly known as Queen Mary
College) in 1986 with a B.Sc. degree (Eng.) in Avionics. Mr.
Sandher became a Chartered Accountant in England in 1991 and
received his Chartered Professional Accountant designation in
Canada in 1997.





Mr. Sandher has considerable private and public company experience.
He served as CFO of MineSense Technologies Inc. from August 2013
until July 2015; as CFO of Alba Mineral Ltd. from June 2017 to the
present; as CFO of Delta Oil & Gas from October 2008 to
September 2017; as CFO of Astorius Resources Ltd. from June 2017 to
the present; as CFO of Hillcrest Petroleum from December 2011 to
April 2015; as CFO of Intigold Mines Ltd. from December 2010 to
April 2017; and as COO & CFO for Marketrend Interactive Inc.,
from March 2004 to March 2006.





Mr. Sandher has also served as CFO of several publicly listed
companies, including: Hillcrest Petroleum (TSX-V), Millrock
Resources Inc. (TSX-V) and St. Elias Mines (TSX-V). Currently, Mr.
Sandher serves as President of Hurricane Corporate Services Ltd.
and as CFO of Alba Resources Ltd. (TSX-V). Furthermore, Mr. Sandher
is currently serving as a director and CFO of Delta Oil and Gas
Inc. since 2007 and Director of The Cloud Nine Education Group Inc
since December 2015.





Iain Ball, Vice-President, Finance





Mr. Ball is an experienced financial executive with over 25 years
of international corporate financial and general management
experience. He has been providing CFO services, along with
strategic and financial advice, to growing companies and start-ups
since 2012, and served as our CFO from June 2015 to June
2016.





He is the former Chief Financial Officer and Director of
Progressive Solutions Inc. (“Progressive Solutions”),
an enterprise resource planning software company that grew (both
organically and by acquisition) from 40 employees to 135 employees
in the United States, the United Kingdom, and Canada. Mr. Ball was
responsible for debt and equity financings that were instrumental
to Progressive Solutions’ acquisitions and international
growth. Progressive Solutions was successfully sold to a strategic
buyer in 2012.





Mr. Ball graduated from the University of Aberdeen in 1975 with a
Bachelor of Science (Honours), as well as a Master of Business
Administration from Simon Fraser University in 1999. He became a
Chartered Accountant in Scotland in 1979 and obtained his Chartered
Professional Accountant designation in 1982 from the Canadian
Institute of Chartered Professional Accountants.





Henry Reisner, Chief Operating Officer





Mr. Reisner is the current President of Intermeccanica, a
subsidiary of our company, which is an automobile manufacturer, and
has held this position since 2001. He is experienced in the
automotive industry and has a background in
manufacturing.





Mr. Reisner holds a Bachelor of Arts degree in political science
from the University of British Columbia in 1989.





33














Ed Theobald, General Manager





Mr. Theobald is a seasoned operational manager with over 40 years
of experience in finance, industrial sales, construction, retail,
and oil & gas industries. This experience includes over 20
years as at Envirotest Canada from when he started in 1995 through
to his current position as general manager which he has held since
January 2015. He also oversaw the operations of 16 automotive
repair shops as Regional Manager of Speedy Glass. Mr, Theobald
became our General Manager in February 2015.





Shaun Greffard, Director





Mr. Greffard is a management professional with over 20 years of
experience in telecommunications, information technology and
government. During his career as a management professional, Mr.
Greffard has been responsible for Ledcor's over $80M Canadian
telecommunications division and responsible for negotiating
commercial and contractual terms for the largest P3
telecommunications deal in North America valued at close to US$600M
over a three-year Design/Build contract and 30 year Operations
contract. He was also responsible for negotiating numerous US
contracts between the public and private sectors, working with and
for local and federal government entities including delivery of one
of the largest Canadian telecommunications deals with the Federal
government. He has been responsible for conducting labor
negotiations and transforming people, culture and corporate image
after a prolonged labor dispute and has run the marketing
organization for a $100M division of Telus. He is adept at
overhauling under-performing business units and analyzing and
removing operational flaws to improve operational performance and
profitability.





Mr. Greffard accumulated his experience and skill set from roles at
Telus Communications Inc., the City of Surrey, and Ledcor Group. He
is currently the Vice President of Strategic Projects at the Ledcor
Group.





Mr. Greffard holds a Master’s in Business Administration from
Royal Roads University.





Dr. Robert Tarzwell, Director





Dr. Tarzwell began his career as a psychiatrist at St. Paul’s
Hospital in 2006. His experience and expertise led him to other
clinical/consultant roles in medicine and academia, serving as
external faculty member for Green College of the University of
British Columbia, medical advisor for virtual healthcare
application Medeo, and clinical assistant professor in the faculty
of medicine at the University of British Columbia. Dr. Tarzwell is
currently Clinical Director of Research for Mental Health at Lions
Gate Hospital. For over five years, Dr. Tarzwell has run his own
private medical practice.





In addition to his background in academia and medicine, Dr.
Tarzwell is an enthusiast of high tech industries, multimedia
innovations, and race cars. He is an investor/advisor for a number
of Vancouver-based start-ups, including Medeo, Hothead Games, EM,
and Viewers Like You Productions.





Dr. Tarzwell holds a Bachelor’s Degree in English and
Literature from Simon Fraser University, a Doctor of Medicine from
the University of Manitoba, a Psychiatrist certification from the
Royal College of Physicians of Canada at Dalhousie University, and
a Nuclear Medicine certification from the Royal College of
Physicians of Canada at the University of British
Columbia.





Louisa Ingargiola





Ms. Ingargiola has been the Chief Financial Officer of Avalon
GloboCare, a leading biotech health care company that is developing
cell based therapeutic technologies for cancer and neuromuscular
disease. Luisa also serves as a director and audit chair of FTE
Networks, a leading international network infrastructure solutions
and cyber security company. Luisa is a former chief financial
officer and current board member of MagneGas Corporation. In
addition, she has served as Audit Chair for several public
companies in the technology, environmental and energy
industries.





Steven Sanders





Since January 2017, Mr. Sanders has been Of Counsel to the law firm
of Ortoli Rosenstadt LLP. From July 2007 until January 2017, Mr.
Sanders was a Senior Partner of Ortoli Rosenstadt LLP. From January
1, 2004 until June 30, 2007, he was of counsel to the law firm of
Rubin, Bailin, Ortoli, LLP.  From January 1, 2001 to
December 31, 2003, he was counsel to the law firm of Spitzer &
Feldman PC.  Mr. Sanders also serves as a Director of
Helijet International, Inc.  Additionally, he is a
Director of the Roundabout Theatre (the largest not-for-profit
theatre in North America), Town Hall New York City, and he is a
director at Trustee, American Academy of Dramatic Arts. Mr. Sanders
received his JD from Cornell University and his BBA from The City
College of New York.





Mark West, Vice-President, Sales & Dealerships





Mark West has over 25 years of experience directing and expanding
operations in the highly competitive food and beverage industry.
Mr. West was instrumental in the local and international growth of
Blenz Coffee from 10 stores to over 70 stores in Canada and Asia.
Mr. West was the President of Blenz Coffee from September 2012 to
December 2016 and previously held the positions of President,
Vice-President, Manager of Operations and Manager of Franchising
from 1996 to 2007. Mr. West was the Vice-President and an owner of
MyCup Coffee and Tea from 2008 to 2012. Mr. West joined our team in
November 2016.





34














Advisory Board





We have a full Advisory Board in place, complete with individuals
who have various backgrounds and experience to complement our
operations, mission, and business strategy. The Advisory
Board provides suggestions to our management on an as-needed
basis. The Advisory Board does not have a charter and does not meet
on a scheduled basis. It is comprised
of the following individuals:





Name
State/province of residence
PositionJohn
Douglas Reynolds
British
Columbia, Canada
Chairperson
of Advisory BoardMyron
Trenne
Michigan,
USA
Advisory
Board memberAnthony
Luzi
Nevada,
USA
Advisory
Board memberBill
Calsbeck
British
Columbia, Canada
Advisory
Board memberMike
Volker
British
Columbia, Canada
Advisory
Board memberJim
Fletcher
British
Columbia, Canada
Advisory
Board memberTed
Wilkinson
British
Columbia, Canada
Advisory
Board member





Myron Trenne, Advisory Board





Mr. Trenne’s background in the automotive industry includes
research and development roles at the General Motors Technical
Center before becoming a founding member and Vice President of
Engineering at TRW Transportation Electronics.





Mr. Trenne further developed his management skills through his role
of General Manager of Eaton’s automotive research and
development center and Yazaki North America, Inc. During his time
at Yazaki North America, Inc., Mr. Trenne was the Vice President of
research and development and marketing and was the General Manager
responsible for overseeing a US$100 million business
unit.





As a pioneer of automotive digital technology, Mr. Trenne led the
first team to apply a programmable microcomputer to a car, which
integrated anti-lock braking system, traction, cruise control,
ignition and digital instruments with a single digital processor.
Subsequent system developments included gas and diesel electronic
fuel injection, EVs, vehicle electrical architectures, vehicle
fiber optics, high voltage EV components, and Intelligent
Transportation Systems. Furthermore, Mr. Trenne has authored over a
dozen vehicle system and control patents.





Mr. Trenne had previously served as Treasurer for the Convergence
Transportation Electronics Association which merged with the
Society of Automotive Engineers in 2009. Mr. Trenne has served many
roles in the SAE including Committee Chair and Board
positions.





Mr. Trenne received a Bachelor of Science in electrical engineering
from Kettering University, formerly known as the General Motors
Institute. He also received his Master of Science in electrical
engineering from the University of Colorado and is a licensed
Professional Engineer.





Mike Volker, Advisory Board





Mr. Volker is an entrepreneur and angel investor active in the
development of new high technology ventures. Shortly after
completing his education at the University of Waterloo, Mr. Volker
founded Volker-Craig Ltd, a video terminal manufacturer, in 1973.
After the sale of Volker-Craig Ltd. in 1981, Mr. Volker focused on
supporting entrepreneurs in building their business and investing
in start-ups. Mr. Volker’s dedication in helping
entrepreneurs has led him to expand his reach into public education
and leading entrepreneurship-centric organizations.





As an instructor, Mr. Volker teaches a business course and an
intellectual property management course at Simon Fraser University
where he is also the Director of the SFU’s Innovation Office,
which facilitates the creation of new university-industry research
and development partnerships and commercializes the
university’s research results.





His recent projects include: GreenAngel Energy Corp, a public
company that invests in green technologies and the Western
Universities Technology Innovation Fund, an angel fund for
start-ups. Mr. Volker runs the Vancouver Angel Technology Network
and is actively involved with New Ventures BC, an annual business
competition.





Mr. Volker holds a Bachelor’s degree in engineering and a
Masters in Applied Science from the University of
Waterloo.





Family Relationships





There are no family relationships among any of our directors and
executive officers.





35














Term of Office





Each director of our company is to serve for a term of one year
ending on the date of the subsequent annual meeting of stockholders
following the annual meeting at which such director was elected.
Notwithstanding the foregoing, each director is to serve until his
successor is elected and qualified or until his death, resignation
or removal. Our Board of Directors appoints our officers and each
officer is to serve until his successor is appointed and qualified
or until his or her death, resignation or removal.





Involvement in Certain Legal Proceedings





During the past ten years, none of our directors or executive
officers have been the subject of the following
events:





1.
a
petition under the Federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of
such person, or any partnership in which he was a general partner
at or within two years before the time of such filing, or any
corporation or business association of which he was an executive
officer at or within two years before the time of such
filing;2.
convicted
in a criminal proceeding or is a named subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);3.
the
subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities;





i)
acting
as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;ii)
engaging
in any type of business practice; oriii)
engaging
in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities
laws;





4.
the
subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any Federal or State authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in
paragraph 3.i in the preceding paragraph or to be associated with
persons engaged in any such activity;5.
was
found by a court of competent jurisdiction in a civil action or by
the SEC to have violated any Federal or State securities law, and
the judgment in such civil action or finding by the SEC has not
been subsequently reversed, suspended, or vacated;





6.
was
found by a court of competent jurisdiction in a civil action or by
the Commodity Futures Trading Commission to have violated any
Federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated;7.
was the
subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:





i)
any
Federal or State securities or commodities law or regulation;
orii)
any law
or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order, oriii)
any law
or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or8.
was the
subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member.





36














Director Independence





Our Board has determined that the following directors are
“independent” as such directors do not have a direct or
indirect material relationship with our company. A material
relationship is a relationship which could, in the view of our
Board of Directors, be reasonably expected to interfere with the
exercise of a director’s independent judgment.





●
Shaun
Greffard;●
Robert
Tarzwell;●
Luisa
Ingargiola; and●
Steven
Sanders.





Code of Business Conduct and Ethics





On December 22, 2017, we adopted a Code of Conduct and Ethics that
applies to our directors, officers and other
employees.





B. Compensation





Compensation Discussion and Analysis





This
section sets out the objectives of our Company’s executive
compensation arrangements, our Company’s executive
compensation philosophy and the application of this philosophy to
our Company’s executive compensation arrangements. It also
provides an analysis of the compensation design, and the decisions
that the Board made in fiscal 2016 with respect to the Named
Executive Officers. When determining the compensation arrangements
for the Named Executive Officers, our Board of Directors acting as
the Compensation Committee considers the objectives of: (i)
retaining an executive critical to the success of the Company and
the enhancement of shareholder value; (ii) providing fair and
competitive compensation; (iii) balancing the interests of
management and our Company’s shareholders; and (iv) rewarding
performance, both on an individual basis and with respect to the
business in general.





Benchmarking





Our Board of Directors established a Compensation Committee in
March 2018. Prior to that, our Board of Directors acted as the
Compensation Committee.





The Compensation Committee will consider a variety of factors when
designing and establishing, reviewing and making recommendations
for executive compensation arrangements for all our executive
officers. The Compensation Committee does not intend to position
executive pay to reflect a single percentile within the industry
for each executive. Rather, in determining the compensation level
for each executive, the Compensation Committee will look at factors
such as the relative complexity of the executive’s role
within the organization, the executive’s performance and
potential for future advancement and pay equity
considerations.





Elements of Compensation





The
compensation paid to Named Executive Officers in any year consists
of two primary components:





(a)
base
salary; and(b)
long-term
incentives in the form of stock options granted under our Stock
Option Plan.





The key
features of these two primary components of compensation are
discussed below:





1.        Base
Salary





Base
salary recognizes the value of an individual to our Company based
on his or her role, skill, performance, contributions, leadership
and potential. It is critical in attracting and retaining executive
talent in the markets in which the Company competes for talent.
Base salaries for the Named Executive Officers are intended to be
reviewed annually. Any change in base salary of a Named Executive
Officer is generally determined by an assessment of such
executive’s performance, a consideration of competitive
compensation levels in companies similar to the Company (in
particular, companies in the EV industry) and a review of the
performance of the Company as a whole and the role such executive
officer played in such corporate performance.





2.        Stock
Option Awards





The
Company provides long-term incentives to Named Executive Officers
in the form of stock options as part of its overall executive
compensation strategy. Our Board of Directors acting as the
Compensation Committee believes that stock option grants serve the
Company’s executive compensation philosophy in several ways:
firstly, it helps attract, retain, and motivate talent; secondly,
it aligns the interests of the Named Executive Officers with those
of the shareholders by linking a specific portion of the
officer’s total pay opportunity to the share price; and
finally, it provides long-term accountability for Named Executive
Officers.








37

















Risks Associated with Compensation Policies and
Practices





The
oversight and administration of the Company’s executive
compensation program requires the Board of Directors acting as the
Compensation Committee to consider risks associated with the
Company’s compensation policies and practices. Potential
risks associated with compensation policies and compensation awards
are considered at annual reviews and also throughout the year
whenever it is deemed necessary by the Board of Directors acting as
the Compensation Committee.





The
Company’s executive compensation policies and practices are
intended to align management incentives with the long-term
interests of the Corporation and its shareholders. In each case,
the Corporation seeks an appropriate balance of risk and reward.
Practices that are designed to avoid inappropriate or excessive
risks include (i) financial controls that provide limits and
authorities in areas such as capital and operating expenditures to
mitigate risk taking that could affect compensation, (ii) balancing
base salary and variable compensation elements and (iii) spreading
compensation across short and long-term programs.





Compensation Governance





The
Compensation Committee intends to conduct a yearly review of
directors’ compensation having regard to various reports on
current trends in directors’ compensation and compensation
data for directors of reporting issuers of comparative size to the
Company. Director compensation is currently limited to the grant of
stock options pursuant to the Stock Option Plan. It is anticipated
that the Chief Executive Officer will review the compensation of
executive officers of the Company for the prior year and in
comparison to industry standards via information disclosed publicly
and obtained through copies of surveys. The Board expects that the
Chief Executive Officer will make recommendations on compensation
to the Compensation Committee. The Compensation Committee will
review and make suggestions with respect to compensation proposals,
and then makes a recommendation to the Board.





The
Compensation Committee is currently comprised of Jerry Kroll, Shaun
Greffard and Robert Tarzwell, which is currently the entire Board
of Directors.





The
Compensation Committee’s responsibility will be to formulate
and make recommendations to the directors of the Company in respect
of compensation issues relating to directors and executive officers
of the Company. Without limiting the generality of the foregoing,
the Compensation Committee when formed will have the following
duties:





(a)
to
review the compensation philosophy and remuneration policy for
executive officers of the Company and to recommend to the directors
of the Company changes to improve the Company’s ability to
recruit, retain and motivate executive officers;(b)
to
review and recommend to the Board the retainer and fees, if any, to
be paid to directors of the Company;(c)
to
review and approve corporate goals and objectives relevant to the
compensation of the CEO, evaluate the CEO’s performance in
light of those corporate goals and objectives, and determine (or
make recommendations to the directors of the Company with respect
to) the CEO’s compensation level based on such
evaluation;(d)
to
recommend to the directors of the Company with respect to non-CEO
officer and director compensation including reviewing
management’s recommendations for proposed stock options and
other incentive-compensation plans and equity- based plans, if any,
for non-CEO officer and director compensation and make
recommendations in respect thereof to the directors of the
Company;(e)
to
administer the stock option plan approved by the directors of the
Company in accordance with its terms including the recommendation
to the directors of the Company of the grant of stock options in
accordance with the terms thereof; and(f)
to
determine and recommend for the approval of the directors of the
Company bonuses to be paid to executive officers and employees of
the Company and to establish targets or criteria for the payment of
such bonuses, if appropriate. Pursuant to the mandate and terms of
reference of the Compensation Committee, meetings of the
Compensation Committee are to take place at least once per year and
at such other times as the Chair of the Compensation Committee may
determine.





38

















Summary Compensation Table





The
following table sets forth all annual and long-term compensation
for services in all capacities to the Company during the fiscal
periods indicated in respect of the Named Executive
Officers:





Compensation Discussion and Analysis





This section sets out the objectives of our company’s
executive compensation arrangements, our company’s executive
compensation philosophy and the application of this philosophy to
our company’s executive compensation arrangements. It also
provides an analysis of the compensation design, and the decisions
that the Board made in fiscal 2016 with respect to our Named
Executive Officers (as defined below). When determining the
compensation arrangements for the Named Executive Officers, our
Board of Directors acting as the Compensation Committee considers
the objectives of: (i) retaining an executive critical to our
success and the enhancement of shareholder value; (ii) providing
fair and competitive compensation; (iii) balancing the interests of
management and our shareholders; and (iv) rewarding performance,
both on an individual basis and with respect to the business in
general.





Benchmarking





Our Board of Directors established a Compensation Committee in
March 2018. Prior to that, our Board of Directors acted as the
Compensation Committee.





The Compensation Committee will consider a variety of factors when
designing and establishing, reviewing and making recommendations
for executive compensation arrangements for all our executive
officers. The Compensation Committee does not intend to position
executive pay to reflect a single percentile within the industry
for each executive. Rather, in determining the compensation level
for each executive, the Compensation Committee will look at factors
such as the relative complexity of the executive’s role
within the organization, the executive’s performance and
potential for future advancement and pay equity
considerations.





Elements of Compensation





The compensation paid to Named Executive Officers in any year
consists of two primary components:





(a)
base
salary; and(b)
long-term
incentives in the form of stock options granted under our Stock
Option Plan (as defined below).





The key features of these two primary components of compensation
are discussed below:





1.
Base
Salary





Base salary recognizes the value of an individual to our company
based on his or her role, skill, performance, contributions,
leadership and potential. It is critical in attracting and
retaining executive talent in the markets in which we compete for
talent. Base salaries for the Named Executive Officers are intended
to be reviewed annually. Any change in base salary of a Named
Executive Officer is generally determined by an assessment of such
executive’s performance, a consideration of competitive
compensation levels in companies similar to our company (in
particular, companies in the EV industry) and a review of our
performance as a whole and the role such executive officer played
in such corporate performance.





2.
Stock
Option Awards





We provide long-term incentives to Named Executive Officers in the
form of stock options as part of its overall executive compensation
strategy. Our Board of Directors acting as the Compensation
Committee believes that stock option grants serve our executive
compensation philosophy in several ways: firstly, it helps attract,
retain, and motivate talent; secondly, it aligns the interests of
the Named Executive Officers with those of the shareholders by
linking a specific portion of the officer’s total pay
opportunity to the share price; and finally, it provides long-term
accountability for Named Executive Officers.





Risks Associated with Compensation Policies and
Practices





The oversight and administration of our executive compensation
program requires the Board of Directors acting as the Compensation
Committee to consider risks associated with our compensation
policies and practices. Potential risks associated with
compensation policies and compensation awards are considered at
annual reviews and also throughout the year whenever it is deemed
necessary by the Board of Directors acting as the Compensation
Committee.





Our executive compensation policies and practices are intended to
align management incentives with the long-term interests of the
Corporation and its shareholders. In each case, the Corporation
seeks an appropriate balance of risk and reward. Practices that are
designed to avoid inappropriate or excessive risks include (i)
financial controls that provide limits and authorities in areas
such as capital and operating expenditures to mitigate risk taking
that could affect compensation, (ii) balancing base salary and
variable compensation elements and (iii) spreading compensation
across short and long-term programs.





39














Compensation Governance





The Compensation Committee intends to conduct a yearly review of
directors’ compensation having regard to various reports on
current trends in directors’ compensation and compensation
data for directors of reporting issuers of comparative our size.
Director compensation is currently limited to the grant of stock
options pursuant to the Stock Option Plan. It is anticipated that
the Chief Executive Officer will review the compensation of our
executive officers for the prior year and in comparison to industry
standards via information disclosed publicly and obtained through
copies of surveys. The Board expects that the Chief Executive
Officer will make recommendations on compensation to the
Compensation Committee. The Compensation Committee will review and
make suggestions with respect to compensation proposals, and then
makes a recommendation to the Board.





The Compensation Committee is currently comprised of Jerry Kroll,
Shaun Greffard and Robert Tarzwell, which is currently the entire
Board of Directors.





The Compensation Committee’s responsibility is to formulate
and make recommendations to our directors in respect of
compensation issues relating to our directors and executive
officers. Without limiting the generality of the foregoing, the
Compensation Committee has the following duties:





(a)
to
review the compensation philosophy and remuneration policy for our
executive officers and to recommend to our directors changes to
improve our ability to recruit, retain and motivate executive
officers;





(b)
to
review and recommend to the Board the retainer and fees, if any, to
be paid to our directors;(c)
to
review and approve corporate goals and objectives relevant to the
compensation of the CEO, evaluate the CEO’s performance in
light of those corporate goals and objectives, and determine (or
make recommendations to our directors with respect to) the
CEO’s compensation level based on such
evaluation;(d)
to
recommend to our directors with respect to non-CEO officer and
director compensation including reviewing management’s
recommendations for proposed stock options and other
incentive-compensation plans and equity-based plans, if any, for
non-CEO officer and director compensation and make recommendations
in respect thereof to our directors;(e)
to
administer the stock option plan approved by our directors in
accordance with its terms including the recommendation to our
directors of the grant of stock options in accordance with the
terms thereof; and(f)
to
determine and recommend for the approval of our directors bonuses
to be paid to our executive officers and employees and to establish
targets or criteria for the payment of such bonuses, if
appropriate. Pursuant to the mandate and terms of reference of the
Compensation Committee, meetings of the Compensation Committee are
to take place at least once per year and at such other times as the
Chair of the Compensation Committee may determine.





Summary Compensation Table





The following table sets forth all annual and long-term
compensation for services in all capacities to the Company during
the fiscal periods indicated in respect of the executive officers
set out below (the “Named Executive
Officers”):





Named Executive Officer and Principal Position
Year
Salary ($)
Share- based awards ($)
Option-based awards ($)(1)
Annual Incentive Plan ($)
Long-term Incentive Plan ($)
Pension Value ($)
All Other Compensation ($)
Total Compensation ($)Jerry
Kroll(2)
2017
60,000
Nil
358,045
Nil
Nil
Nil
Nil
418,694President and
ChiefExecutive
Officer
2016
30,000
Nil
887,605
Nil
Nil
Nil
Nil
917,605Kulwant
Sandher(3)
2017
65,000
Nil
86,394
Nil
Nil
Nil
Nil
190,777Chief
Financial
2016
31,000
Nil
Nil
Nil
Nil
Nil
Nil
31,000Officer and SecretaryIain
Ball(4)
2017
60,000
Nil
37,235
Nil
Nil
Nil
Nil
97,883Vice-President,
2016
52,500
Nil
87,958
Nil
Nil
Nil
Nil
140,458FinanceHenry
Reisner(5)
2017
60,000
Nil
69,757
Nil
Nil
Nil
Nil
130,405Chief
Operating
2016
53,000
Nil
168,494
Nil
Nil
Nil
Nil
221,494OfficerEd
Theobald(6)
2017
60,000
Nil
37,235
Nil
Nil
Nil
Nil
97,883General Manager
2016
45,000
Nil
87,958
Nil
Nil
Nil
Nil
132,958Mark
West(7)
2017
160,167
Nil
70,563
Nil
Nil
Nil
16,167
262,896Vice-President,
2016
16,000
Nil
Nil
Nil
Nil
Nil
Nil
16,000Sales & Dealerships








(1)
The
grant date fair values of the share option awards are determined
using a Black-Scholes option pricing model. For a discussion of the
assumptions made in the valuation, refer to Note 11 to our
financial statements for the fiscal year ended December 31,
2016.(2)
Mr.
Kroll was appointed the President and Chief Executive Officer of
the Company on February 16, 2015, and served as the Secretary of
the Company from June 11, 2015 to August 8, 2016.(3)
Mr.
Sandher was appointed Chief Financial Officer of the Company on
June 15, 2016. Mr. Sandher was appointed as Secretary of the
Company on August 8, 2016.(4)
Mr.
Ball was appointed Chief Financial Officer of the Company on June
4, 2015 and subsequently was appointed Vice- President, Finance of
the Company on June 27, 2016.(5)
Mr.
Reisner was appointed Chief Operating Officer of the Company on
February 16, 2015.(6)
Mr.
Theobald was appointed General Manager of the Company on February
16, 2015.(7)
Mr.
West was appointed Vice-President, Sales & Dealerships of the
Company on November 1, 2016.





40














Executive Compensation Agreements





Jerry Kroll





On July 1, 2016, our Board of Directors approved the entering into
of an executive services agreement with Jerry Kroll with a term
expiring on July 1, 2019 (the“Kroll
Agreement”).





The Kroll Agreement is subject to automatic renewal on a one-month
to one-month term renewal basis unless either we or Mr. Kroll
provides written notice not to renew the Kroll Agreement no later
than 30 days prior to the end of the then current or renewal
term.





Pursuant to the terms and provisions of the Kroll Agreement: (a)
Mr. Kroll is appointed as our President and Chief Executive Officer
and will undertake and perform the duties and responsibilities
normally and reasonably associated with such office; (b) we shall
pay to Mr. Kroll a monthly fee of $5,000; (c) grant to Mr. Kroll
45,000,000 stock options exercisable into 45,000,000 common
shares at an exercise price of $0.15
per share expiring on June 11, 2022 and 5,000,000 stock options
exercisable into 5,000,000 common shares at an exercise price of $0.40 per share
expiring on December 9, 2022 (such options have already been
granted prior to the Kroll Agreement); (d) provide Mr. Kroll with
employee benefits, including group health insurance, accidental
death and dismemberment insurance, travel accident insurance, group
life insurance, short-term disability insurance, long-term
disability insurance, drug coverage and dental coverage (the
“Group
Benefits”); and (e) four
weeks’ paid annual vacation per calendar
year.





We may terminate the employment of Mr. Kroll under the Kroll
Agreement without any notice or any payment in lieu of notice for
just cause. Mr. Kroll may terminate his employment under the Kroll
Agreement for any reason by providing not less than 90 calendar
days’ notice in writing to us, provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion.





The employment of Mr. Kroll will terminate upon the death of Mr.
Kroll. Upon the death or Mr. Kroll during the continuance of the
Kroll Agreement, we will provide Mr. Kroll’s estate and, if
applicable, Mr. Kroll’s immediate family members with the
following: (a) three month’s base salary, less any required
statutory deductions, if any; (b) that portion of any then declared
and/or earned or accrued bonus, prorated to the end of the
three-month period from the effective date of termination that our
chairman determines would likely have been paid to Mr. Kroll; (c)
any outstanding vacation pay as at the effective date of
termination; (d) any outstanding expenses owing to Mr. Kroll as at
the effective date of termination; and (e) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr.
Kroll’s estate to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





If we elect to terminate the Kroll Agreement without just cause,
and provided that Mr. Kroll is in compliance with the relevant
terms and conditions of the Kroll Agreement, we shall be obligated
to provide a severance package to Mr. Kroll as follows: (a) a cash
payment equating to an aggregate of 12 months of the then monthly
fee, less any required statutory deductions, if any; (b) that
portion of any then declared and/or earned or accrued bonus,
prorated to the end of the three-month period from the effective
date of termination that our chairman determines would likely have
been paid to Mr. Kroll; (c) the present value, as determined by us,
acting reasonably, of each of the Group Benefits that would have
been enjoyed by Mr. Kroll during the next three months from the
effective date of termination; (d) any outstanding vacation pay as
at the effective date of termination; (e) any outstanding expenses
owing to Mr. Kroll as at the effective date of termination; (f)
maintain Mr. Kroll’s Group Benefits for a period of one year
from the effective date of termination; and (g) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr. Kroll to
then exercise any unexercised and fully vested portion of stock
options on the effective date of termination at any time during
three months from the effective date of termination.





Mr. Kroll may terminate his employment under the Kroll Agreement in
connection with any change in control of us by providing not less
than 90 calendar days’ notice in writing to us after the
change in control has been effected; provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion. If Mr. Kroll terminates his
employment under the Kroll Agreement as a consequence of a change
in control of us, we will: (a) pay the total of (i) 24
months’ base salary, less any required statutory deductions,
if any; (ii) that portion of any then declared and/or earned or
accrued bonus, prorated to the end of the six-month period from the
effective date of termination that our chairman determines would
likely have been paid to Mr. Kroll; (iii) the present value, as
determined by us, acting reasonably, of each of the Group Benefits
that would have been enjoyed by Mr. Kroll during the next six
months from the effective date of termination assuming Mr.
Kroll’s employment was not terminated and assuming the then
currently level of Group Benefits were continued for that six
months; (iv) any outstanding vacation pay as at the effective date
of termination; (v) any outstanding expenses owing to Mr. Kroll as
at the effective date of termination; (b) maintain Mr.
Kroll’s Group Benefits for a period of one year from the
effective date of termination; and (c) subject to our then Option
Plan and the rules and policies of any regulatory authority and
stock exchange having jurisdiction over us, allow Mr. Kroll to then
exercise any unexercised and fully vested portion of stock options
on the effective date of termination at any time during three
months from the effective date of termination.





41














Iain Ball





On July 1, 2016, our Board of Directors approved the entering into
of an executive services agreement with Iain Ball with a term
expiring on July 1, 2019 (the“Ball
Agreement”).





The Ball Agreement is subject to automatic renewal on a one-month
to one-month term renewal basis unless either we or Mr. Ball
provides written notice not to renew the Ball Agreement no later
than 30 days prior to the end of the then current or renewal
term.





Pursuant to the terms and provisions of the Ball Agreement: (a) Mr.
Ball is appointed as our Vice-President, Finance and will undertake
and perform the duties and responsibilities normally and reasonably
associated with such office; (b) we shall pay to Mr. Ball a monthly
fee of $5,000; (c) grant to Mr. Ball 500,000 stock options
exercisable into 500,000 common shares at an exercise price of $0.15 per share
expiring on August 13, 2022 and 750,000 stock options exercisable
into 750,000 common shares at
an exercise price of $0.40 per share expiring on December 9, 2022
(such options have already been granted prior to the Ball
Agreement); (d) provide Mr. Ball with Group Benefits,; and (e) four
weeks’ paid annual vacation per calendar
year.





We may terminate the employment of Mr. Ball under the Ball
Agreement without any notice or any payment in lieu of notice for
just cause. Mr. Ball may terminate his employment under the Ball
Agreement for any reason by providing not less than 90 calendar
days’ notice in writing to us, provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion.





The employment of Mr. Ball will terminate upon the death of Mr.
Ball. Upon the death or Mr. Ball during the continuance of the Ball
Agreement, we will provide Mr. Ball’s estate and, if
applicable, Mr. Balls’ immediate family members with the
following: (a) three month’s base salary, less any required
statutory deductions, if any; (b) that portion of any then declared
and/or earned or accrued bonus, prorated to the end of the
three-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Ball; (c)
any outstanding vacation pay as at the effective date of
termination; (d) any outstanding expenses owing to Mr. Ball as at
the effective date of termination; and (e) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr.
Ball’s estate to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





If we elect to terminate the Ball Agreement without just cause, and
provided that Mr. Ball is in compliance with the relevant terms and
conditions of the Ball Agreement, we shall be obligated to provide
a severance package to Mr. Ball as follows: (a) a cash payment
equating to an aggregate of six month’s base salary, less any
required statutory deductions, if any; (b) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
three-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Ball; (c)
the present value, as determined by us, acting reasonably, of each
of the Group Benefits that would have been enjoyed by Mr. Ball
during the next three months from the effective date of
termination; (d) any outstanding vacation pay as at the effective
date of termination; (e) any outstanding expenses owing to Mr. Ball
as at the effective date of termination; (f) maintain Mr.
Ball’s Group Benefits for a period of six months from the
effective date of termination; and (g) subject to our then Option
Plan and the rules and policies of any regulatory authority and
stock exchange having jurisdiction over us, allow Mr. Ball to then
exercise any unexercised and fully vested portion of stock options
on the effective date of termination at any time during three
months from the effective date of termination.





Mr. Ball may terminate his employment under the Ball Agreement in
connection with any change in control of us by providing not less
than 90 calendar days’ notice in writing to us after the
change in control has been effected; provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion. If Mr. Ball terminates his employment
under the Ball Agreement as a consequence of a change in control of
us, we will: (a) pay the total of (i) 12 months’ base salary,
less any required statutory deductions, if any; (ii) that portion
of any then declared and/or earned or accrued bonus, prorated to
the end of the six-month period from the effective date of
termination that our President determines would likely have been
paid to Mr. Ball; (iii) the present value, as determined by us,
acting reasonably, of each of the Group Benefits that would have
been enjoyed by Mr. Ball during the next six months from the
effective date of termination assuming Mr. Ball’s employment
was not terminated and assuming the then currently level of Group
Benefits were continued for that six months; (iv) any outstanding
vacation pay as at the effective date of termination; (v) any
outstanding expenses owing to Mr. Ball as at the effective date of
termination; (b) maintain Mr. Ball’s Group Benefits for a
period of six months from the effective date of termination; and
(c) subject to our then Option Plan and the rules and policies of
any regulatory authority and stock exchange having jurisdiction
over us, allow Mr. Ball to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





42














Ed Theobald





On July 1, 2016, our Board of Directors approved the entering into
of an executive services agreement with Edward Theobald with a term
expiring on July 1, 2019 (the“Theobald
Agreement”).





The Theobald Agreement is subject to automatic renewal on a
one-month to one-month term renewal basis unless either we or Mr.
Theobald provides written notice not to renew the Theobald
Agreement no later than 30 days prior to the end of the then
current or renewal term.





Pursuant to the terms and provisions of the Theobald Agreement: (a)
Mr. Theobald is appointed as our General Manager and will undertake
and perform the duties and responsibilities normally and reasonably
associated with such office; (b) we shall pay to Mr. Theobald a
monthly fee of $5,000; (c) grant to Mr. Theobald 500,000 stock
options exercisable into 500,000 common shares at an exercise price of $0.15 per share
expiring on August 13, 2022 and 750,000 stock options exercisable
into 750,000 common shares at
an exercise price of $0.40 per share expiring on December 9, 2022
(such options have already been granted prior to the Theobald
Agreement); (d) provide Mr. Theobald with Group Benefits; and (e)
four weeks’ paid annual vacation per calendar
year.





We may terminate the employment of Mr. Theobald under the Theobald
Agreement without any notice or any payment in lieu of notice for
just cause. Mr. Theobald may terminate his employment under the
Theobald Agreement for any reason by providing not less than 90
calendar days’ notice in writing to us, provided, however,
that we may waive or abridge any notice period specified in such
notice in our sole and absolute discretion.





The employment of Mr. Theobald will terminate upon the death of Mr.
Theobald. Upon the death or Mr. Theobald during the continuance of
the Theobald Agreement, we will provide Mr. Theobald’s estate
and, if applicable, Mr. Theobalds’ immediate family members
with the following: (a) three month’s base salary, less any
required statutory deductions, if any; (b) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
three-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Theobald;
(c) any outstanding vacation pay as at the effective date of
termination; (d) any outstanding expenses owing to Mr. Theobald as
at the effective date of termination; and (e) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr.
Theobald’s estate to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





If we elect to terminate the Theobald Agreement without just cause,
and provided that Mr. Theobald is in compliance with the relevant
terms and conditions of the Theobald Agreement, we shall be
obligated to provide a severance package to Mr. Theobald as
follows: (a) a cash payment equating to an aggregate of six
month’s base salary, less any required statutory deductions,
if any; (b) that portion of any then declared and/or earned or
accrued bonus, prorated to the end of the three-month period from
the effective date of termination that our President determines
would likely have been paid to Mr. Theobald; (c) the present value,
as determined by us, acting reasonably, of each of the Group
Benefits that would have been enjoyed by Mr. Theobald during the
next three months from the effective date of termination; (d) any
outstanding vacation pay as at the effective date of termination;
(e) any outstanding expenses owing to Mr. Theobald as at the
effective date of termination; (f) maintain Mr. Theobald’s
Group Benefits for a period of six months from the effective date
of termination; and (g) subject to our then Option Plan and the
rules and policies of any regulatory authority and stock exchange
having jurisdiction over us, allow Mr. Theobald to then exercise
any unexercised and fully vested portion of stock options on the
effective date of termination at any time during three months from
the effective date of termination.





Mr. Theobald may terminate his employment under the Theobald
Agreement in connection with any change in control of us by
providing not less than 90 calendar days’ notice in writing
to us after the change in control has been effected; provided,
however, that we may waive or abridge any notice period specified
in such notice in our sole and absolute discretion. If Mr. Theobald
terminates his employment under the Theobald Agreement as a
consequence of a change in control of us, we will: (a) pay the
total of (i) 12 months’ base salary, less any required
statutory deductions, if any; (ii) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
six-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Theobald;
(iii) the present value, as determined by us, acting reasonably, of
each of the Group Benefits that would have been enjoyed by Mr.
Theobald during the next six months from the effective date of
termination assuming Mr. Theobald’s employment was not
terminated and assuming the then currently level of Group Benefits
were continued for that six months; (iv) any outstanding vacation
pay as at the effective date of termination; (v) any outstanding
expenses owing to Mr. Theobald as at the effective date of
termination; (b) maintain Mr. Theobald’s Group Benefits for a
period of six months from the effective date of termination; and
(c) subject to our then Option Plan and the rules and policies of
any regulatory authority and stock exchange having jurisdiction
over us, allow Mr. Theobald to then exercise any unexercised and
fully vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





43














Kulwant Sandher





On July 1, 2016, our Board of Directors approved the entering into
of an executive services agreement with Hurricane Corporate
Services Ltd. (“Hurricane Corp.”), Mr. Sandher’s
services corporation, with a term expiring on July 1, 2019
(the“Sandher
Agreement”).





The Sandher Agreement is subject to automatic renewal on a
one-month to one-month term renewal basis unless either we or
Hurricane Corp. provides written notice not to renew the Sandher
Agreement no later than 30 days prior to the end of the then
current or renewal term.





Pursuant to the terms and provisions of the Sandher Agreement: (a)
through Hurricane Corp, Mr. Sandher is appointed as our Chief
Financial Officer and will undertake and perform the duties and
responsibilities normally and reasonably associated with such
office; (b) we shall pay to Hurricane Corp. a monthly fee of
$5,000; (c) grant to Hurricane Corp. and/or Mr. Sandher as soon as
reasonably practicable after the effective date of the Sandher
Agreement stock options to purchase a certain number of
common shares on terms reasonably
consistent with our other recent executive officers; (d) provide
Hurricane Corp. and/or Mr. Sandher with Group Benefits; and (e)
four weeks’ paid annual vacation per calendar
year.





We may terminate the engagement of Hurricane Corp. under the
Sandher Agreement without any notice or any payment in lieu of
notice for just cause. Hurricane Corp. may terminate its engagement
under the Sandher Agreement for any reason by providing not less
than 90 calendar days’ notice in writing to us, provided,
however, that we may waive or abridge any notice period specified
in such notice in our sole and absolute discretion.





The engagement of Hurricane Corp. will terminate upon the death of
Mr. Sandher. Upon the death or Mr. Sandher during the continuance
of the Sandher Agreement, we will provide Mr. Sandher’s
estate and, if applicable, Mr. Sandher’s immediate family
members with the following: (a) three month’s base salary,
less any required statutory deductions, if any; (b) that portion of
any then declared and/or earned or accrued bonus, prorated to the
end of the three-month period from the effective date of
termination that our President determines would likely have been
paid to Hurricane Corp.; (c) any outstanding vacation pay as at the
effective date of termination; (d) any outstanding expenses owing
to Hurricane Corp. as at the effective date of termination; and (e)
subject to our then Option Plan and the rules and policies of any
regulatory authority and stock exchange having jurisdiction over
us, allow Mr. Sandher’s estate to then exercise any
unexercised and fully vested portion of stock options on the
effective date of termination at any time during three months from
the effective date of termination.





If we elect to terminate the Sandher Agreement without just cause,
and provided that Hurricane Corp. is in compliance with the
relevant terms and conditions of the Sandher Agreement, we shall be
obligated to provide Hurricane Corp. with the following: (a) a cash
payment equating to an aggregate of six month’s base salary,
less any required statutory deductions, if any; (b) that portion of
any then declared and/or earned or accrued bonus, prorated to the
end of the three-month period from the effective date of
termination that our President determines would likely have been
paid to Hurricane Corp.; (c) the present value, as determined by
us, acting reasonably, of each of the Group Benefits that would
have been enjoyed by Hurricane Corp. and/or Mr. Sandher during the
next three months from the effective date of termination; (d) any
outstanding vacation pay as at the effective date of termination;
(e) any outstanding expenses owing to Hurricane Corp. as at the
effective date of termination; (f) maintain Hurricane Corp.’s
and/or Mr. Sandher’s Group Benefits for a period of six
months from the effective date of termination; and (g) subject to
our then Option Plan and the rules and policies of any regulatory
authority and stock exchange having jurisdiction over us, allow the
Executive and Mr. Sandher to then exercise any unexercised and
fully vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





Hurricane Corp. may terminate its engagement under the Sandher
Agreement in connection with any change in control of us by
providing not less than 90 calendar days’ notice in writing
to us after the change in control has been effected; provided,
however, that we may waive or abridge any notice period specified
in such notice in our sole and absolute discretion. If Hurricane
Corp. terminates its engagement under the Sandher Agreement as a
consequence of a change in control of us, we will: (a) pay the
total of (i) 12 months’ base salary, less any required
statutory deductions, if any; (ii) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
six-month period from the effective date of termination that our
President determines would likely have been paid to Hurricane
Corp.; (iii) the present value, as determined by us, acting
reasonably, of each of the Group Benefits that would have been
enjoyed by Hurricane Corp. and/or Mr. Sandher during the next six
months from the effective date of termination assuming Hurricane
Corp.’s engagement was not terminated and assuming the then
currently level of Group Benefits were continued for that six
months; (iv) any outstanding vacation pay as at the effective date
of termination; (v) any outstanding expenses owing to Hurricane
Corp. as at the effective date of termination; (b) maintain
Hurricane Corp.’s and/or Mr. Sandher’s Group Benefits
for a period of six months from the effective date of termination;
and (c) subject to our then Option Plan and the rules and policies
of any regulatory authority and stock exchange having jurisdiction
over us, allow Hurricane Corp. and Mr. Sandher to then exercise any
unexercised and fully vested portion of stock options on the
effective date of termination at any time during three months from
the effective date of termination.





44














Henry Reisner





On July 1, 2016, our Board of Directors approved the entering into
of an executive services agreement with Henry Reisner with a term
expiring on July 1, 2019 (the“Reisner
Agreement”).





The Reisner Agreement is subject to automatic renewal on a
one-month to one-month term renewal basis unless either we or Mr.
Reisner provides written notice not to renew the Reisner Agreement
no later than 30 days prior to the end of the then current or
renewal term.





Pursuant to the terms and provisions of the Reisner Agreement: (a)
Mr. Reisner is appointed as our Vice-President, Finance and will
undertake and perform the duties and responsibilities normally and
reasonably associated with such office; (b) we shall pay to Mr.
Reisner a monthly fee of $5,000; (c) grant to Mr. Reisner 1,250,000
stock options exercisable into 1,250,000 common shares at an exercise price of $0.15 per share
expiring on August 13, 2022 and 1,250,000 stock options exercisable
into 1,250,000 common shares at
an exercise price of $0.40 per share expiring on December 9, 2022
(such options have already been granted prior to the Reisner
Agreement); (d) provide Mr. Reisner with Group Benefits; and (e)
four weeks’ paid annual vacation per calendar
year.





We may terminate the employment of Mr. Reisner under the Reisner
Agreement without any notice or any payment in lieu of notice for
just cause. Mr. Reisner may terminate his employment under the
Reisner Agreement for any reason by providing not less than 90
calendar days’ notice in writing to us, provided, however,
that we may waive or abridge any notice period specified in such
notice in our sole and absolute discretion.





The employment of Mr. Reisner will terminate upon the death of Mr.
Reisner. Upon the death or Mr. Reisner during the continuance of
the Reisner Agreement, we will provide Mr. Reisner’s estate
and, if applicable, Mr. Reisner’s immediate family members
with the following: (a) three month’s base salary, less any
required statutory deductions, if any; (b) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
three-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Reisner;
(c) any outstanding vacation pay as at the effective date of
termination; (d) any outstanding expenses owing to Mr. Reisner as
at the effective date of termination; and (e) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr.
Reisner’s estate to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





If we elect to terminate the Reisner Agreement without just cause,
and provided that Mr. Reisner is in compliance with the relevant
terms and conditions of the Reisner Agreement, we shall be
obligated to provide a severance package to Mr. Reisner as follows:
(a) a cash payment equating to an aggregate of six month’s
base salary, less any required statutory deductions, if any; (b)
that portion of any then declared and/or earned or accrued bonus,
prorated to the end of the three-month period from the effective
date of termination that our President determines would likely have
been paid to Mr. Reisner; (c) the present value, as determined by
us, acting reasonably, of each of the Group Benefits that would
have been enjoyed by Mr. Reisner during the next three months from
the effective date of termination; (d) any outstanding vacation pay
as at the effective date of termination; (e) any outstanding
expenses owing to Mr. Reisner as at the effective date of
termination; (f) maintain Mr. Reisner’s Group Benefits for a
period of six months from the effective date of termination; and
(g) subject to our then Option Plan and the rules and policies of
any regulatory authority and stock exchange having jurisdiction
over us, allow Mr. Reisner to then exercise any unexercised and
fully vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





Mr. Reisner may terminate his employment under the Reisner
Agreement in connection with any change in control of us by
providing not less than 90 calendar days’ notice in writing
to us after the change in control has been effected; provided,
however, that we may waive or abridge any notice period specified
in such notice in our sole and absolute discretion. If Mr. Reisner
terminates his employment under the Reisner Agreement as a
consequence of a change in control of us, we will: (a) pay the
total of (i) 12 months’ base salary, less any required
statutory deductions, if any; (ii) that portion of any then
declared and/or earned or accrued bonus, prorated to the end of the
six-month period from the effective date of termination that our
President determines would likely have been paid to Mr. Reisner;
(iii) the present value, as determined by us, acting reasonably, of
each of the Group Benefits that would have been enjoyed by Mr.
Reisner during the next six months from the effective date of
termination assuming Mr. Reisner’s employment was not
terminated and assuming the then currently level of Group Benefits
were continued for that six months; (iv) any outstanding vacation
pay as at the effective date of termination; (v) any outstanding
expenses owing to Mr. Reisner as at the effective date of
termination; (b) maintain Mr. Reisner’s Group Benefits for a
period of six months from the effective date of termination; and
(c) subject to our then Option Plan and the rules and policies of
any regulatory authority and stock exchange having jurisdiction
over us, allow Mr. Reisner to then exercise any unexercised and
fully vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





45

















Mark West





On November 1, 2016, our Board of Directors approved the entering
into of an executive services agreement with Mark West with a term
expiring on November 1, 2019 (the“West
Agreement”).





The West Agreement is subject to automatic renewal on a one-month
to one-month term renewal basis unless either we or Mr. West
provides written notice not to renew the West Agreement no later
than 30 days prior to the end of the then current or renewal
term.





Pursuant to the terms and provisions of the West Agreement: (a) Mr.
West is appointed as our Vice-President, Sales & Dealerships
and will undertake and perform the duties and responsibilities
normally and reasonably associated with such office; (b) we shall
pay to Mr. West an initial monthly fee of $4,000 for the month of
November 2016, and thereafter a monthly fee of $12,000; (c) pay Mr.
West a commission of $10,000 for each and every dealership which is
officially opened, which was directly sourced and completed by Mr.
West and which is established under an authorization to sell and
distribute our goods and services in a particular area; (c) grant
to Mr. West as soon as reasonably practicable after the effective
date of the West Agreement stock options to purchase a certain
number of common shares on terms reasonably consistent with our
other recent executive officers; (d) provide Mr. West with
individual benefits of up to $10,000 per annum as a car allowance
and up to $5,000 per annum as an education allowance (the
“Individual
Benefits”); (e) provide
Mr. West with Group Benefits; and (f) four weeks’ paid annual
vacation per calendar year.





We may terminate the employment of Mr. West under the West
Agreement without any notice or any payment in lieu of notice for
just cause. Mr. West may terminate his employment under the West
Agreement for any reason by providing not less than 90 calendar
days’ notice in writing to us, provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion.





The employment of Mr. West will terminate upon the death of Mr.
West. Upon the death or Mr. West during the continuance of the West
Agreement, we will provide Mr. West’s estate and, if
applicable, Mr. West’s immediate family members with the
following: (a) three month’s base salary, less any required
statutory deductions, if any; (b) any outstanding commissions, less
any required statutory deductions, if any; (c) that portion of any
then declared and/or earned or accrued bonus, prorated to the end
of the three-month period from the effective date of termination
that our President determines would likely have been paid to Mr.
West; (d) any outstanding vacation pay as at the effective date of
termination; (e) any outstanding expenses owing to Mr. West as at
the effective date of termination; and (f) subject to our then
Option Plan and the rules and policies of any regulatory authority
and stock exchange having jurisdiction over us, allow Mr.
West’s estate to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





If we elect to terminate the West Agreement without just cause, and
provided that Mr. West is in compliance with the relevant terms and
conditions of the West Agreement, we shall be obligated to provide
a severance package to Mr. West as follows: (a) if the effective
date of termination occurs within the first year of the West
Agreement, a cash payment equating to an aggregate of nine
month’s base salary, less any required statutory deductions,
if any; (b) if the effective date of termination occurs after the
first year but before November 1, 2019, a cash payment equating to
an aggregate of twelve month’s base salary, less any required
statutory deductions, if any; (c) if the effective date of
termination occurs after November 1, 2019 and during any renewal
period during the continuance of the West Agreement, a cash payment
equating to the greater of (i) twelve month’s base salary,
less any required statutory deductions, if any, and (ii) $100,000;
(d) any outstanding commissions, less any required statutory
deductions, if any; (e) that portion of any then declared and/or
earned or accrued bonus, prorated to the end of the three-month
period from the effective date of termination that our President
determines would likely have been paid to Mr. West; (f) the present
value, as determined by us, acting reasonably, of each of the
Individual Benefits that would have been enjoyed by Mr. West during
the next six months from the effective date of termination; (g) the
present value, as determined by us, acting reasonably, of each of
the Group Benefits that would have been enjoyed by Mr. West during
the next six months from the effective date of termination; (h) any
outstanding vacation pay as at the effective date of termination;
(i) any outstanding expenses owing to Mr. West as at the effective
date of termination; (j) maintain Mr. West’s Individual
Benefits for a period of six months from the effective date of
termination; (k) maintain Mr. West’s Group Benefits for a
period of six months from the effective date of termination; and
(l) subject to our then Option Plan and the rules and policies of
any regulatory authority and stock exchange having jurisdiction
over us, allow Mr. West to then exercise any unexercised and fully
vested portion of stock options on the effective date of
termination at any time during three months from the effective date
of termination.





Mr. West may terminate his employment under the West Agreement in
connection with any change in control of us by providing not less
than 90 calendar days’ notice in writing to us after the
change in control has been effected; provided, however, that we may
waive or abridge any notice period specified in such notice in our
sole and absolute discretion. If Mr. West terminates his employment
under the West Agreement as a consequence of a change in control of
us, we will: (a) pay the total of (i) 12 months’ base salary,
less any required statutory deductions, if any; (ii) any
outstanding commissions, less any required statutory deductions, if
any; (iii) that portion of any then declared and/or earned or
accrued bonus, prorated to the end of the six-month period from the
effective date of termination that our President determines would
likely have been paid to Mr. West; (iv) the present value, as
determined by us, acting reasonably, of each of the Individual
Benefits that would have been enjoyed by Mr. West during the next
six months from the effective date of termination assuming Mr.
West’s employment was not terminated and assuming the then
currently level of Individual Benefits were continued for that six
months; (v) the present value, as determined by us, acting
reasonably, of each of the Group Benefits that would have been
enjoyed by Mr. West during the next six months from the effective
date of termination assuming Mr. West’s employment was not
terminated and assuming the then currently level of Group Benefits
were continued for that six months; (vi) any outstanding vacation
pay as at the effective date of termination; (vii) any outstanding
expenses owing to Mr. West as at the effective date of termination;
(b) maintain Mr. West’s Individual Benefits for a period of
six months from the effective date of termination; (c) maintain Mr.
West’s Group Benefits for a period of six months from the
effective date of termination; and (d) subject to our then Option
Plan and the rules and policies of any regulatory authority and
stock exchange having jurisdiction over us, allow Mr. West to then
exercise any unexercised and fully vested portion of stock options
on the effective date of termination at any time during three
months from the effective date of termination.





46




















Stock Option Plans and Stock Options








The
following table sets forth, as at December 31, 2017, the equity
compensation plans pursuant to which equity securities of the
Company may be issued:





Plan
Category
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights (a)
Weighted-average exercise price of outstanding options, warrants and rights
($) (b)
Number of securities remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a)) (c)Equity compensation
plans approved by securityholders
-
-
-Equity compensation
plans not approved by securityholders
57,197,500
$0.20
2,802,500Total
57,197,500
$0.20
2,802,500





2015 Stock Option Plan





On June
11, 2015, our Board of Directors adopted the 2015 Stock Option Plan
(the “Stock Option Plan”) under which an aggregate of
60,000,000 shares may be issued, subject to adjustment as described
in the Stock Option Plan. As at
December 31, 2017, there were 57,197,500 outstanding options under
the Stock Option Plan leaving an additional 2,802,500 options to
acquire common shares that may
be granted under the Stock Option Plan.





The
purpose of the Stock Option Plan is to retain the services of
valued key employees, directors and consultants of the Company and
such other persons as the plan administrator, which is currently
the Board of Directors, shall select in accordance with the
eligibility requirements of the Stock Option Plan, and to encourage
such persons to acquire a greater proprietary interest in the
Company, thereby strengthening their incentive to achieve the
objectives of the shareholders of the Company, and to serve as an
aid and inducement in the hiring of new employees and to provide an
equity incentive to consultants and other persons selected by the
plan administrator. The Stock Option Plan shall be administered
initially by the Board of Directors of the Company, except that the
Board may, in its discretion, establish a committee composed of two
(2) or more members of the Board to administer the Stock Option
Plan, which committee may be an executive, compensation or other
committee, including a separate committee especially created for
this purpose.





Unless
accelerated in accordance with the Stock Option Plan, unvested
options shall terminate immediately upon the optionee resigning
from or the Company terminating the optionee’s employment or
contractual relationship with the Company or any related company
for any reason whatsoever, including death or disability. Options
that have vested shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following
events: (i) the expiration of the option as designated by the plan
administrator; (ii) the date of an optionee’s termination of
employment or contractual relationship with the Company or any
related company for cause (as determined in the sole discretion of
the plan administrator); (iii) the expiration of three (3) months
from the date of an optionee’s termination of employment or
contractual relationship with the Company or any related company
for any reason whatsoever other than cause, death or disability; or
(iv) the expiration of three (3) months from termination of an
optionee’s employment or contractual relationship by reason
of death or disability. Upon the death of an optionee, any vested
options held by the optionee shall be exercisable only by the
person or persons to whom such optionee’s rights under such
option shall pass by the optionee’s will or by the laws of
descent and distribution of the optionee’s domicile at the
time of death and only until such options terminate as provided
above. For purposes of the Stock Option Plan, unless otherwise
defined in the stock option agreement between the Company and the
optionee, “disability” shall mean medically
determinable physical or mental impairment which has lasted or can
be expected to last for a continuous period of not less than six
(6) months or that can be expected to result in death. The plan
administrator shall determine whether an optionee has incurred a
disability on the basis of medical evidence acceptable to the plan
administrator. Upon making a determination of disability, the plan
administrator shall, for purposes of the Stock Option Plan,
determine the date of an optionee’s termination of employment
or contractual relationship.





The
foregoing summary of the Stock Option Plan is not complete and is
qualified in its entirety by reference to the Stock Option Plan,
which is filed as Exhibit 99.1 to our registration statement on
Form F-1 under the U.S. Securities Act, as filed with the SEC on
October 11, 2016 and is incorporated by reference
herein.








47




















Incentive Plan Awards





Option–based AwardsNamed Executive Officer
or Director
Number of securities underlying
unexercised options (#)
Option exercise
price (US$)
Option expiration
dateJerry
Kroll President, Chief
Executive Officer and a director
45,000,000
5,000,000
10,000
$0.15
$0.40
$1.00
June
11, 2022
Dec. 9,
2022
Feb.
17, 2024Kulwant
Sandher Chief Financial
Officer and Secretary
250,000
$1.00
Feb.
17, 2024Iain
Ball Vice-President,
Finance
500,000
750,000
10,000
$0.15
$0.40
$1.00
Aug.
13, 2022
Dec. 9,
2022
Feb.
17, 2024Henry
Reisner Chief Operating
Officer
1,250,000
1,250,000
10,000
$0.15
$0.40
$1.00
Aug.
13, 2022
Dec. 9,
2022
Feb.
17, 2024Ed
Theobald General
Manager
500,000
750,000
10,000
$0.15
$0.40
1.00
Aug.
13, 2022
Dec. 9,
2022
Feb.
17, 2024Mark
West Vice-President, Sales
& Dealerships
225,000
$1.00
Feb.
17, 2024Shaun
Greffard
Director
50,000
25,000
250,000
$0.15
$0.40
$1.00
Aug.
13, 2022
Dec. 9,
2022
Feb.
17, 2024Robert
Tarzwell
Director
25,000
5,000
$0.15
$1.00
Aug.
13, 2022
Feb.
17, 2024





Incentive Plan Awards








The
following table provides information concerning the incentive award
plans of the Company with respect to each Named Executive Officer
during the fiscal year ended December 31, 2017. The only incentive
award plan of the Company during such fiscal year was the Stock
Option Plan:





Named
Executive Officer
and
Director
Option-based Awards
– Value Vested During the
Year ($)(1)
Non-Equity Incentive
Plan Compensation
– Value Vested During the Year ($)Jerry
Kroll President and Chief
Executive Officer
$80,139,063
NilKulwant
Sandher Chief Financial
Officer and Secretary
$523,699
NilIain
Ball Vice-President,
Finance
$1,964,414
NilHenry
Reisner Chief Operating
Officer
$3,944,453
NilEd
Theobald General
Manager
$1,964,414
NilMark
West Vice-President, Sales
& Dealerships
$366,589
NilShaun
Greffard,
Director
$40,226
NilRobert
Tarzwell,
Director
$119,115
Nil





(1)
The
amount represents the aggregate dollar value that would have been
realized if the options had been exercised on the vesting date,
based on the difference between US$5.25, the last closing price of
our shares on the OTCQB for the year ended December 31, 2017, and
the exercise price of the options, multiplied by the number of
options that have vested








48

















Director Compensation for Fiscal 2017





Prior to March 2018, including for our fiscal year ended December
31, 2017, our Board of Directors acted as a compensation committee.
The Board as a whole made the final determination in respect of
compensation matters. Remuneration was assessed and determined by
taking into account such factors as our size and the level of
compensation earned by directors and officers of companies of
comparable size and industry.





The only arrangements we have, standard or otherwise, pursuant to
which directors were compensated by us for their services in their
capacity as directors, or for committee participation, involvement
in special assignments or for services as consultants or experts
for the financial year ended December 31, 2017, was through the
issuance of stock options. The number of options to be granted from
time to time is determined by the Board in its
discretion.





During the fiscal year ended December 31, 2017, there were three
directors, Jerry Kroll, Shaun Greffard and Robert Tarzwell. Mr.
Kroll’s compensation information is reported in the Summary
Compensation Table for Named Executive Officers above.





We reimburse out-of-pocket costs that are incurred by the
directors. Neither we nor any of our subsidiaries has entered into
a service contract with any director providing for benefits upon
termination of such office.





In March 2018, our Board of Directors appointed a Compensation
Committee to assess the appropriate level of remuneration for our
directors and officers.





Pension Benefits





We do
not have any defined benefit pension plans or any other plans
providing for retirement payments or benefits.





Termination of Employment and Change of Control
Benefits





Details
with respect to termination of employment and change of control
benefits for our directors and executive officers is reported above
under the section titled “Executive Compensation
Agreements.”





C. Board
Practices





Board of Directors





Our Notice of Articles and Articles are attached as exhibits to the
registration statement of which this prospectus forms a part. The
Articles of the Company provide that the number of directors is set
at:





(a)
subject
to paragraphs (b) and (c), the number of directors that is equal to
the number of our first directors;(b)
if we
are a public company, the greater of three and the number most
recently elected by ordinary resolution (whether or not previous
notice of the resolution was given); and





(c)
if we
are not a public company, the number most recently elected by
ordinary resolution (whether or not previous notice of the
resolution was given).





Our Board of Directors (the “Board”) currently consists
of six directors. Our directors are elected annually at each annual
meeting of our company’s shareholders. The Board assesses
potential Board candidates to fill perceived needs on the Board for
required skills, expertise, independence and other
factors.





Our Board of Directors is responsible for appointing our
company’s officers.





Board Committees





Our Board of Directors currently has six committees, the Audit
Committee, the Nominating Committee, the Corporate Governance and
Human Resources Committee, the Compensation Committee, the
Enterprise Risk Oversight Committee and the Social Media
Committee.





49














Audit Committee





Our Audit Committee consists of Luisa Ingagiola, Steven Sanders,
Robert Trazwell and Shaun Greffard and is chaired by Luisa
Ingagiola. Each member of the Audit Committee satisfies the
“independence” requirements of Rule 5605(a)(2) of the
Listing Rules of the NASDAQ Stock Market and meet the independence
standards under Rule 10A-3 under the Exchange Act. Our audit
committee will consist solely of independent directors that satisfy
the Nasdaq and SEC requirements within one year of the completion
of this offering. Our Audit Committee Financial Expert is Robert
Tarzwell who qualifies as an “audit committee financial
expert” within the meaning of the SEC rules and possesses
financial sophistication within the meaning of the Listing Rules of
the NASDAQ Stock Market. The audit committee will oversee our
accounting and financial reporting processes and the audits of the
financial statements of our company. The audit committee will be
responsible for, among other things:





●
selecting
our independent registered public accounting firm
and pre-approving all auditing
and non-auditing services permitted to be performed by
our independent registered public accounting firm;





●
reviewing
with our independent registered public accounting firm any audit
problems or difficulties and management’s response and
approving all proposed related party transactions, as defined in
Item 404 of Regulation S-K;





●
discussing
the annual audited financial statements with management and our
independent registered public accounting firm;





●
annually
reviewing and reassessing the adequacy of our audit committee
charter;





●
meeting
separately and periodically with the management and our internal
auditor and our independent registered public accounting
firm;





●
reporting
regularly to the full board of directors;





●
reviewing
the adequacy and effectiveness of our accounting and internal
control policies and procedures and any steps taken to monitor and
control major financial risk exposure; and





●
such
other matters that are specifically delegated to our audit
committee by our board of directors from time to time.





Nominating Committee





Our Nominating Committee consists of Steven Sanders and Robert
Trazwell and is chaired by Jerry Kroll. The nominating committee is
responsible for overseeing the selection of persons to be nominated
to serve on our board of directors. The nominating committee
considers persons identified by its members, management,
shareholders, investment bankers and others.





Corporate Governance and Human Resources Committee





Our Corporate Governance and Human Resources Committee consists of
Steven Sanders, Luisa Ingagiola, Robert Trazwell and Shaun Greffard
and is chaired by Steven Sanders. The Corporate Governance and
Human Resources Committee shall be responsible for developing our
approach to the Board and corporate governance issues; helping to
maintain an effective working relationship between the Board and
management; exercising, within the limits imposed by the by-laws of
the Company, by applicable laws, and by the Board, the powers of
the Board for the management and direction of the affairs of the
Company during the intervals between meetings of the Board;
reviewing and making recommendations to the Board for the
appointment of senior executives of the Company and for considering
their terms of employment; reviewing succession planning, matters
of compensation; recommending awards under the Company’s long
term and short term incentive plans; assuming the role of
administrator, whether by delegation or by statute, for the
corporate-sponsored registered pension plans and the Supplementary
Executive Retirement Plan of the Company and its wholly-owned
subsidiaries and any future, additional or replacement plans
relating to the plans; and monitoring the investment performance of
the trust funds for the plans and compliance with applicable
legislation and investment policies.





Our Corporate Governance and Human Resources Committee shall also
review any “red flags” or issues that may arise out of
the Compensation Committee compensation and award recommendations
and report them to the Board of Directors. The Compensation
Committee and Governance Committee, at times, may be collaborative
but will not coordinate as the process is intended to be a
“checks and balance” approach. It is being set up as an
internal control mechanism that would safeguard against fraud and
errors due to omission





50














Compensation Committee





Our Compensation Committee consists of Luisa Ingagiola, Steven
Sanders and Robert Trazwell and is chaired by Luisa Ingagiola. Each
of the Compensation Committee members satisfies the
“independence” requirements of Rule 5605(a)(2) of
the Listing Rules of the NASDAQ Stock Market. Our compensation
committee will assist the board in reviewing and approving the
compensation structure, including all forms of compensation,
relating to our directors and executive officers. No officer may be
present at any committee meeting during which such officer’s
compensation is deliberated upon. The compensation committee will
be responsible for, among other things:





●
reviewing
and approving to the board with respect to the total compensation
package for our most senior executive officers;





●
approving
and overseeing the total compensation package for our executives
other than the most senior executive officers;





●
reviewing
and recommending to the board with respect to the compensation of
our directors;





●
reviewing
periodically and approving any long-term incentive compensation or
equity plans;





●
selecting
compensation consultants, legal counsel or other advisors after
taking into consideration all factors relevant to that
person’s independence from management; and





●
programs
or similar arrangements, annual bonuses, employee pension and
welfare benefit plans.





Enterprise Risk Oversight Committee





Our Enterprise Risk Oversight Committee consists of Steven Sanders,
Luisa Ingagiola, Robert Trazwell and Shaun Greffard and is chaired
by Steven Sanders. The Enterprise Risk Oversight Committee shall
oversee the effectiveness of risk management policies, procedures
and practices implemented by management of the Corporation with
respect to strategic, operational, environmental, health and
safety, human resources, legal and compliance and other risks faced
by the Corporation. The committee shall:





●
 review
executive management’s assessment of the company’s
material risk exposures and the company’s actions to
identify, monitor and mitigate such exposures,





●
 review
executive management’s implementation of systems and controls
designed to promote compliance with applicable legal and regulatory
requirements and





●
 report
to the Board on an annual basis with respect to the
committee’s review of the company’s material risks and
measures in place to mitigate them, and at least annually in
respect of the committee’s other activities.





Social Media Committee





Our
Social Media Committee consists of Jerry Kroll, Robert Trazwell,
Shaun Greffard and Henry Reisner and is chaired by Jerry Kroll. The
Social Media Committee shall oversee the social media strategy
initiatives for the Company pursuant to Regulation FD. The Social
Media Committee shall:





●
 provide compliant
Regulation FD strategic leadership for social media through the
alignment of social media strategies and activities with enterprise
strategic objectives and processes;





●
 establish and
maintain corporate policies with respect to use of social media for
both process-driven social engagements, as well as for use of
social media by employees for participating in social conversations
(e.g. blogging and Tweeting by subject matter
experts);





●
 prioritize social
media initiatives and deliver final approvals and recommendations
on proceeding with proposed social media projects, including
process, technology, and organizational project;





●
 ensure open
communication between the social media department and the other
functional units of the Company so as to promote collaborative
strategies, planning, and implementation.





51














D. Employees





As of April 11, 2018, we
employed a total of 44 full-time and no part-time people at our principal executive
offices in Vancouver, British Columbia. None of our employees are
covered by a collective bargaining agreement.





The breakdown of employees by main category of activity is as
follows:





Activity
Number
of EmployeesEngineering/R&D
29Sales &
Marketing
4General &
Administration
5Executives
6





E. Share
Ownership





Shares





The
shareholdings of our officers and directors are set out in Item 7
below.





Options





The
stock options, exercisable into common shares of the Company, held
by our officers and directors are set out in Item 6 B
above.





Warrants





Warrants,
exercisable into common shares of the Company, held by our officers
and directors are set forth below as of April 11,
2018.





Name
Position
Allotment date
Expiration date
Exercise price
TotalJerry
Kroll
President, CEO and
Director
Jun. 15,
2015 Jan. 26, 2016
Jun. 15,
2020 Jan. 26, 2021
$0.40$1.00
50,000125,000Iain
Ball
Vice-President,
Finance
Aug 19,
2015
Aug. 19,
2020
$1.00
62,500Robert
Tarzwell
Director
Jun. 26,
2015
Jun. 26,
2020
$0.40
375,000(1)Mark
West
Vice-President,
Sales & Dealerships
Dec. 1,
2015
Dec. 1,
2020
$1.00
15,500





Notes:(1)
Mr.
Tarzwell hold 187,500 warrants directly and 187,500 warrants
registered to Robert Tarzwell M.D. Inc.





52

















ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS





A. Major
Shareholders





Security Ownership of Certain Beneficial Owners and
Management





The following table sets forth certain information regarding the
beneficial ownership of our common share as of April 11,
2018 by (a) each stockholder who is
known to us to own beneficially 5% or more of our outstanding
common share; (b) all directors; (c) our executive officers, and
(d) all executive officers and directors as a group. Except as
otherwise indicated, all persons listed below have (i) sole voting
power and investment power with respect to their common
shares, except to the extent that
authority is shared by spouses under applicable law, and (ii)
record and beneficial ownership with respect to their common
shares.





Name
Common
Shares of the Company Beneficially Owned (1)
Percentage
of Common Shares Beneficially Owned (2)Directors and Executive Officers:Jerry
Kroll Vancouver, President,
CEO and a director
50,058,324(3)
61.0%Iain
Ball Vancouver, Vice-President, Finance
843,749(4)
1.7%Henry
Reisner,  COO
7,508,331(5)
14.8%Kulwant
Sandher,  CFO
Nil
NilEd
Theobald Vancouver, General Manager
1,218,749(6)
2.4%Shaun
Greffard Surrey, Director
44,789(7)
*Robert
Tarzwell, Director
765,623(8)
1.5%Mark West, 
Vice-President, Sales &
Dealerships
101,313(9)
*Directors
and Executive Officers as a Group (Eight Persons)
60,540,878(10)
70.8%Other 5% or more Shareholders:Megan
Martin
5,400,000(11)
10.0%Yuan Sheng
Zhang
5,400,000(12)
10.0%Shang Wen
Yang
4,000,000(13)
7.8%Unison
International Holdings Ltd.
6,400,000(14)
12.0%Zongshen (Canada)
Environtech Ltd.
5,600,000(15)
10.8%





*
Less
than 1%.(1)
Under
Rule 13d–3, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract,
arrangement, understanding, relationship, or otherwise has or
shares: (i) voting power, which includes the power to vote, or to
direct the voting of shares; and (ii) investment power, which
includes the power to dispose or direct the disposition of shares.
Certain shares may be deemed to be beneficially owned by more than
one person (if, for example, persons share the power to vote or the
power to dispose of the shares). In addition, shares are deemed to
be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within
60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason
of these acquisition rights. As a result, the percentage of
outstanding shares of any person as shown in this table does not
necessarily reflect the person’s actual ownership or voting
power with respect to the number of common shares actually
outstanding on April 11, 2018.(2)
The
percentage is calculated based on 49,119,449 common shares that were
outstanding as of April 11, 2018.(3)
This
figure consists of (i) 7,175,000 common shares registered directly to Jerry Kroll,
(ii) 10,000,000 common shares
registered to Ascend Sportmanagement Inc., which Mr. Kroll has
discretionary voting and investment authority over securities held
by Ascend Sportmanagement Inc., (iii) 175,000 common shares issuable upon exercise of warrants
registered directly to Mr. Kroll, (iv) 30,625,000 stock options to
purchase 30,625,000 shares of our common share which have vested,
and (v) 2,083,332 stock options to purchase 2,083,332 shares of our
common share which will vest within 60 days of April 11,
2018.(4)
This
figure consists of (i) 62,500 common shares registered directly to Iain Ball,
(ii) 62,500 common shares
issuable upon exercise of warrants registered directly to Mr. Ball,
(iii) 666,667 stock options to purchase 666,667 shares of our
common share which have vested, and (iv) 52,082 stock options to
purchase 52,082 shares of our common share which will vest within
60 days of April 11, 2018.(5)
This
figure consists of (i) 4,750,000 common shares registered directly to Henry
Reisner, (ii) 1,050,000 common shares held of record by Mr.
Reisner’s wife, (iii) 250,000 common shares held of record by Mr.
Reisner’s daughter, (iv) 1,354,167 stock options to purchase
1,354,167 shares of our common share which have vested, and (v)
104,164 stock options to purchase 104,164 shares of our common
share which will vest within 60 days of April 11,
2018.(6)
This
figure consists of (i) 500,000 common shares registered directly to Ed Theobald,
(ii) 666,667 stock options to purchase 666,667 shares of our common
share which have vested, and (iii) 52,082 stock options to purchase
52,082 shares of our common share which will vest within 60 days of
April 11, 2018.(7)
This
figure consists of (i) 41,667 stock options to purchase 41,667
shares of our common share which have vested, and (ii) 3,122 stock
options to purchase 3,122 shares of our common share which will
vest within 60 days of April 11, 2018.(8)
This
figure consists of (i) 187,500 common shares registered directly to Robert
Tarzwell, (ii) 187,500 common shares held of record by Robert Tarzwell
M.D. Inc., which Mr. Tarzwell has discretionary voting and
investment authority over such securities, (iii) 187,500 common
shares issuable upon exercise
of warrants registered directly to Mr. Tarzwell, (iv) 187,500
common shares issuable upon
exercise of warrants held of record by Robert Tarzwell M.D. Inc.,
(v) 14,583 stock options to purchase 14,583 shares of our common
share which have vested, and (vi) 1,040 stock options to purchase
1,040 shares of our common share which will vest within 60 days of
January ,25 2018.(9)
This
figure consists of (i) 15,500 common shares registered directly to Mark West,
(ii) 15,500 common shares
issuable upon exercise of warrants registered directly to Mr. West,
(iii) 60,938 stock options to purchase 60.938 shares of our common
share which have vested, and (iv) 9,375 stock options to purchase
9,375 common shares which will vest within 60 days of April 11,
2018.(10)
This
figure consists of (i) 24,178,000 common shares and (ii) 36,362,878 of common shares
underlying warrants and stock options which have vested or will
vest within 60 days of April 11, 2018.(11)
This
figure consists of (i) 1,250,000 common shares registered directly to Megan Martin,
(ii) 1,250,000 common shares
held of record by Ms. Martin’s husband, Yuan Sheng Zhang,
(iii) 200,000 common shares
held of record by Ms. Martin’s son, Bo Hong Zhang, (iv)
1,250,000 common shares
issuable upon exercise of warrants registered directly to Ms.
Martin, (v) 1,250,000 common shares issuable upon exercise of warrants
held of record by Ms. Martin’s husband, and (vi) 200,000
common shares issuable upon
exercise of warrants held of record by Ms. Martin’s
son.(12)
This
figure consists of (i) 1,250,000 common shares registered directly to Yuan Sheng
Zhang, (ii) 1,250,000 common shares held of record by Mr. Zhang’s
wife, Megan Martin, (iii) 200,000 common shares held of record by Mr. Zhang’s
son, Bo Hong Zhang, (iv) 1,250,000 common shares issuable upon exercise of warrants
registered directly to Mr. Zhang, (v) 1,250,000 common shares issuable upon exercise of warrants
held of record by Mr. Zhang’s wife, and (vi) 200,000 common
shares issuable upon exercise
of warrants held of record by Mr. Zhang’s son.(13)
This
figure consists of (i) 2,000,000 common shares registered directly to Shang Wen
Yang and (ii) 2,000,000 common shares issuable upon exercise of warrants
registered directly to Cheng Qun Sang.(14)
This
figure consists of (i) 2,400,000 common shares registered to Unison International
Holdings Ltd. and (ii) 4,000,000 common shares issuable upon exercise of warrants
registered to Unison International Holdings Ltd. Mr. Ping Hui Lu is
the President of Unison International Holdings Ltd. and has
discretionary voting and investment authority over securities held
by Unison International Holdings Ltd.(15)
This
figure consists of (i) 2,800,000 common shares registered to Zongshen (Canada)
Environtech Ltd. and (ii) 2,800,000 common shares issuable upon exercise of warrants
registered to Zongshen (Canada) Environtech Ltd. Mr. Daxue Zhang is
the sole director of Zongshen (Canada) Environtech Ltd. and has
discretionary voting and investment authority over securities held
by Zongshen (Canada) Environtech Ltd.





The information as to shares beneficially owned, not being within
our knowledge, has been furnished by the officers and
directors.





As at April 6, 2018, there were 98 holders of record of our
common shares. Approximately nine
registered holders have mailing addresses in the United States and
together hold approximately 944,000 common shares, which constitutes approximately 2% of our
issued and outstanding common shares as of April 6, 2018.





53














Transfer Agent





Our
shares of common stock are recorded in registered form on the books
of our transfer agent, Computershare Investor Services Inc.,
located at 3rd Floor, 510
Burrard Street, Vancouver, British Columbia, Canada, V6C
3B9.





B. Related Party
Transactions





Jerry Kroll





On
October 16, 2017, Jerry Kroll, our President and CEO, entered into
a Share Pledge Agreement with Zongshen to guarantee our payment for
the cost of the prototype tooling and molds estimated to be $1.8
million through the pledge of 800,000 common shares of the Company
at a deemed price of USD $2.00. We have agreed to reimburse Mr.
Kroll on a one-for-one basis for any pledged shares realized by
Zongshen at a deemed issue price of $2.00 per common
share.





From February 16, 2015 to November 13, 2015, Mr. Kroll provided us
with a loans in the aggregate amount of $185,000. These loans were
unsecured, non-interest bearing, and due on demand. No formal
written agreements regarding these loans were signed, however, they
are documented in our accounting records. On January 20, 2016, we
repaid $135,000 of these loans and $50,000 was repaid through the
issuance of 125,000 post-subdivision units at a price of $0.40 per
unit.





On February 16, 2015, Mr. Kroll acquired 7,000,000 common shares
and Ascend Sportmanagement Inc., a corporation under the control
and direction of Mr. Kroll, acquired 10,000,000 common shares at a
price of $0.0002 per common share pursuant to a private placement.
In addition, on June 15, 2015, Mr. Kroll acquired 50,000 units at a
price of $0.20 per unit pursuant to a private placement. Each unit
consisted of one common share and one common share purchase
warrant. Each warrant is exercisable for one additional common
share at a price of $0.40 per common share until June 15, 2020.
Furthermore, on January 22, 2016, Mr. Kroll acquired 125,000 units
at a price of $0.40 per unit pursuant to a private placement. Each
unit consisted of one common share and one common share purchase
warrant. Each warrant is exercisable for one additional common
share at a price of $1.00 per common share until January 22,
2021.





On June 11, 2015 we granted 45,000,000 stock options to Mr. Kroll
having an exercise price of $0.15 per common share until June 11,
2022. In addition, on December 9, 2015 we granted 5,000,000 stock
options to Mr. Kroll having an exercise price of $0.40 per common
share until December 9, 2022. Furthermore, on February 17, 2017 we
granted 10,000 stock options to Mr. Kroll having an exercise price
of $1.00 per common share until February 17, 2024.





Henry Reisner





On
October 18, 2017, we entered into a Share Purchase Agreement (the
“SPA”) to acquire Intermeccanica with Henry Reisner,
our Chief Operating Officer, and two members of his family, which
replaced a prior Joint Operating Agreement. Under the SPA, we
agreed to purchase all the shares of Intermeccanica for $2,500,000,
$300,000 of which had been previously paid under the Joint
Operating Agreement. At closing, we paid the sellers $700,000 and
issued a Note for the balance of $1,500,000. On January 28, 2018,
we paid off all of the principal and interest due on the Note for
$1,520,548.





On February 16, 2015, Mr. Henry Reisner acquired 4,750,000 common
shares at a price of $0.0002 per common share pursuant to a private
placement. Mr. Reisner’s wife and daughter acquired 1,050,000
common share s and 250,000 common shares, respectively, at a price
of $0.0002 per common share pursuant to a private
placement.





On July 15, 2015, as amended on September 19, 2016, we entered into
a Joint Operating Agreement with Intermeccanica and Henry Reisner
which is comprised of three underlying agreements. The Joint
Operating Agreement was terminated upon the entry into the
SPA.





On August 13, 2015, we granted 1,250,000 stock options to Mr.
Reisner having an exercise price of $0.15 per common share until
August 13, 2022. In addition, on December 9, 2015, we granted
1,250,000 stock options to Mr. Reisner having an exercise price of
$0.40 per common share until December 9, 2022. Furthermore, on
February 17, 2017, we granted 10,000 stock options to Mr. Reisner
having an exercise price of $1.00 per common share until February
17, 2024.





54














Iain Ball





On August 13, 2015, we granted 500,000 stock option to Iain Ball
having an exercise price of $0.15 per common share until August 13,
2022. In addition on December 9, 2015, we granted 750,000 stock
options to Mr. Ball having an exercise price of $0.40 per common
share until December 9, 2022. Furthermore, on February 17, 2017 we
granted 10,000 stock options to Mr. Ball having an exercise price
of $1.00 per common share until February 17, 2024.





On August 19, 2015, Mr. Iain Ball acquired 62,500 units at a price
of $0.40 per unit. Each unit consisted of one common share and one
common share purchase warrant. Each warrant is exercisable for one
additional common share at a price of $1.00 per common share until
August 19, 2020.





Kulwant Sandher





On February 17, 2017, we granted 250,000 stock options to Mr.
Sandher having an exercise price of $1.00 per common share until
February 17, 2024.





Ed Theobald





On February 16, 2015, Mr. Ed Theobald acquired 500,000 common
shares at a price of $0.0002 per common share pursuant to a private
placement.





On August 13, 2015, we granted 500,000 stock options to Mr.
Theobald having an exercise price of $0.15 per common share until
August 13, 2022. In addition on December 9, 2015, we granted
750,000 stock options to Mr. Theobald having an exercise price of
$0.40 per common share until December 9, 2022. Furthermore, on
February 17, 2017 we granted 10,000 stock options to Mr. Theobald
having an exercise price of $1.00 per common share until February
17, 2024.





Shaun Greffard





On August 13, 2015, we granted 50,000 stock options to Mr. Sean
Greffard having an exercise price of $0.15 per common share until
August 13, 2022. In addition on December 9, 2015, we granted 25,000
stock options to Mr. Greffard having an exercise price of $0.40 per
common share until December 9, 2022. Furthermore, on February 17,
2017 we granted 250,000 stock options to Mr. Greffard having an
exercise price of $1.00 per common share until February 17,
2024.





Robert Tarzwell





On June 26, 2015, Mr. Robert Tarzwell acquired 187,500 units and
Robert Tarzwell M.D. Inc., a corporation under the control and
direction of Mr. Tarzwell, acquired 187,500 units at a price of
$0.20 per unit. Each unit consisted of one common share and one
common share purchase warrant. Each warrant is exercisable for one
additional common share at a price of $0.40 per common share until
June 26, 2020.





On August 13, 2015, we granted 25,000 stock options to Mr. Tarzwell
having an exercise price of $0.15 per common share until August 13,
2022. In addition, on February 17, 2017, we granted 5,000 stock
options to Mr. Tarzwell having an exercise price of $1.00 per
common share until February 17, 2024.





Mark West





On December 1, 2015, Mr. Mark West acquired 15,500 units at a price
of $0.40 per unit. Each unit consisted of one common share and one
common share purchase warrant. Each warrant is exercisable for one
additional common share at a price of $1.00 per common share until
December 1, 2020.





On February 17, 2017, we granted 225,000 stock options to Mr. West
having an exercise price of $1.00 per common share until February
17, 2024.





Zongshen (Canada) Environtech Ltd.





On October 2, 2017, we announced a manufacturing agreement with
Zongshen to produce 75,000 SOLO all-electric vehicles over the next
three years. Zongshen is an entity under common control with
Zongshen (Canada) Environtech Ltd., which is the beneficial owner
of approximately 11.1% of our common shares. Specifically, the plan
calls for the production of 5,000 SOLOs in 2018, 20,000 in 2019 and
50,000 in 2020. Under the agreement the Company agrees to reimburse
Zongshen for the cost of the prototype tooling and molds estimated
to be $1.8 million, which shall be payable on or before March 18,
2018, and the mass production tooling and molds estimated to be
$6.0 million, which shall be payable 50% when Zongshen commences
manufacturing the tooling and molds (which we expect will be in the
second quarter of 2018), 40% when Zongshen completes manufacturing
the tooling and molds (which we expect will be in the third quarter
of 2018), and 10% upon delivery to the Company of the first
production vehicle (which we expect will be in the third quarter of
2018).





55














C. Interests of
Experts and Counsel





Not
Applicable.





ITEM 8. FINANCIAL INFORMATION





A. Consolidated
Statements and Other Financial Information





Financial Statements





The
financial statements of the Company for the years ended December
31, 2017 and 2016 have been prepared in accordance with IFRS, as
issued by the International Accounting Standards Board, or IASB,
and are included under Item 18 of this annual report. The financial
statements including related notes are accompanied by the report of
the Company’s independent registered public accounting firm,
Dale Matheson Carr-Hilton Labonte LLP.





Legal Proceedings





As of
the date of this Annual Report, in the opinion of our management,
we are not currently a party to any litigation or legal proceedings
which are material, either individually or in the aggregate, and,
to our knowledge, no legal proceedings of a material nature
involving us currently are contemplated by any individuals,
entities or governmental authorities.





Dividends





We have
not paid any dividends on our common shares since incorporation.
Our management anticipates that we will retain all future earnings
and other cash resources for the future operation and development
of our business. We do not intend to declare or pay any cash
dividends in the foreseeable future. Payment of any future
dividends will be at the Board’s discretion, subject to
applicable law, after taking into account many factors including
our operating results, financial condition and current and
anticipated cash needs.





B. Significant
Changes





We have not experienced any significant changes since the date of
the financial statements included with this Form 20-F except as
disclosed in this Form 20-F.





ITEM 9. THE OFFER AND LISTING





A. Offer and
Listing





On September 1, 2017, our common share began to be quoted on the
OTC Market Group Inc.’s Venture Market (the
“OTCQB”) under the symbol “ECCTF”.
On April 11, 2018, the last
reported sale price of our common share on the OTCQB was US$4.52
per share, and on April 11, 2018, we had approximately 49,119,449 common shares outstanding. The market for our common
shares is limited, volatile and sporadic. The following table sets
forth, for the periods indicated, the high and low bid prices of
our common shares on the OTCQB as reported by Google Finance. The
following quotations reflect inter-dealer prices, without retail
mark-up, markdown, or commissions, and may not reflect actual
transactions.





Quarter ended
High
Bid
Low
BidDecember
31, 2017
$US 7.50
$US 5.00March
31, 2018
$US 5.35
$US 4.50Month endedOctober
31, 2017
$US 7.50
$US 6.20November
30, 2017
$US 6.75
$US 5.75December
31, 2017
$US 7.50
$US 5.00January
31, 2018
$US 5.35
$US 4.74February
28, 2018
$US 5.00
$US 4.56March
31, 2018
$US 5.00
$US 4.50





We submitted our application for listing our common shares on the
Nasdaq Capital Market on October 17, 2017.





56

















B. Plan of
Distribution





Not
Applicable.





C. Markets





Please
see Section 9.A above.





D. Selling
Shareholders





Not
Applicable.





E. Dilution





Not
Applicable.





F. Expenses of the
Issue





Not
Applicable.





ITEM 10. ADDITIONAL INFORMATION





A. Share
Capital





Not
Applicable.





B. Memorandum and
Articles of Association





The following is a summary of our Notice of Articles and Articles.
You should read those documents for a complete understanding of the
rights and limitations set out therein. Our corporation number, as
assigned by the British Columbia Registry Services, is
BC1027632.





Remuneration of Directors





Our directors are entitled to the remuneration, if any, for acting
as directors as the directors may from time to time determine. If
the directors so decide, the remuneration of the directors will be
determined by the shareholders. That remuneration may be in
addition to any salary or other remuneration paid to a director in
such director’s capacity as an officer or employee of
ours.





Number of Directors





According to Article 11.1 of our Articles, the number of directors,
excluding additional directors appointed under Article 12.7 is set
at:





(a)
subject
to paragraphs (b) and (c), the number of directors that is equal to
the number of our first directors;(b)
if we
are a public company, the greater of three and the number most
recently elected by ordinary resolution (whether or not previous
notice of the resolution was given); and(c)
if we
are not a public company, the number most recently elected by
ordinary resolution (whether or not previous notice of the
resolution was given).





Directors





Our directors are elected annually at each annual meeting of our
company’s shareholders. Our Articles provide that the Board
of Directors may, between annual meetings, appoint one or more
additional directors to serve until the next annual meeting, but
the number of additional directors must not at any time
exceed:





(a)
one-third
of the number of first directors, if, at the time of the
appointments, one or more of the first directors have not yet
completed their first term of office; or(b)
in any
other case, one-third of the number of the current directors who
were elected or appointed as directors at the expiration of the
last annual meeting of our company’s
shareholders.





57














Our Articles provide that our directors may from time to time on
behalf of our company, without shareholder approval:





●
create
one or more classes or series of shares or, if none of the shares
of a class or series of shares are allotted or issued, eliminate
that class or series of shares;●
increase, reduce or
eliminate the maximum number of shares that we are authorized to
issue out of any class or series of shares or establish a maximum
number of shares that we are authorized to issue out of any class
or series of shares for which no maximum is
established;●
if we
are authorized to issue shares of a class of shares with par
value:





o
decrease the par
value of those shares;o
if none
of the shares of that class of shares are allotted or issued,
increase the par value of those shares;o
subdivide all or
any of its unissued or fully paid issued shares with par value into
shares of smaller par value; oro
consolidate all or
any of its unissued or fully paid issued shares with par value into
share of larger par value;





●
subdivide all or
any of its unissued or fully paid issued shares without par
value;●
change
all or any of its unissued or fully paid issued shares with par
value into shares without par value or all or any of its unissued
shares without par value into shares with par value;●
alter
the identifying name of any of its shares;●
consolidate all or
any of its unissued or fully paid issued shares without par
value;●
otherwise alter it
shares or authorized share structure when required or permitted to
do so by the Business Corporations Act;●
borrow
money in the manner and amount, on the security, from the sources
and on the terms and conditions that they consider
appropriate;●
issue
bonds, debentures and other debt obligations either outright or as
security for any liability or obligation of the Company or any
other person, and at any discount or premium and on such terms as
they consider appropriate;●
guarantee the
repayment of money by any other person or the performance of any
obligation of any other person; or●
mortgage or charge,
whether by way of specific or floating charge, or give other
security on the whole or any part of the present and future assets
and undertaking of the Company.





Our Articles also provide that, we may by resolution of the
directors authorize an alteration to our Notice of Articles to
change our name or adopt or change any translation of that
name.





Our Articles provide that the directors may meet together for the
conduct of business, adjourn and otherwise regulate their meetings
as they think fit, and meetings of the Board held at regular
intervals may be held at the place and at the time that the Board
may by resolution from time to time determine. Questions arising at
any meeting of directors are to be decided by a majority of votes
and, in the case of an equality of votes, the chair of the meeting
does not have a second or casting vote. A director may participate
in a meeting of the directors or of any committee of the directors
in person, or by telephone or other communications medium, if all
directors participating in the meeting are able to communicate with
each other. A director may participate in a meeting of the
directors or of any committee of the directors by a communications
medium other than telephone if all directors participating in the
meeting, whether in person or by telephone or other communications
medium, are able to communicate with each other and if all
directors who wish to participate in the meeting agree to such
participation. A director who participates in a meeting in a manner
contemplated by such provisions of our Articles is deemed for all
purposes of theBusiness Corporations
Act and our Articles to be
present at the meeting and to have agreed to participate in that
manner.





58














Our Articles provide that the quorum necessary for the transaction
of the business of the directors may be set by the directors and,
if not so set, is a majority of the directors.





Our Articles do not restrict: (i) a director’s power to vote
on a proposal, arrangement or contract in which the director is
materially interested (although theBusiness Corporations
Act(British Columbia)
generally requires a director who is materially interested in a
material contract or material transaction to disclose his or her
interest to the Board, and to abstain from voting on any resolution
to approve the contract or transaction, failing which the British
Columbia Supreme Court may, on application of our company or any of
our shareholders, set aside the material contract or material
transaction on any terms that it thinks fit, or require the
director to account to the Company for any profit or gain realized
on it, or both); or (ii) our directors’ power, in the absence
of an independent quorum, to vote compensation to themselves or any
members of their body.





Our Articles do not set out a mandatory retirement age for our
directors. Our directors are not required to own securities of our
company to serve as directors.





Authorized Capital





Our Notice of Articles provide that our authorized capital consists
of an unlimited number of common shares, without par value, and an
unlimited number of preferred shares, without par value, which have
special rights or restrictions.





Rights, Preferences and Restrictions Attaching to Our
Shares





TheBusiness Corporations
Actprovides the following
rights, privileges, restrictions and conditions attaching to our
common shares:





●
to vote
at meetings of shareholders, except meetings at which only holders
of a specified class of shares are entitled to vote;●
subject
to the rights, privileges, restrictions and conditions attaching to
any other class of shares of our company, to share equally in the
remaining property of our company on liquidation, dissolution or
winding-up of our company; and●
subject
to the rights of the preferred shares, the common shares are
entitled to receive dividends if, as, and when declared by the
Board of Directors.





Our preferred shares may include one or more series and, subject to
theBusiness Corporations
Act, the directors may,
by resolution, if none of the shares of that particular series are
issued, alter our Articles and authorize the alteration of our
Notice of Articles, as the case may be, to do one or more of the
following:





(a)
determine
the maximum number of shares of that series that we are authorized
to issue, determine that there is no such maximum number, or alter
any such determination;(b)
create
an identifying name for the shares of that series, or alter any
such identifying name; and





(c)
attach
special rights or restrictions to the shares of that series, or
alter any such special rights or restrictions.





The provisions in our Articles attaching to our common shares and
our preferred shares may be altered, amended, repealed, suspended
or changed by the affirmative vote of the holders of not less than
two-thirds of the outstanding common shares and two-thirds of the
preferred shares, as applicable.





With the exception of special resolutions (i.e. resolutions in
respect of fundamental changes to our company, including: the sale
of all or substantially all of our assets, a merger or other
arrangement or an alteration to our authorized capital that is not
allowed by resolution of the directors) that require the approval
of holders of two-thirds of the outstanding common shares entitled
to vote at a meeting, either in person or by proxy, resolutions to
approve matters brought before a meeting of our shareholders
require approval by a simple majority of the votes cast by
shareholders entitled to vote at a meeting, either in person or by
proxy.





59














Shareholder Meetings





TheBusiness Corporations
Act provides that: (i) a
general meetings of shareholders must be held in British Columbia,
or may be held at a location outside British Columbia since our
Articles do not restrict our company from approving a location
outside of British Columbia for the holding of the general meeting
and the location for the meeting is approved by ordinary
resolution, or the location for the meeting is approving in writing
by the British Columbia Registrar of Companies before the meeting
is held; (ii) directors must call an annual meeting of shareholders
not later than 15 months after the last preceding annual meeting;
(iii) for the purpose of determining shareholders entitled to
receive notice of or vote at meetings of shareholders, the
directors may fix in advance a date as the record date for that
determination, provided that such date shall not precede by more
than two months or by less than 21 days the date on which the
meeting is to be held; (iv) the holders of not less than 5% of the
issued shares entitled to vote at a meeting may requisition the
directors to call a meeting of shareholders for the purposes stated
in the requisition; (v) only shareholders entitled to vote at the
meeting, our directors and our auditor are entitled to be present
at a meeting of shareholders; and (vi) upon the application of a
director or shareholder entitled to vote at the meeting, the
British Columbia Supreme Court may order a meeting to be called,
held and conducted in a manner that the Court
directs.





Pursuant to Article 8.20 of our Articles, a shareholder or proxy
holder who is entitled to participate in a meeting of shareholders
may do so in person, or by telephone or other communications
medium, if all shareholders and proxy holders participating in the
meeting are able to communicate with each other; provided, however,
that nothing in Article 8.20 of our Articles shall obligate us to
take any action or provide any facility to permit or facilitate the
use of any communications medium at a meeting of shareholders. If
one or more shareholders or proxy holders participate in a meeting
of shareholders in a matter contemplated by Article 8.20 of our
Articles:





(a)
each
such shareholder or proxy holder shall be deemed to be present at
the meeting; and(b)
the
meeting shall be deemed to be help at the location specified in the
notice of the meeting.





Pursuant to our Articles, the quorum for the transaction of
business at a meeting of our shareholders is one or more persons,
present in person or by proxy.





LIMITATIONS ON RIGHTS OF NON-CANADIANS





Electrameccanica is incorporated pursuant to the laws of the
Province of British Columbia, Canada. There is no law or
governmental decree or regulation in Canada that restricts the
export or import of capital, or affects the remittance of
dividends, interest or other payments to a non-resident holder of
common shares, other than withholding tax requirements. Any such
remittances to United States residents are generally subject to
withholding tax, however no such remittances are likely in the
foreseeable future. See “Canadian Federal Income Tax
Considerations For United States Residents,”
below.





There is no limitation imposed by Canadian law or by the charter or
other constituent documents of our company on the right of a
non-resident to hold or vote common shares of our company. However,
the Investment Canada
Act(Canada) (the
“Investment Act”) has rules regarding certain
acquisitions of shares by non-residents, along with other
requirements under that legislation.





The following discussion summarizes the principal features of the
Investment Act for a non-resident who proposes to acquire common
shares of our company. The discussion is general only; it is not a
substitute for independent legal advice from an investor’s
own advisor; and it does not anticipate statutory or regulatory
amendments.





The Investment Act is a federal statute of broad application
regulating the establishment and acquisition of Canadian businesses
by non-Canadians, including individuals, governments or agencies
thereof, corporations, partnerships, trusts or joint ventures (each
an “entity”). Investments by non-Canadians to acquire
control over existing Canadian businesses or to establish new ones
are either reviewable or notifiable under the Investment Act. If an
investment by a non-Canadian to acquire control over an existing
Canadian business is reviewable under the Investment Act, the
Investment Act generally prohibits implementation of the investment
unless, after review, the Minister of Industry, is satisfied that
the investment is likely to be of net benefit to
Canada.





60














A non-Canadian would acquire control of our company for the
purposes of the Investment Act through the acquisition of common
shares if the non-Canadian acquired a majority of the common shares
of our company.





Further, the acquisition of less than a majority but one-third or
more of the common shares of our company would be presumed to be an
acquisition of control of our company unless it could be
established that, on the acquisition, our company was not
controlled in fact by the acquirer through the ownership of common
shares.





For a direct acquisition that would result in an acquisition of
control of our company, subject to the exception for
“WTO-investors” that are controlled by persons who are
resident in World Trade Organization (“WTO”) member
nations, a proposed investment would be reviewable where the value
of the acquired assets is $5 million or more, or if an order for
review was made by the federal cabinet on the grounds that the
investment related to Canada’s cultural heritage or national
identity, where the value of the acquired assets is less than $5
million.





For a proposed indirect acquisition that is not a so-called WTO
transaction and that would result in an acquisition of control of
our company through the acquisition of a non-Canadian parent
entity, the investment would be reviewable where (a) the value of
the Canadian assets acquired in the transaction is $50 million or
more, or (b) the value of the Canadian assets is greater than 50%
of the value of all of the assets acquired in the transaction and
the value of the Canadian assets is $5 million or
more.





In the case of a direct acquisition by or from a “WTO
investor”, the threshold is significantly higher. The 2016
threshold was $600 million was increased to $800 million in April
2017 for a two year period. Other than the exception noted below,
an indirect acquisition involving a WTO investor is not reviewable
under the Investment Act.





The higher WTO threshold for direct investments and the exemption
for indirect investments do not apply where the relevant Canadian
business is carrying on a “cultural business”. The
acquisition of a Canadian business that is a “cultural
business” is subject to lower review thresholds under the
Investment Act because of the perceived sensitivity of the cultural
sector.





In 2009, amendments were enacted to the Investment Act concerning
investments that may be considered injurious to national security.
If the Minister of Industry has reasonable grounds to believe that
an investment by a non-Canadian “could be injurious to
national security,” the Minister of Industry may send the
non-Canadian a notice indicating that an order for review of the
investment may be made. The review of an investment on the grounds
of national security may occur whether or not an investment is
otherwise subject to review on the basis of net benefit to Canada
or otherwise subject to notification under the Investment Act. To
date, there is neither legislation nor guidelines published, or
anticipated to be published, on the meaning of “injurious to
national security.” Discussions with government officials
suggest that very few investment proposals will cause a review
under these new sections.





Certain transactions, except those to which the national security
provisions of the Investment Act may apply, relating to common
shares of our company are exempt from the Investment Act,
including





(a)
the
acquisition of our common shares by a person in the ordinary course
of that person’s business as a trader or dealer in
securities,





(b)
the
acquisition of control of our company in connection with the
realization of security granted for a loan or other financial
assistance and not for a purpose related to the provisions on the
Investment Act, and(c)
the
acquisition of control of our company by reason of an amalgamation,
merger, consolidation or corporate reorganization following which
the ultimate direct or indirect control in fact of our company,
through the ownership of common shares, remained
unchanged.





C. Material
Contracts





The
following summary of our material agreements, all of which have
been previously filed with the SEC, does not purport to be complete
and is subject to, and is qualified in its entirety by reference
to, all the provisions of those agreements. There are no material
contracts, other than those contracts entered into in the ordinary
course of business, currently in place or to which we or any member
of our group is a party, from the two years immediately preceding
the publication of this annual report, except as
follows:








61

















Lease Agreement





Together with our subsidiary, Intermeccanica, we entered into a
lease agreement with Cressey (Quebec Street) Development LLP (the
“Landlord”) to jointly lease the premises located at
102 East 1stAvenue, Vancouver, British Columbia, Canada, V5T 1A4.
The term of the lease is 60 months commencing November 1, 2015. We
will pay half of the lease costs, including fees, taxes, and other
charges associated with occupancy, to a maximum amount of $4,000
per month or $48,000 per year, paid in equal monthly installments.
We will provide additional payment for any additional expenses
incurred by Intermeccanica and us pursuant to the lease. Beginning
August 1, 2015, we will also pay 25% of the costs associated with
Intermeccanica’s existing lease at 39 Braid Street, New
Westminster, British Columbia, Canada. We also advanced $10,000
(and whatever else is reasonably agreed upon mutually) to
Intermeccanica prior to occupancy, which was used for improvement
costs. We are not be able to sublease the premises.





SOLO Manufacturing Agreement





On October 2, 2017, we announced a manufacturing agreement with
Zongshen to produce 75,000 SOLO all-electric vehicles over the next
three years. Specifically, the plan calls for the production of
5,000 SOLOs in 2018; 20,000 in 2019; and 50,000 in 2020. Under the
agreement the Company agrees to reimburse Zongshen for the cost of
the prototype tooling and molds estimated to be $1.8 million, which
shall be payable on or before March 18, 2018, and the mass
production tooling and molds estimated to be $6.0 million, which
shall be payable 50% when Zongshen commences manufacturing the
tooling and molds (which we expect will be in the second quarter of
2018), 40% when Zongshen completes manufacturing the tooling and
molds (which we expect will be in the third quarter of 2018), and
10% upon delivery to the Company of the first production vehicle
(which we expect will be in the third quarter of
2018).





Share Pledge Agreement





In
connection with the manufacturing agreement with Zongshen, on
October 16, 2017, Jerry Kroll, our President and CEO, entered into
a Share Pledge Agreement to guarantee the payment by us for the
cost of the prototype tooling and molds estimated to be $1.8
million to Zongshen through the pledge of 800,000 of our common
shares at a deemed price of USD $2.00. We have agreed to reimburse
Mr. Kroll on a one-for-one basis for any pledged shares realized by
Zongshen under the Share Pledge Agreement.





Share Purchase Agreement





On
October 18, 2017 we entered into the SPA to acquire Intermeccanica,
which replaced the Joint Operating Agreement. Under the SPA, we
agreed to purchase all the shares of Intermeccanica for $2,500,000.
In addition to an initial payment of $100,000 in 2016, during the
nine months ended September 30, 2017 an additional $200,000 was
paid. On October 18, 2017, we paid $700,000, and entered into a
Note for the balance of $1,500,000 of the Purchase Price. On
January 28, 2018, we paid off all of the principal and interest due
on the Note for $1,520,548.





D. Exchange
Controls





We are
incorporated pursuant to the laws of the Province of British
Columbia, Canada. There is no law or governmental decree or
regulation in Canada that restricts the export or import of
capital, or affects the remittance of dividends, interest or other
payments to a non-resident holder of common shares, other than
withholding tax requirements. Any such remittances to United States
residents are generally subject to withholding tax, however no such
remittances are likely in the foreseeable future. See
“Certain Canadian Federal Income Tax Information For United
States Residents,” below.





There
is no limitation imposed by Canadian law or by the charter or other
constituent documents of our Company on the right of a non-resident
to hold or vote common shares of our Company. However,
the Investment Canada
Act (Canada) (the “Investment Act”) has
rules regarding certain acquisitions of shares by non-residents,
along with other requirements under that legislation.





The
following discussion summarizes the principal features of the
Investment Act for a nonresident who proposes to acquire common
shares of our Company. The discussion is general only; it is not a
substitute for independent legal advice from an investor’s
own advisor; and it does not anticipate statutory or regulatory
amendments.





The
Investment Act is a federal statute of broad application regulating
the establishment and acquisition of Canadian businesses by
non-Canadians, including individuals, governments or agencies
thereof, corporations, partnerships, trusts or joint ventures (each
an “entity”). Investments by non-Canadians to acquire
control over existing Canadian businesses or to establish new ones
are either reviewable or notifiable under the Investment Act. If an
investment by a non-Canadian to acquire control over an existing
Canadian business is reviewable under the Investment Act, the
Investment Act generally prohibits implementation of the investment
unless, after review, the Minister of Industry, is satisfied that
the investment is likely to be of net benefit to
Canada.








62

















A
non-Canadian would acquire control of our Company for the purposes
of the Investment Act through the acquisition of common shares if
the non-Canadian acquired a majority of the common shares of our
Company.





Further,
the acquisition of less than a majority but one-third or more of
the common shares of our Company would be presumed to be an
acquisition of control of our Company unless it could be
established that, on the acquisition, our Company was not
controlled in fact by the acquirer through the ownership of common
shares.





For a
direct acquisition that would result in an acquisition of control
of our Company, subject to the exception for
“WTO-investors” that are controlled by persons who are
resident in World Trade Organization (“WTO”) member
nations, a proposed investment would be reviewable where the value
of the acquired assets is CAD $5 million or more, or if an order
for review was made by the federal cabinet on the grounds that the
investment related to Canada’s cultural heritage or national
identity, where the value of the acquired assets is less than CAD
$5 million.





For a
proposed indirect acquisition that is not a so-called WTO
transaction and that would result in an acquisition of control of
our Company through the acquisition of a non-Canadian parent
entity, the investment would be reviewable where (a) the value of
the Canadian assets acquired in the transaction is CAD $50 million
or more, or (b) the value of the Canadian assets is greater than
50% of the value of all of the assets acquired in the transaction
and the value of the Canadian assets is CAD $5 million or
more.





In the
case of a direct acquisition by or from a “WTO
investor”, the threshold is significantly higher. The 2016
threshold is CAD$600 million, which threshold will be increased to
CAD$800 million in April 2017 for a two year period. Other than the
exception noted below, an indirect acquisition involving a WTO
investor is not reviewable under the Investment Act.





The
higher WTO threshold for direct investments and the exemption for
indirect investments do not apply where the relevant Canadian
business is carrying on a “cultural business”. The
acquisition of a Canadian business that is a “cultural
business” is subject to lower review thresholds under the
Investment Act because of the perceived sensitivity of the cultural
sector.





In
2009, amendments were enacted to the Investment Act concerning
investments that may be considered injurious to national security.
If the Industry Minister has reasonable grounds to believe that an
investment by a non-Canadian “could be injurious to national
security,” the Industry Minister may send the non-Canadian a
notice indicating that an order for review of the investment may be
made. The review of an investment on the grounds of national
security may occur whether or not an investment is otherwise
subject to review on the basis of net benefit to Canada or
otherwise subject to notification under the Investment Canada Act.
To date, there is neither legislation nor guidelines published, or
anticipated to be published, on the meaning of “injurious to
national security.” Discussions with government officials
suggest that very few investment proposals will cause a review
under these new sections.





Certain
transactions, except those to which the national security
provisions of the Investment Act may apply, relating to common
shares of our Company are exempt from the Investment Act,
including:





(a)
acquisition
of common shares of the Company by a person in the ordinary course
of that person’s business as a trader or dealer in
securities,(b)
acquisition
of control of our Company in connection with the realization of
security granted for a loan or other financial assistance and not
for a purpose related to the provisions on the Investment Act,
and(c)
acquisition
of control of our Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the
ultimate direct or indirect control in fact of our Company, through
the ownership of common shares, remained unchanged.





E. Taxation





CANADIAN FEDERAL INCOME TAX CONSIDERATIONS FOR UNITED STATES
RESIDENTS





The
following is a summary of the principal Canadian federal income tax
considerations generally applicable to the holding and disposition
of our common shares acquired by a holder who, at all relevant
times, (a) for the purposes of the Income Tax Act (Canada) (the
“Tax Act”), (i) is not resident, or deemed to be
resident, in Canada, (ii) deals at arm’s length with us, and
is not affiliated with us, (iii) holds our common shares as capital
property, (iv) does not use or hold the common shares in the course
of carrying on, or otherwise in connection with, a business carried
on or deemed to be carried on in Canada and (v) is not a
“registered non-resident insurer” or “authorized
foreign bank” (each as defined in the Tax Act), and (b) for
the purposes of the Canada-U.S. Tax Convention, is a resident of
the United States, has never been a resident of Canada, does not
have and has not had, at any time, a permanent establishment or
fixed base in Canada, for purposes of the Tax Act, and who
otherwise qualifies for the full benefits of the Canada-U.S. Tax
Convention. The common shares will generally be considered to be
capital property to a holder unless such common shares are held in
the course of carrying on a business of buying or selling
securities, or as part of an adventure or concern in the nature of
trade. Holders who meet all the criteria in clauses (a) and (b) are
referred to herein as “Non-Canadian
Holders”.





63

















This
summary does not deal with special situations, such as the
particular circumstances of traders or dealers, tax exempt
entities, insurers or financial institutions. Such holders and
other holders who do not meet the criteria in clauses (a) and (b)
should consult their own tax advisers.





This
summary is based upon the current provisions of the Tax Act, the
regulations thereunder in force at the date hereof
(“Regulations”), the current provisions of the
Canada-U.S. Tax Convention and our understanding of the
administrative and assessing practices of the Canada Revenue Agency
published in writing prior to the date hereof. This summary takes
into account all specific proposals to amend the Tax Act and
Regulations publicly announced by or on behalf of the Minister of
Finance (Canada) prior to the date hereof (the “Proposed
Amendments”)and assumes that such Proposed Amendments will be
enacted in the form proposed. However, no assurance can be given
that such Proposed Amendments will be enacted in the form proposed,
or at all. This summary does not otherwise take into account or
anticipate any changes in law or administrative or assessing
practices, whether by legislative, governmental or judicial
decision or action, nor does it take into account tax laws of any
province or territory of Canada or of any other jurisdiction
outside Canada, which may differ from those discussed in this
summary. For the purposes of the Tax Act, all amounts relating to
the acquisition, holding or disposition of our common shares must
generally be expressed in Canadian dollars. Amounts denominated in
United States currency generally must be converted into Canadian
dollars using the rate of exchange that is acceptable to the Canada
Revenue Agency.





This
summary is of a general nature only and is not intended to be, nor
should it be construed to be, legal or tax advice to any particular
Non-Canadian Holder and no representation with respect to the
Canadian federal income tax consequences to any particular
Non-Canadian Holder or prospective Non-Canadian Holder is made.
This summary is not exhaustive of all Canadian federal income tax
considerations. Accordingly, prospective purchasers should consult
with their own tax advisors for advice with respect to their own
particular circumstances.





Withholding Tax on Dividends





Amounts
paid or credited or deemed to be paid or credited as, on account or
in lieu of payment, or in satisfaction of, dividends on our common
shares to a Non Canadian Holder will be subject to Canadian
withholding tax. Under the Canada-U.S. Tax Convention, the rate of
Canadian withholding tax on dividends paid or credited by us to a
Non-Canadian Holder that beneficially owns such dividends is
generally 15% unless the beneficial owner is a company, which owns
at least 10% of our voting stock at that time, in which case the
rate of Canadian withholding tax is reduced to 5%.





Dispositions





A
Non-Canadian Holder will not be subject to tax under the Tax Act on
any capital gain realized on a disposition or deemed disposition of
a common share, unless the common shares are “taxable
Canadian property” to the Non-Canadian Holder for purposes of
the Tax Act and the Non-Canadian Holder is not entitled to relief
under an applicable income tax convention between Canada and the
country in which the Non-Canadian Holder is resident.





Generally,
the common shares will not constitute “taxable Canadian
property” to a Non-Canadian Holder at a particular time
unless at any time during the 60 month period immediately preceding
the disposition, more than 50% of the fair market value of the
common shares was derived, directly or indirectly, from one or any
combination of: (i) real or immoveable property situated in Canada,
(ii) “Canadian resource properties” (as defined in the
Tax Act), (iii) “timber resource properties” (as
defined in the Tax Act), and (iv) options in respect of, or
interests in, or for civil law rights in, property in any of the
foregoing whether or not the property exists. Notwithstanding the
foregoing, in certain circumstances set out in the Tax Act, common
shares could be deemed to be “taxable Canadian
property”. Non-Canadian Holders whose common shares may
constitute “taxable Canadian property” should consult
their own tax advisors.





Under
the Canada-U.S. Tax Convention, the gains derived by a Non-Canadian
Holder from the disposition of common shares would generally not be
taxable in Canada unless the value of the common shares is derived
principally from real property situated in Canada. The Company
believes that the value of its common shares are not currently
derived principally from real property situated in Canada and it
does not expect this to change in the foreseeable
future.








64

















CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS





The
following is a general summary of certain material U.S. federal
income tax considerations applicable to a U.S. Holder (as defined
below) arising from the acquisition, ownership and disposition of
our common stock. This summary applies only to U.S. Holders that
acquire our common stock from a Selling Securityholder pursuant to
this prospectus and does not apply to any subsequent U.S. Holder of
our common stock.





This
summary is for general information purposes only and does not
purport to be a complete analysis or listing of all potential U.S.
federal income tax considerations that may apply to a U.S. Holder
as a result of the acquisition, ownership and disposition of our
common stock. In addition, this summary does not take into account
the individual facts and circumstances of any particular U.S.
Holder that may affect the U.S. federal income tax consequences to
such U.S. Holder, including specific tax consequences to a U.S.
Holder under an applicable tax treaty. Accordingly, this summary is
not intended to be, and should not be construed as, legal or U.S.
federal income tax advice with respect to any particular U.S.
Holder. In addition, this summary does not address the U.S. federal
alternative minimum, U.S. federal estate and gift, U.S. Medicare
contribution, U.S. state and local, or non-U.S. tax consequences of
the acquisition, ownership or disposition of our common stock.
Except as specifically set forth below, this summary does not
discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax
advisor regarding all U.S. federal, U.S. state and local and
non-U.S. tax consequences of the acquisition, ownership and
disposition of our common stock.





No
opinion from U.S. legal counsel or ruling from the Internal Revenue
Service (the “IRS”) has been requested, or will be
obtained, regarding the U.S. federal income tax consequences of the
acquisition, ownership or disposition of our common stock. This
summary is not binding on the IRS, and the IRS is not precluded
from taking a position that is different from, or contrary to, any
position taken in this summary. In addition, because the
authorities upon whom this summary is based are subject to various
interpretations, the IRS and the U.S. courts could disagree with
one or more of the positions taken in this summary.





Scope of This Disclosure





Authorities





This
summary is based on the Internal Revenue Code of 1986, as amended
(the “Code”), Treasury Regulations (whether final,
temporary, or proposed), published rulings of the IRS, published
administrative positions of the IRS, the Convention Between Canada
and the United States of America with Respect to Taxes on Income
and on Capital, signed September 26, 1980, as amended (the
“Canada-U.S. Tax Convention”), and U.S. court decisions
that are applicable and, in each case, as in effect and available,
as of the date hereof. Any of the authorities on which this summary
is based could be changed in a material and adverse manner at any
time, and any such change could be applied on a retroactive or
prospective basis, which could affect the U.S. federal income tax
considerations described in this summary. This summary does not
discuss the potential effects, whether adverse or beneficial, of
any proposed legislation that, if enacted, could be applied on a
retroactive or prospective basis.





U.S. Holders





For
purposes of this summary, the term “U.S. Holder” means
a beneficial owner of our common stock that is for U.S. federal
income tax purposes:





●
 an individual who
is a citizen or resident of the U.S.;





●
 a corporation (or
other entity taxable as a corporation for U.S. federal income tax
purposes) created or organized in or under the laws of the U.S.,
any state thereof or the District of Columbia;





●
 an estate, the
income of which is subject to U.S. federal income taxation
regardless of its source; or





●
 a trust that (a) is
subject to the primary supervision of a court within the U.S. and
the control of one or more U.S. persons for all substantial
decisions or (b) has a valid election in effect under applicable
Treasury Regulations to be treated as a U.S. person.





Transactions Not Addressed





This
summary does not address the tax consequences of transactions
effected prior or subsequent to, or concurrently with, any purchase
of our common stock pursuant to this prospectus (whether or not any
such transactions are undertaken in connection with the purchase of
our common stock pursuant to this prospectus).





65

















U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not
Addressed





This
summary does not address the U.S. federal income tax considerations
of the acquisition, ownership or disposition of our common stock by
U.S. Holders that are subject to special provisions under the Code,
including, but not limited to, the following: (a) tax-exempt
organizations, qualified retirement plans, individual retirement
accounts, or other tax-deferred accounts; (b) financial
institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies; (c)
broker-dealers, dealers, or traders in securities or currencies
that elect to apply a “mark-to-market” accounting
method; (d) U.S. Holders that have a “functional
currency” other than the U.S. dollar; (e) U.S. Holders that
own our common stock as part of a straddle, hedging transaction,
conversion transaction, constructive sale, or other arrangement
involving more than one position; (f) U.S. Holders that acquire our
common stock in connection with the exercise of employee stock
options or otherwise as compensation for services; (g) U.S. Holders
that hold our common stock other than as a capital asset within the
meaning of Section 1221 of the Code (generally, property held for
investment purposes); and (h) U.S. Holders that own directly,
indirectly, or by attribution, 10% or more, by voting power, of the
outstanding stock of the Company. This summary also does not
address the U.S. federal income tax considerations applicable to
U.S. Holders who are: (a) U.S. expatriates or former long-term
residents of the U.S.; (b) persons that have been, are, or will be
a resident or deemed to be a resident in Canada for purposes of the
Income Tax Act (Canada); (c) persons that use or hold, will use or
hold, or that are or will be deemed to use or hold our common stock
in connection with carrying on a business in Canada; (d) persons
whose common stock in our Company constitutes “taxable
Canadian property” under the Income Tax Act (Canada); or (e)
persons that have a permanent establishment in Canada for purposes
of the Canada-U.S. Tax Convention. U.S. Holders that are subject to
special provisions under the Code, including U.S. Holders described
immediately above, should consult their own tax advisors regarding
all U.S. federal, U.S. state and local, and non-U.S. tax
consequences (including the potential application and operation of
any income tax treaties) relating to the acquisition, ownership or
disposition of our common stock.





If an
entity or arrangement that is classified as a partnership (or other
“pass-through” entity) for U.S. federal income tax
purposes holds our common stock, the U.S. federal income tax
consequences to such partnership and the partners (or other owners)
of such partnership of the acquisition, ownership or disposition of
our common stock generally will depend on the activities of the
partnership and the status of such partners (or other owners). This
summary does not address the U.S. federal income tax considerations
for any such partner or partnership (or other
“pass-through” entity or its owners). Owners of
entities and arrangements that are classified as partnerships (or
other “pass-through” entities) for U.S. federal income
tax purposes should consult their own tax advisors regarding the
U.S. federal income tax consequences of the acquisition, ownership
or disposition of our common stock.





Acquisition of Our Common Stock





A U.S.
Holder generally will not recognize gain or loss upon the
acquisition of our common stock from a Selling Securityholder for
cash pursuant to this prospectus. A U.S. Holder’s initial tax
basis in our common stock acquired pursuant to this prospectus will
be equal to the U.S. Holder’s U.S. dollar cost for the common
stock. A U.S. Holder’s holding period for such common stock
will begin on the day after the acquisition.





Ownership and Disposition of Our Common Stock





Distributions on Our Common Stock





Subject
to the “passive foreign investment company”
(“PFIC”) rules discussed below (see “Tax
Consequences if the Company is a PFIC”), a U.S. Holder that
receives a distribution, including a constructive distribution,
with respect to our common stock will be required to include the
amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such
distribution) to the extent of the current or accumulated
“earnings and profits” of the Company, as computed for
U.S. federal income tax purposes. To the extent that a distribution
exceeds the current and accumulated “earnings and
profits” of the Company, such distribution will be treated
first as a tax-free return of capital to the extent of a U.S.
Holder’s tax basis in our common stock and thereafter as gain
from the sale or exchange of such common stock (see “Sale or
Other Taxable Disposition of Our Common Stock” below).
However, the Company may not maintain calculations of earnings and
profits in accordance with U.S. federal income tax principles, and
each U.S. Holder should therefore assume that any distribution by
the Company with respect to our common stock will constitute a
dividend. Dividends received on our common stock generally will not
be eligible for the “dividends received deduction”
available to U.S. corporate shareholders receiving dividends from
U.S. corporations. If the Company is eligible for the benefits of
the Canada-U.S. Tax Convention or our common stock is readily
tradable on an established securities market in the U.S., dividends
paid by the Company to non-corporate U.S. Holders generally will be
eligible for the preferential tax rates applicable to long-term
capital gains, provided certain holding period and other conditions
are satisfied, including that the Company not be classified as a
PFIC in the tax year of distribution or in the preceding tax year.
The dividend rules are complex, and each U.S. Holder should consult
its own tax advisor regarding the application of such
rules.








66

















Sale or Other Taxable Disposition of Our Common Stock





Subject
to the PFIC rules discussed below, upon the sale or other taxable
disposition of our common stock, a U.S. Holder generally will
recognize capital gain or loss in an amount equal to the difference
between the amount of cash plus the fair market value of any
property received and such U.S. Holder’s tax basis in the
common stock sold or otherwise disposed of. Such capital gain or
loss will be long-term capital gain or loss if, at the time of the
sale or other taxable disposition, the U.S. Holder’s holding
period for our common stock is more than one year. Preferential tax
rates apply to long-term capital gains of non-corporate U.S.
Holders. There are currently no preferential tax rates for
long-term capital gains of a U.S. Holder that is a corporation.
Deductions for capital losses are subject to significant
limitations under the Code.





PFIC Status of the Company





If the
Company is or becomes a PFIC, the preceding sections of this
summary may not describe the U.S. federal income tax consequences
to U.S. Holders of the ownership and disposition of our common
stock. The U.S. federal income tax consequences of owning and
disposing of our common stock if the Company is or becomes a PFIC
are described below under the heading “Tax Consequences if
the Company is a PFIC.”





A
non-U.S. corporation is a PFIC for each tax year in which (i) 75%
or more of its gross income is passive income (as defined for U.S.
federal income tax purposes) (the “income test”) or
(ii) on average for such tax year, 50% or more (by value) of its
assets either produces or is held for the production of passive
income (the “asset test”). For purposes of the PFIC
provisions, “gross income” generally includes sales
revenues less cost of goods sold, plus income from investments and
from incidental or outside operations or sources, and
“passive income” generally includes dividends,
interest, certain rents and royalties, and certain gains from
commodities or securities transactions. In determining whether or
not it is a PFIC, a non-U.S. corporation is required to take into
account its pro rata portion of the income and assets of each
corporation in which it owns, directly or indirectly, at least a
25% interest (by value). If certain conditions are met, a start-up
non-U.S. corporation is not a PFIC in the first year that it has
gross income, but could be a PFIC in one or more earlier years in
which it has no gross income but satisfies the asset
test.





Under
certain attribution and indirect ownership rules, if the Company is
a PFIC, U.S. Holders will generally be deemed to own their
proportionate shares of the Company’s direct or indirect
equity interest in any company that is also a PFIC (a
“Subsidiary PFIC”). At this time, however, the Company
does not own any direct or indirect equity interests in another
company.





The
Company does not know if it currently is a PFIC or was a PFIC in a
prior year and, based on current business plans and financial
projections, does not know if it will be a PFIC in subsequent tax
years. The determination of PFIC status is inherently factual, is
subject to a number of uncertainties, and can be determined only
annually after the close of the tax year in question. Additionally,
the analysis depends, in part, on the application of complex U.S.
federal income tax rules, which are subject to differing
interpretations. There can be no assurance that the Company will or
will not be determined to be a PFIC for the current tax year or any
prior or future tax year, and no opinion of legal counsel or ruling
from the IRS concerning the status of the Company as a PFIC has
been obtained or will be requested. U.S. Holders should consult
their own U.S. tax advisors regarding the PFIC status of the
Company.





Tax Consequences if the Company is a PFIC





If the
Company is a PFIC for any tax year during which a U.S. Holder owns
our common stock, special rules may increase such U.S.
Holder’s U.S. federal income tax liability with respect to
the ownership and disposition of such common stock. If the Company
meets the income test or the asset test for any tax year during
which a U.S. Holder owns our common stock, the Company will be
treated as a PFIC with respect to such U.S. Holder for that tax
year and for all subsequent tax years, regardless of whether the
Company meets the income test or the asset test for such subsequent
tax years, unless the U.S. Holder elects to recognize any
unrealized gain in such common stock or makes a timely and
effective QEF Election or, if applicable, Mark-to-Market
Election.





Under
the default PFIC rules:





●
 any gain realized
on the sale or other disposition (including dispositions and
certain other events that would not otherwise be treated as taxable
events) of our common stock (including an indirect disposition of
the stock of any Subsidiary PFIC) and any “excess
distribution” (defined as a distribution to the extent it,
together with all other distributions received in the relevant tax
year, exceeds 125% of the average annual distribution received
during the preceding three years) received on our common stock or
with respect to the stock of a Subsidiary PFIC will be allocated
rateably to each day of such U.S. Holder’s holding period for
our common stock;





●
 the amount
allocated to the current tax year and any year prior to the first
year in which the Company was a PFIC will be taxed as ordinary
income in the current year;





●
 the amount
allocated to each of the other tax years (the “Prior PFIC
Years”) will be subject to tax at the highest ordinary income
tax rate in effect for the applicable class of taxpayer for that
year;





●
 an interest charge
will be imposed with respect to the resulting tax attributable to
each Prior PFIC Year, which interest charge is not deductible by
non-corporate U.S. Holders; and





●
 any loss realized
on the disposition of our common stock generally will not be
recognized.








67

















A U.S.
Holder that makes a timely and effective
“mark-to-market” election under Section 1296 of the
Code (a “Mark-to-Market Election”) or a timely and
effective election to treat the Company and each Subsidiary PFIC as
a “qualified electing fund” (a “QEF”) under
Section 1295 of the Code (a “QEF Election”) may
generally mitigate or avoid the PFIC consequences described above
with respect to our common stock.





If a
U.S. Holder makes a timely and effective QEF Election, the U.S.
Holder must include currently in gross income each year its pro
rata share of the Company’s ordinary income and net capital
gains, regardless of whether such income and gains are actually
distributed. Thus, a U.S. Holder could have a tax liability with
respect to such ordinary income or gains without a corresponding
receipt of cash from the Company. If the Company is a QEF with
respect to a U.S. Holder, the U.S. Holder’s basis in our
common stock will be increased to reflect the amount of the taxed
but undistributed income. Distributions of income that had
previously been taxed will result in a corresponding reduction of
basis in our common stock and will not be taxed again as a
distribution to a U.S. Holder. Taxable gains on the disposition of
our common stock by a U.S. Holder that has made a timely and
effective QEF Election are generally capital gains. A U.S. Holder
must make a QEF Election for the Company and each Subsidiary PFIC
if it wishes to have this treatment. To make a QEF Election, a U.S.
Holder will need to have an annual information statement from the
Company setting forth the ordinary income and net capital gains for
the year.U.S. Holders
should be aware that there can be no assurance that the Company
will satisfy the recordkeeping requirements that apply to a QEF or
that the Company will supply U.S. Holders with information such
U.S. Holders require to report under the QEF rules in the event
that the Company is a PFIC for any tax year.





In
general, a U.S. Holder must make a QEF Election on or before the
due date for filing its income tax return for the first year to
which the QEF Election applies. Under applicable Treasury
Regulations, a U.S. Holder will be permitted to make retroactive
elections in particular circumstances, including if it had a
reasonable belief that the Company was not a PFIC and filed a
protective election. If a U.S. Holder owns PFIC stock indirectly
through another PFIC, separate QEF Elections must be made for the
PFIC in which the U.S. Holder is a direct shareholder and the
Subsidiary PFIC for the QEF rules to apply to both PFICs. Each U.S.
Holder should consult its own tax advisor regarding the
availability and desirability of, and procedure for, making a
timely and effective QEF Election for the Company and any
Subsidiary PFIC.





A
Mark-to-Market Election may be made with respect to stock in a PFIC
if such stock is “regularly traded” on a
“qualified exchange or other market” (within the
meaning of the Code and the applicable Treasury Regulations). A
class of stock that is traded on one or more qualified exchanges or
other markets is considered to be “regularly traded”
for any calendar year during which such class of stock is traded in
other than de minimus quantities on at least 15 days during each
calendar quarter. If our common stock is considered to be
“regularly traded” within this meaning, then a U.S.
Holder generally will be eligible to make a Mark-to-Market Election
with respect to our common stock but not with respect to a
Subsidiary PFIC. At this time, however, our common stock is not
listed or posted for trading on any securities exchange or stock
quotation system, and therefore is not considered to be
“regularly traded” for this purpose.





Should
our common stock become “regularly traded,” a U.S.
Holder that makes a timely and effective Mark-to-Market Election
with respect to our common stock generally will be required to
recognize as ordinary income in each tax year in which the Company
is a PFIC an amount equal to the excess, if any, of the fair market
value of such stock as of the close of such taxable year over the
U.S. Holder’s adjusted tax basis in such stock as of the
close of such taxable year. A U.S. Holder’s adjusted tax
basis in our common stock generally will be increased by the amount
of ordinary income recognized with respect to such stock. If the
U.S. Holder’s adjusted tax basis in our common stock as of
the close of a tax year exceeds the fair market value of such stock
as of the close of such taxable year, the U.S. Holder generally
will recognize an ordinary loss, but only to the extent of net
mark-to-market income recognized with respect to such stock for all
prior taxable years. A U.S. Holder’s adjusted tax basis in
our common stock generally will be decreased by the amount of
ordinary loss recognized with respect to such stock. Any gain
recognized upon a disposition of our common stock generally will be
treated as ordinary income, and any loss recognized upon a
disposition generally will be treated as ordinary loss to the
extent of the net mark-to-market income recognized for all prior
taxable years. Any loss recognized in excess thereof will be taxed
as a capital loss. Capital losses are subject to significant
limitations under the Code. Each U.S. Holder should consult its own
tax advisor regarding the availability and desirability of, and
procedure for, making a timely and effective Mark-to-Market
Election with respect to our common stock.





Foreign Tax Credit





A U.S.
Holder that pays (whether directly or through withholding) Canadian
income tax in connection with the ownership or disposition of our
common stock may be entitled, at the election of such U.S. Holder,
to receive either a deduction or a credit for such Canadian income
tax paid. Generally, a credit will reduce a U.S. Holder’s
U.S. federal income tax liability on a dollar-for-dollar basis,
whereas a deduction will reduce a U.S. Holder’s income
subject to U.S. federal income tax. This election is made on a
year-by-year basis and applies to all creditable foreign taxes paid
(whether directly or through withholding) by a U.S. Holder during a
year.





68

















Complex
limitations apply to the foreign tax credit, including the general
limitation that the credit cannot exceed the proportionate share of
a U.S. Holder’s U.S. federal income tax liability that such
U.S. Holder’s “foreign source” taxable income
bears to such U.S. Holder’s worldwide taxable income. In
applying this limitation, a U.S. Holder’s various items of
income and deduction must be classified, under complex rules, as
either “foreign source” or “U.S. source.”
Generally, dividends paid by a non-U.S. corporation should be
treated as foreign source for this purpose, and gains recognized on
the sale of securities of a non-U.S. corporation by a U.S. Holder
should be treated as U.S. source for this purpose, except as
otherwise provided in an applicable income tax treaty, and if an
election is properly made under the Code. However, the amount of a
distribution with respect to our common stock that is treated as a
“dividend” may be lower for U.S. federal income tax
purposes than it is for Canadian federal income tax purposes,
resulting in a reduced foreign tax credit allowance to a U.S.
Holder. In addition, this limitation is calculated separately with
respect to specific categories of income. The foreign tax credit
rules are complex, and each U.S. Holder should consult its own U.S.
tax advisor regarding the foreign tax credit rules.





Special
rules apply to the amount of foreign tax credit that a U.S. Holder
may claim on a distribution, including a constructive distribution,
from a PFIC. Subject to such special rules, non-U.S. taxes paid
with respect to any distribution in respect of stock in a PFIC are
generally eligible for the foreign tax credit.The rules relating to
distributions by a PFIC and their eligibility for the foreign tax
credit are complicated, and a U.S. Holder should consult its own
tax advisor regarding their application to the U.S.
Holder.





Receipt of Foreign Currency





The
amount of any distribution or proceeds paid in Canadian dollars to
a U.S. Holder in connection with the ownership, sale or other
taxable disposition of our common stock, will be included in the
gross income of a U.S. Holder as translated into U.S. dollars
calculated by reference to the exchange rate prevailing on the date
of actual or constructive receipt of the payment, regardless of
whether the Canadian dollars are converted into U.S. dollars at
that time. If the Canadian dollars received are not converted into
U.S. dollars on the date of receipt, a U.S. Holder will have a
basis in the Canadian dollars equal to their U.S. dollar value on
the date of receipt. Any U.S. Holder who receives payment in
Canadian dollars and engages in a subsequent conversion or other
disposition of the Canadian dollars may have a foreign currency
exchange gain or loss that would be treated as ordinary income or
loss, and generally will be U.S. source income or loss for foreign
tax credit purposes. Different rules apply to U.S. Holders who use
the accrual method with respect to foreign currency. Each U.S.
Holder should consult its own U.S. tax advisor regarding the U.S.
federal income tax consequences of receiving, owning, and disposing
of Canadian dollars.





Information Reporting; Backup Withholding





Under
U.S. federal income tax law, certain categories of U.S. Holders
must file information returns with respect to their investment in,
or involvement in, a non-U.S. corporation. For example, U.S. return
disclosure obligations (and related penalties) are imposed on
individuals who are U.S. Holders that hold certain specified
foreign financial assets in excess of certain threshold amounts.
The definition of “specified foreign financial assets”
includes not only financial accounts maintained in non-U.S.
financial institutions, but also, if held for investment and not in
an account maintained by certain financial institutions, any stock
or security issued by a non-U.S. person, any financial instrument
or contract that has an issuer or counterparty other than a U.S.
person and any interest in a non-U.S. entity. A U.S. Holder may be
subject to these reporting requirements unless such U.S.
Holder’s shares of our common stock are held in an account at
certain financial institutions. Penalties for failure to file
certain of these information returns are substantial. U.S. Holders
should consult with their own tax advisors regarding the
requirements of filing information returns on IRS Form 8938 for
specified foreign financial assets, filing obligations relating to
the PFIC rules including possible reporting on IRS Form 8621, and
any other applicable reporting requirements.





Payments
made within the U.S. or by a U.S. payor or U.S. middleman of (a)
distributions on our common stock, and (b) proceeds arising from
the sale or other taxable disposition of our common stock generally
will be subject to information reporting. In addition, backup
withholding, currently at a rate of 28%, may apply to such payments
if a U.S. Holder (a) fails to furnish such U.S. Holder’s
correct U.S. taxpayer identification number (“TIN”)
(generally on Form W-9), (b) furnishes an incorrect U.S. TIN, (c)
is notified by the IRS that such U.S. Holder has previously failed
to properly report items subject to backup withholding, or (d)
fails to certify, under penalty of perjury, that such U.S. Holder
has furnished its correct U.S. TIN and that the IRS has not
notified such U.S. Holder that it is subject to backup withholding.
Certain exempt persons generally are excluded from these
information reporting and backup withholding rules. Backup
withholding is not an additional tax. Any amounts withheld under
the U.S. backup withholding rules are allowed as a credit against a
U.S. Holder’s U.S. federal income tax liability, if any, or
will be refunded, if such U.S. Holder furnishes required
information to the IRS in a timely manner. The information
reporting and backup withholding rules may apply even if, under the
Canada-U.S. Tax Convention, payments are exempt from dividend
withholding tax or otherwise eligible for a reduced withholding
rate.





The
discussion of reporting requirements set forth above is not
intended to constitute an exhaustive description of all reporting
requirements that may apply to a U.S. Holder. A failure to satisfy
certain reporting requirements may result in an extension of the
time period during which the IRS can assess a tax, and, under
certain circumstances, such an extension may apply to assessments
of amounts unrelated to any unsatisfied reporting requirement. Each
U.S. Holder should consult its own tax advisor regarding the
information reporting and backup withholding rules.





THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS
OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH
RESPECT TO THE ACQUISITION, OWNERSHIP OR DISPOSITION OF OUR COMMON
STOCK. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR
CIRCUMSTANCES.








69

















F. Dividends and
Paying Agents





Not
Applicable.





G. Statements by
Experts





Not
Applicable.





H. Documents on
Display





The
documents concerning us which are referred to in this Annual Report
may be inspected at our offices located at 102 East 1st Avenue,
Vancouver, British Columbia, Canada, V5T 1A4.





In
addition, we have filed with the SEC a registration statement on
Form F-1 under the U.S. Securities Act and the documents referred
to in this Annual Report have been filed as exhibits to such Form
F-1 with the SEC and may be inspected and copied at the public
reference facility maintained by the SEC at 100F. Street NW,
Washington, D.C. 20549. In addition, the SEC maintains a website at
www.sec.gov that contains copies of documents that we have filed
with the SEC using its EDGAR system.





I. Subsidiary
Information





We have
one subsidiary, Intermeccanica
International Inc., a corporation subsisting under the laws of the
Province of British Columbia, Canada. We own 100% of the
voting and dispositive control over the subsidiary





ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





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





Credit Risk





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





Liquidity Risk





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





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





The
following is an analysis of the contractual maturities of our
non-derivative financial liabilities as at December 31, 2017 and
2016:





At December 31,
2017
Within one
year
Between one and five
years
More
than
five
yearsBank
loan
$123,637
$-
$-Trade
payables
474,334
-
-Customer
deposits
447,071
-
-Convertible
loan
-
-
-Shareholder
loan
10,383Promissory
note
1,500,000
-
-2,555,425
$-
$-At December 31,
2016
Within
one year
Between one and five
years
More
than five yearsTrade
payables
$150,305
Nil
NilCustomer
deposits
$169,500
Nil
NilConvertible
loan
$243,676
Nil
NilShareholder
loan
Nil
Nil
Nil





70

















Foreign Exchange Risk





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





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





December 31,
2016
December 31,
2017Cash and cash
equivalents
$98,762
$5,596,635Trade
payables
$(4,804)
$(138,794)$93,958
$5,457,841





Interest Rate Risk





Interest
rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. We are exposed to interest rate risk on our cash
equivalents as these instruments have original maturities of three
months or less and are therefore exposed to interest rate
fluctuations on renewal. A 1% change in market interest rates would
have an impact on our net loss of $1,064 for the period ended
December 31, 2015. A 1% change in market interest rates would have
an impact on the Company’s net loss of $699 for the year
ended December 31, 2016.





Classification of Financial Instruments





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





December 31,
2016
December 31,
2017Loans and
receivables:Cash
$3,916,283
$8,610,996Other
receivables
$271,284
$243,639





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





December 31,
2016
December 31,
2017Non-derivative
financial liabilities:Bank
Loan
$-
$123,637Trade
payable
$150,305
$474,334Advance
payable
$-
$-Customer
deposits
$169,500
$447,071Shareholder
loan
$-
$10,383Convertible
loan
$243,676
$-Promissory
Note
$-
$1,500,000Derivative
LiabilityWarrant
derivative liability
$-
$3,655,686$563,481
$6,271,111





71

















Fair Value





The
fair value of our financial assets and liabilities approximates the
carrying amount. Financial instruments measured at fair value are
classified into one of three levels in the fair value hierarchy
according to the relative reliability of the inputs used to
estimate the fair values. The three levels of the fair value
hierarchy are:





o
Level 1
– Unadjusted quoted prices in active markets for identical
assets or liabilities;





o
Level 2
– Inputs other than quoted prices that are observable for the
asset or liability either directly or indirectly; ando
Level 3
– Inputs that are not based on observable market
data.





The
following is an analysis of our financial assets measured at fair
value as at December 31, 2017 and 2016:





As at December 31, 2017Level 1
Level 2
Level 3Cash
and cash equivalents
$8,610,996





The
following is an analysis of our financial assets measured at fair
value as at December 31, 2016:





As at December 31, 2016Level 1
Level 2
Level 3Cash
and cash equivalents
$3,916,283





ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES








Not
Applicable.








72




















PART II








ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES





There
have not been any defaults with respect to dividends, arrearages or
delinquencies since incorporation on February 16,
2015.





ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS





There
have been no material modifications to the rights of our security
holders since incorporation on February 16, 2015.





Use of Proceeds





On
February 10, 2017, a Registration Statement on Form F-1 (File No.
333-214067) for the resale of up to 3,805,587
shares of our common stock and 4,305,587 shares of our common stock
issuable upon exercise of outstanding warrants. We will not
receive any of the proceeds from the sale of our previously-issued
shares of common stock by such selling securityholders. However, up
to an additional 4,305,587 shares of common stock that may be
offered for sale by such selling securityholders under the
prospectus included in the Form F-1 are issuable upon exercise of
warrants. If all of these warrants are exercised, which cannot be
assured, we will receive total proceeds of $5,750,549. The
proceeds, if any, would be used for general corporate and working
capital purposes.





ITEM 15. CONTROLS AND PROCEDURES





Disclosure
controls and procedures are defined in Rule 13a-15(e) and 15d-15(e)
under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) to
mean controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the Company
in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms and includes,
without limitation, controls and procedures designed to ensure that
such information is accumulated and communicated to the
issuer’s management, including its principal executive and
principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure.





As
required by Rule 13a-15 or 15d-15 under the Exchange Act, we have
carried out an evaluation of the effectiveness of our
Company’s disclosure controls and procedures as of the end of
the period covered by this Annual Report on Form 20-F, being
December 31, 2017. This evaluation was carried out by our Chief
Executive Officer and Chief Financial Officer. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures were
effective as of December 31, 2017.





Management’s Annual Report On Internal Control Over Financial
Reporting





Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Exchange Act in Rule
13a-15(f ) and 15d-15(f ) defines this as a process designed by, or
under the supervision of, the company’s principal executive
and principal financial officers and effected by the Board,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles and
includes those policies and procedures that:





●
 pertain to the
maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of
the company;





●
 provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with
authorizations of management and directors of the company;
and





●
 provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the company’s assets that
may have a material effect on the financial
statements.





73

















Under
the supervision and with the participation of our Chief Executive
Officer and Chief Financial Officer, our management assessed the
effectiveness of our internal control over financial reporting as
at December 31, 2017. In making this assessment, our management
used the criteria, established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Based upon this assessment, our
management concluded that our internal control over financial
reporting was effective as at December 31, 2017.





Because
of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness of internal control
over financial reporting to future periods are subject to risk that
controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may
deteriorate.





This
Annual Report does not include an attestation report of the
Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s
report is not subject to attestation by the Company’s
registered public accounting firm pursuant to rules of the
Securities and Exchange Commission that permit the Company to
provide only management’s report in this Annual
Report.





Changes In Internal Control Over Financial Reporting





During
the period ended December 31, 2017, there were no changes in our
internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.





ITEM 16. [RESERVED]





ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT





As
disclosed above, as of the date hereof, our Audit Committee is
comprised of Jerry Kroll, Shaun Greffard and Robert Tarzwell.
Messrs. Greffard and Tarzwell are independent under the listing
standards regarding “independence” of the NYSE MKT
Equities Exchange. Mr. Kroll is not independent as he is our Chief
Executive Officer.





Our
Board has determined that Robert Tarzwell qualifies as an audit
committee financial expert pursuant to Items 16A(b) and (c) of Form
20-F. In addition, Messrs. Greffard and Tarzwell are also
considered independent and all members of the audit committee are
considered financially literate under applicable Canadian
laws.





ITEM 16B. CODE OF ETHICS





We have
adopted a Code of Ethics that applies to all of our employee and
officers, including our principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions. The Coe of Ethics meets the
requirements for a “code of ethics” within the meaning
of that term in Item 16B of Form 20-F. A copy of our Code of Ethics
will be provided to any person without charge, upon request. All
requests for a copy of our Code of Ethics should be directed in
writing to the attention of Kulwant Sandher, 102 East 1st Avenue,
Vancouver, British Columbia, Canada V5T 1A4, or by email at
kulwant@electrameccanica.com.





During
the most recently completed fiscal year, the Company has neither:
(a) amended its Code of Ethics; nor (b) granted any waiver
(including any implicit waiver) form any provision of its Code of
Ethics.





ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES





The
following table sets forth information regarding the amount billed
to us by our principal independent auditors, Dale Matheson
Carr-Hilton Labonte LLP for the fiscal year ended December 31, 2017
and 2016:





Period
Ended December 312017
2016Audit
Fees:
$24,000
$24,000Audit Related
Fees:
$62,000
$39,700Tax
Fees:
$6,700
NilTotal:
$92,700
$63,700





74

















Audit Fees





This
category includes the aggregate fees billed by our independent
auditor for the audit of our annual financial statements, reviews
of interim financial statements that are provided in connection
with statutory and regulatory filings or engagements.





Audit Related Fees





This
category includes the aggregate fees billed in each of the last two
fiscal years for assurance and related services by the independent
auditors that are reasonably related to the performance of the
audits or reviews of the financial statements and are not reported
above under “Audit Fees,” and generally consist of fees
for other engagements under professional auditing standards,
accounting and reporting consultations,





Tax Fees





This
category includes the aggregate fees billed in each of the last two
fiscal years for professional services rendered by the independent
auditors for tax compliance, tax planning and tax
advice.





Policy on Pre-Approval by Audit Committee of Services Performed by
Independent Auditors





The
policy of our Audit Committee is to pre-approve all audit and
permissible non-audit services to be performed by our independent
auditors during the fiscal year.





ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES





Not
Applicable.





ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS





Not
Applicable.





ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING
ACCOUNTANT.





Not
Applicable.





ITEM 16G. CORPORATE GOVERNANCE.





Not
Applicable





ITEM 16H. MINE SAFETY DISCLOSURE





Not
Applicable.








75




















PART III





ITEM 17. FINANCIAL STATEMENTS





Not
Applicable.





ITEM 18. FINANCIAL STATEMENTS





Our
financial statements were prepared in accordance with IFRS, as
issued by the IASB, and are presented in Canadian
dollars.





Financial
statements filed as part of this Annual Report:





Audited Consolidated Financial StatementsReport
of Independent Registered Public Accounting Firm dated April 2,
2018;
F-1Statement of
Financial Position as at December 31, 2017 and 2016;
F-2Statement of
Comprehensive Loss for the years ended December 31, 2017 and
2016;
F-3Statements of
Changes in Equity for the period from inception (February 16, 2015)
to December 31, 2017;
F-4Statements of Cash
Flows for the years ended December 31, 2017 and 2016;
and
F-5Notes
to the Financial Statements.
F-6Unaudited Pro Forma Financial Statements
F-29





76




















DALE MATHESON CARR-HILTON LABONTE LLP


CHARTERED
PROFESSIONAL ACCOUNTANTS





INDEPENDENT AUDITOR’S REPORT





To the
Shareholders of Electrameccanica Vehicles Corp.





We have
audited the accompanying consolidated financial statements of
Electrameccanica Vehicles Corp. which comprise the consolidated
statements of financial position as at December 31, 2017 and 2016,
and the consolidated statements of comprehensive loss, changes in
equity and cash flows for the years then ended, and a summary of
significant accounting policies and other explanatory
information.





Management's Responsibility for the Consolidated Financial
Statements





Management
is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as
management determines is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.





Auditor’s Responsibility





Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.





An
audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.





We
believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit
opinion.





Opinion





In our
opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of Electrameccanica
Vehicles Corp. as at December 31, 2017 and 2016, and its financial
performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as
issued by the International Accounting Standards
Board.





Emphasis of Matter





Without
qualifying our opinion, we draw attention to Note 1 in the
consolidated financial statements which describes certain
conditions that indicate the existence of a material uncertainty
that cast significant doubt about Electrameccanica Vehicles
Corp.’s ability to continue as a going concern. The
consolidated financial statements do not include any adjustments
that might result from this uncertainty.





/s/
DALE MATHESON CARR-HILTON LABONTE LLP







DALE
MATHESON CARR-HILTON LABONTE LLP





CHARTERED
PROFESSIONAL ACCOUNTANTS





Vancouver,
Canada





April
2, 2018























F-1

















Electrameccanica Vehicles Corp.


Consolidated Statements of Financial Position


(Expressed in Canadian dollars)








Note
December
31, 2017
December
31, 2016ASSETSCurrent
assetsCash and cash
equivalents
4
$8,610,996
$3,916,283Receivables
5
243,639
271,284Prepaid
expenses

920,146
249,585Inventory

232,903
-10,007,684
4,437,152Non-current
assetsPlant and
equipment
6
1,393,683
225,269Investment
7
-
100,000Trademark and
patents

-
23,175Goodwill and other
intangible assets
7
1,260,014
2,170TOTAL
ASSETS

$12,661,381
$4,787,766LIABILITIESCurrent
liabilitiesBank overdraft and
demand loan
9
$123,637
$-Trade payables and
accrued liabilities
8
1,123,790
468,000Customer
deposits

447,071
169,500Convertible
loan
11
-
243,676Shareholder
loan

10,383
-Promissory
note
7
1,500,000
-Deferred income
tax
7
149,794
-3,354,675
881,176Non-current
liabilitiesDerivative
liability1
12
3,655,690
-TOTAL
LIABILITIES

7,010,365
881,176EQUITYShare
capital
13
22,718,282
11,383,996Common share
subscription

750,000
101,500Share-based payment
reserve
14
3,518,286
2,351,144Equity component
reserve
14
-
39,130Deficit

(21,335,552)
(9,969,180)TOTAL
EQUITY

5,651,016
3,906,590TOTAL
LIABILITIES AND EQUITY

$12,661,381
$4,787,766








The
accompanying notes are an integral part of these consolidated
financial statements





Commitments
(Notes 6 and 9)





Subsequent
events (Note 21)





On
behalf of the Board of Directors.





/s/ Steven A.
Sanders
 
 /s/ Luisa
Ingargiola





Director
 Director





F-2








1Footnote: The warrant derivative liability is
valued at fair value in accordance with International Financial
Reporting Standards (“IFRS”). There are no
circumstances in which the Company would be required to pay cash
upon exercise or expiry of the warrants. See Note
12.











Electrameccanica Vehicles Corp.


Consolidated Statements of Comprehensive Loss


(Expressed in Canadian dollars)








Year
endedNote
December
31,
2017
December
31,
2016Revenue

$109,173
$-Cost
of revenue

63,950
-Gross
profit

45,223
-Operating
expensesAmortization
6
124,134
22,567General and
administrative expenses
15
2,373,251
1,205,835Research and
development expenses
16
4,430,386
2,778,295Sales and marketing
expenses
17
631,381
209,455Stock-based
compensation expense
13
889,511
1,461,189Share-based payment
expense
13
1,085,716
3,264,681(9,534,379)
(8,942,022)Loss
before other items

(9,489,156)
(8,942,022)Other
itemsAccretion interest
expense
11
69,562
25,908Changes in fair
value of warrant derivative
12
186,269
-Finder’s fee
on convertible loan
11
258,542
-Impairment of
goodwill
7
1,342,794
-Foreign exchange
loss

20,048
5,417Net
and comprehensive loss

$(11,366,372)
$(8,973,347)Loss
per share – basic and fully diluted

$(0.35)
$(0.27)Weighted
average number of shares outstanding – basic and fully
diluted
13
43,636,629
32,684,868





The
accompanying notes are an integral part of these consolidated
financial statements





F-3























Electrameccanica Vehicles Corp.


Consolidated Statements of Changes in Equity


(Expressed in Canadian dollars)


Years ended December 31, 2017 and 2016








Share
capitalNote
Number of
shares
Amount
Share
subscription
Share
Issue
cost
Share-based payment
reserve
Equity component
reserve
Deficit
TotalBalance
at Dec 31, 2015

26,783,625
$458,520
$50,000
$-
$354,015
$-
$(995,833)
$(133,298)Shares issued for
cash
13
13,575,200
8,375,519
-
(1,604,486)
-
-
-
6,771,033Share issued for
finders fees
13
1,273,512
823,512
-
-
519,088
-
-
1,342,600Shares issued for
convertible debt issue cost
11,13
26,250
26,250
-
-
16,852
-
-
43,102Share issued to
settle debt
13
125,000
50,000
-
-
-
-
-
50,000Share-based
payment
13
-
3,264,681
-
-
-
-
-
3,264,681Stock-based
compensation
13
-
-
-
-
1,461,189
-
-
1,416,189Share
subscription
13
-
-
51,500
(10,000)
-
-
-
41,500Equity component of
convertible loan
11
-
-
-
-
-
39,130
-
39,130Net and
comprehensive loss for the year

-
-
-
-
-
-
(8,973,347)
(8,973,347)Balance
at December 31, 2016

41,783,587
12,998,482
101,500
(1,614,486)
2,351,144
39,130
(9,969,180)
3,906,590Shares issued for
cash
13
3,820,499
12,022,308
(101,500)
(1,381,442)
-
-
-
10,454,366Adjustment for
warrant derivative liability


(2,410,255)





(2,410,255)Issuance of
convertible debt
11





130,439

130,439Shares issued for
finders fees
13
214,009
709,521
-
-
3,223
-
-
712,744Shares issued upon
conversion of convertible debt
11,13
1,620,114
1,657,845
-
-
-
(169,569)
-
1,488,276Shares and warrants
issued to services
13
150,000
811,308
-
-
274,408
-
-
1,085,716Stock-based
compensation
13
-
-
-
-
889,511
-
-
889,511Share
subscription
13
-
-
750,000
(75,000)
-
-
-
675,000Net and
comprehensive loss for the year

-
-
-
-
-
-
(11,366,372)
(11,366,372)Balance
at December 31, 2017

47,588,209
$25,789,209
$750,000
$(3,070,928)
$3,518,286
$-
$(21,335,552)
$5,566,015





The
accompanying notes are an integral part of these consolidated
financial statements





During
the year ended December 31, 2016, the Company completed a 1:5
forward share split and all references to number of shares have
been retroactively adjusted.





See
Note 13 for further details.





F-4























Electrameccanica Vehicles Corp.


Consolidated Statements of Cash Flows


(Expressed in Canadian dollars)








Year
endedDecember
31,
2017
December
31,
2016Operating
activitiesLoss for the
year
$(11,366,372)
$(8,973,347)Adjustments
for:Amortization
124,134
22,567Stock-based
compensation expense
889,511
1,461,189Shares issued for
services
1,085,716
3,264,681Interest accretion
expense
69,562
25,908Finder’s fee
on convertible loan
258,542
-Impairment of
goodwill
1,342,794
-Impairment of
trademark and patents
19,174
-Change in fair
value of warrant derivative
186,269
-Changes in non-cash
working capital items:Receivables
93,210
(242,645)Prepaid
expenses
(657,713)
(202,238)Inventory
(44,092)
14,966Trades payable and
accrued liabilities
568,850
325,090Customer
deposits
110,335
140,994Net
cash flows used in operating activities
(7,320,080)
(4,162,835)Investing
activitiesExpenditures on
plant and equipment
(1,264,265)
(232,027)Purchase of
Intermeccanica
(900,000)
(100,000)Cash received on
business combination
59,449
-Expenditures on
trademarks and patents
-
(25,345)Net
cash flows used in investing activities
(2,104,816)
(357,372)Financing
activitiesProceeds from bank
loan
123,637
-Proceeds from
convertible loans
2,441,225
300,000Repayment of
shareholder loans
(33,155)
(135,000)Proceeds from share
subscription
750,000
101,500Proceeds on
issuance of common shares – net of issue costs
10,837,902
8,063,633Net
cash flows from financing activities
14,119,609
8,330,133Increase in cash
and cash equivalents
4,694,713
3,809,926Cash and cash
equivalents, beginning
3,916,283
106,357Cash
and cash equivalents, ending
$8,610,996
$3,916,283








The
accompanying notes are an integral part of these financial
statements





Non-cash
financing and investing transactions:





Issuance of
promissory note for acquisition of Intermeccanica
$1,500,000
-








F-5

















Electrameccanica Vehicles Corp.


Notes to the Consolidated Financial Statements


(Expressed in Canadian dollars)


For the years ended December 31, 2017 and 2016





1.
 Nature
and continuance of operations





Electrameccanica
Vehicles Corp (the “Company”) was incorporated on
February 16, 2015, under the laws of the province of British
Columbia, Canada, and its principal activity is the development and
manufacture of electric vehicles. The Company acquired
Intermeccanica International Inc. (“Intermeccanica”) on
October 18, 2017, and its principal activity is the development and
manufacture of high end custom built vehicles.





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





These
consolidated financial statements have been prepared on the
assumption that the Company will continue as a going concern,
meaning it will continue in operation for the foreseeable future
and will be able to realize assets and discharge liabilities in the
ordinary course of operations. As at December 31, 2017 the
Company’s principal activity, the development and manufacture
of electric vehicles, is in the development stage, and the
Company’s continuation as a going concern is dependent upon
the successful results from its electric vehicle development and
manufacturing activities and its ability to attain profitable
operations and generate funds there from and/or raise equity
capital or borrowings sufficient to meet current and future
obligations. It is anticipated that significant additional funding
will be required. These factors indicate the existence of a
material uncertainty that may cast significant doubt about the
Company’s ability to continue as a going concern. Management
intends to finance its operations over the next twelve months
through private placement of equity capital. Should the Company be
unable to continue as a going concern, the net realizable value of
its assets may be materially less than the amounts on its statement
of financial position.





2.
 Significant
accounting policies and basis of preparation





The
financial statements were authorized for issue on April 2, 2018 by
the directors of the Company.





Statement of compliance with International Financial Reporting
Standards





These
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting
Standards Board (“IASB”) and including interpretations
of the International Financial Reporting Interpretations Committee
(“IFRIC”) as applicable to the preparation of annual
financial statements.





Basis of preparation





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





Consolidation





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





Significant estimates and assumptions





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





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





F-6

















Significant judgments





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





•
 The assessment of
the Company’s ability to continue as a going concern and
whether there are events or conditions that may give rise to
significant uncertainty;





•
 the classification
of financial instruments; and





•
 the calculation of
income taxes require judgement in interpreting tax rules and
regulations.





Share-based payments





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





Loss per share





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





Financial instruments





The
Company classifies its financial instruments in the following
categories: at fair value through profit or loss, loans and
receivables, held-to-maturity investments, available-for-sale and
financial liabilities. The classification depends on the purpose
for which the financial instruments were acquired. Management
determines the classification of its financial instruments at
initial recognition. The Company has no financial instruments
classified as fair value through profit or loss, held-to-maturity,
or available for sale.





Loans
and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market and
are subsequently measured at amortized cost. They are included in
current assets, except for maturities greater than 12 months after
the end of the reporting period. These are classified as
non-current assets. Cash and accounts receivable are classified as
loans and receivables.





Non-derivative
financial liabilities (excluding financial guarantees) are
subsequently measured at amortized cost. The Company’s
non-derivative financial liabilities consist of trade payables,
customer deposits, convertible loans, promissory note and
shareholder loans. Derivative financial liabilities are measured at
fair value and are subsequently valued at fair value through profit
or loss. The Company’s derivative liability consists of
warrants exercisable in currencies other than the Company’s
functional currency.





Financial
assets are derecognized when the rights to receive cash flows from
the investments have expired or have been transferred and the
Company has transferred substantially all risks and rewards of
ownership. Financial liabilities are derecognized when the
Company’s obligations are discharged, cancelled or
expired.





At each
reporting date, the Company assesses whether there is objective
evidence that a financial instrument has been impaired. Any
impairment is recorded in profit or loss. No impairment was
required on the Company’s financial instruments.





The
Company does not have any derivative financial assets.





F-7

















Impairment of assets





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





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





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





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





Income taxes





Current income tax:





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





Deferred income tax:





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





Cash and cash equivalents





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





Inventory





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





Trademarks and patents





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





F-8




















Plant and equipment





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





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





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





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





Class
of plant and
equipment
 Amortization
rate





Office furniture
and 
equipment
 20%





Shop
equipment
 20%





Computer
equipment
 33%





Computer
software
 50%





Vehicles
 33%





Leasehold 
improvement
 over term of lease





Tooling
 20%





Production
molds
 per unit produced





Research and development costs





Research
costs are expensed when incurred and are stated net of government
grants. Development costs including direct material, direct labour
and contract service costs are capitalized as intangible assets
when the Company can demonstrate that the technical feasibility of
the project has been established; the Company intends to complete
the asset for use or sale and has the ability to do so; the asset
can generate probable future economic benefits; the technical and
financial resources are available to complete the development; and
the Company can reliably measure the expenditure attributable to
the intangible asset during its development. After initial
recognition, internally generated intangible assets are recorded at
cost less accumulated amortization and accumulated impairment
losses. These costs are amortized on a straight-line basis over the
estimated useful life. The Company did not have any development
costs that met the capitalization criteria for the year ended
December 31, 2017 or 2016.





Revenue recognition





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





Part sales:





Sales
of parts are recognized when the Company has transferred
significant risks and rewards of ownership to the customer which
generally occurs upon shipment.





Services, repairs and support services:





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





Sales of vehicles:





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





F-9




















3.
 Accounting
standards issued but not yet effective





New standard IFRS 9 “Financial
Instruments”





This
new standard is a partial replacement of IAS 39 “Financial
Instruments: Recognition and Measurement”. IFRS 9 uses a
single approach to determine whether a financial asset is measured
at amortized cost or fair value, replacing the multiple rules in
IAS 39. The approach in IFRS 9 is based on how an entity manages
its financial instruments in the context of its business model and
the contractual cash flow characteristics of the financial
assets.





The new
standard also requires a single impairment method to be used,
replacing the multiple impairment methods in IAS 39. IFRS 9 is
effective for annual periods beginning on or after January 1,
2018.





New standard IFRS 15 “Revenue from Contracts with
Customers”





This
new standard contains a single model that applies to contracts with
customers and two approaches to recognizing revenue: at a point in
time or over time. The model features a contract-based five-step
analysis of transactions to determine whether, how much and when
revenue is recognized. New estimates and judgmental thresholds have
been introduced, which may affect the amount and/or timing of
revenue recognized.  IFRS 15 is effective for annual periods
beginning on or after January 1, 2018 with early adoption
permitted.





New standard IFRS 16 “Leases”





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





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





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





4.
 Cash
and cash equivalents





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





December
31,
2017
December
31,
2016Cash
$6,715,996
$666,293Cash
equivalent
1,895,000
3,249,990$8,610,996
$3,916,283








F-10

















5.
 Receivables











December
31,
2017
December
31,
2016Trade
receivable
$154,698
$-GST
receivable
84,566
155,498IRAP contribution
receivable
-
108,535GIC interest
receivable
4,375
6,000Other
-
1,251$243,639
$271,284








F-11




















6.
 Plant
and equipment











Furniture
and equipment
Computer
hardware
and software
Vehicles
Leasehold
Improvements
Production
molds deposit
TotalCost:At December 31,
2015
$16,438
$-
$-
$-
$-
$16,438Additions
27,771
18,897
173,213
12,146
-
232,027At December 31,
2016
44,209
18,897
173,213
12,146
-
248,465Additions
246,634
54,775
216,837
89,055
914,060
1,521,361December 31,
2017
290,843
73,672
390,050
101,201
914,060
1,769,826Amortization:At December 31,
2015
629
-
-
-
-
629Charge for the
year
6,483
2,514
11,666
1,904
-
22,567At December 31,
2016
7,112
2,514
11,666
1,904
-
23,196Charge for the
year
181,494
24,633
74,098
72,703
-
352,928At December 31,
2017
188,606
27,147
85,764
74,607
-
376,124Net
book value:At December 31,
2016
$37,097
$16,383
$161,547
$10,242
$-
$225,269At December 31,
2017
$102,237
$46,507
$304,286
$26,594
$914,060
$1,393,683








On
September 29, 2017 the Company entered into a manufacturing
agreement with Chongqing Zongshen Automobile Co., Ltd.
(“Zongshen”). Under the agreement the Company agrees to
reimburse Zongshen for the cost of prototype tooling and molds
estimated to be CNY ¥9.5 million (CAD $1.8 million), which
shall be payable on or before March 18, 2018, and mass production
tooling and molds estimated to be CNY ¥29.3 million (CAD $6.0
million), which shall be payable 50% when Zongshen commences
manufacturing the tooling and molds, 40% when Zongshen completes
manufacturing the tooling and molds, and 10% upon delivery to the
Company of the first production vehicle. At December 31, 2017 the
Company had paid 50% of prototype tooling and molds.





F-12

















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





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





7.
 Acquisition
of Intermeccanica





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





Total
purchase consideration was $2,500,000. In addition to an initial
payment of $100,000 in 2016, an additional $200,000 was paid prior
to acquisition. On October 18, 2017 the Company paid $700,000, and
entered into a Promissory Note (the “Note”) for the
balance of $1,500,000. The Note bears interest at 5% per annum, and
was payable in installments of $500,000 plus accrued interest on
the 6th,
12th and
18th month
after purchase. Under the Note if the Company raises at least $10
million by way of equity or debt after October 18, 2017 the unpaid
portion of the Note shall be paid within 30 days. The Promissory
Note was secured over the assets of Intermeccanica. The Note was
paid in full on January 28, 2018.





The
following table summarizes the consideration paid for
Intermeccanica, the fair value of identifiable assets acquired,
liabilities assumed, goodwill and other intangible assets and an
impairment of goodwill and other intangible assets.





Fair
value of purchase consideration at October 18, 2017Cash
$1,000,000Promissory
note
1,500,000Total
consideration
$2,500,000Fair
value amounts of identifiable assets acquired and liabilities
assumedCash
$59,449Receivables
65,565Prepaid
expenses
12,848Inventory
188,811Plant and
equipment
24,282Intangible
assets:Customer
relationships
87,000Contracted
backlog
23,000Non-compete
covenants
25,000Trade
name
423,000Trades payable and
accrued liabilities
(91,025)Customer
deposits
(167,236)Shareholder
loans
(43,538)Deferred income
tax
(149,794)Total net
identifiable assets
457,362Goodwill and other
intangible assets
2,042,638Total
$2,500,000








The
Company performed an impairment test of the goodwill. The
recoverable amount of the Intermeccanica cash-generating unit was
determined to be $1,157,206 based on its fair value less costs to
sell. The difference of $1,342,794 has been recorded as an
impairment in net loss.





F-13

















Goodwill
and other intangible assets recognized was primarily attributed to
expected synergies arising from the Intermeccanica acquisition and
the expertise and reputation of the assembled management and
workforce. Goodwill is not expected to be deductible for income tax
purposes. During the period from October 18, 2017 to December 31,
2017 the Company did not record any amortization relating to the
acquired intangible assets as the amortization amount was trivial.
No further impairment was identified at December 31,
2017.





Identifiable
intangibles on acquisition
Goodwill
on acquisition
Domain
name
TotalDecember 31, 2015
and 2016
$-
$-
$2,170
$2,170Acquired in
year
558,000
2,042,638
-
2,600,638Impairment
-
(1,342,794)
-
(1,342,794)December 31,
2017
$558,000
$699,844
$2,170
$1,260,014





The
following unaudited supplemental pro-forma data presents
consolidated information as if the acquisition been completed on
January 1, 2017. The pro-forma financial information is presented
for informational purposes only and is not indicative of the
results of operations that would have been achieved if the
acquisition had taken place at the beginning of 2017.





Pro-forma
information
2017Revenue
$947,600Gross
Profit
347,375Net and
comprehensive loss
(8,848,308)





Since
October 19, 2017 Intermeccanica contributed revenue of $109,173
from the sale of custom built vehicles and realized net income of
$23,598.





F-14




















8.
 Trade
payables and accrued liabilities





December
31,
2017
December
31,
2016Trade
payables
$457,520
$70,401Wages
payables
62,110
-Due to related
parties (Note 18)
16,814
79,904Accrued
liabilities
587,346
317,695$1,123,790
$468,000








9.
 Commitments





Intermeccanica,
its President and his wife have a joint business line of credit
with Bank of Montreal (BMO) with a limit of $200,000 that is
payable on demand, bears interest at BMO’s personal line of
credit base rate plus 1.5% and is secured by a general security
agreement, a specific charge over a vehicle, and a charge over the
personal home of the President and his wife. The balance
outstanding at December 31, 2017 was $100,705 (2016 -
$nil).





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





As at
December 31, 2017, future payments required under non-cancellable
operating leases contracted for but not capitalized in the
financial statements are as follows:





December
31,
2017
December
31,
2016Payable not later
than one year
$310,034
$221,071Payable later than
one year and not later than five years
507,036
601,542Payable later than
five years
-
-$817,070
$882,613








F-15

















10.
 Income
tax expense and deferred tax assets and liabilities





A
reconciliation of the expected income tax recovery to the actual
income tax recovery is as follows:





December
31, 2017
December
31, 2016Net
loss
$(11,366,371)
$(8,973,347)Statutory tax
rate
26%
26%Expected income tax
recovery at the statutory tax rate
(2,955,257)
(2,333,070)Stock-based
compensation
231,273
1,228,726Share issue cost
and other
488,227
(231,643)Effect of change in
tax rate
(149,561)
-SR&ED
effects
183,351
-Temporary
differences not recognized
2,385,319
1,335,987Income tax
recovery
$-
$-








The
Company has the following deductible temporary
differences:





December
31,
2017
December
31, 2016Non-capital loss
carry-forwards
$11,436,565
$5,019,398Property, plant and
equipment
141,271
23,197Share issue
costs
1,983,154
737,637SR&ED
1,397,672
-Other
(558,000)
-14,400,662
5,780,231Deferred tax assets
not recognized
(14,955,454)
(5,780,231)Deferred tax
liability
(554,794)
-Deferred tax
liability (tax effected at 27%)
$(149,794)
$-





F-16

















The
non-capital losses expire between 2035 and 2037.





11.
 Convertible
loan





On July
31, 2017 the unsecured convertible loan for $300,000, which was
issued on September 7, 2016, was converted by the holder into units
of the Company at a price of $1 per unit. Each unit consisted of
one common share and one non-transferable common share purchase
warrant with each warrant entitling the subscriber to acquire one
additional share at a price of $2 per warrant share for a period of
five years from September 7, 2016. Previously, on October 5, 2016,
the Company issued 26,250 units at a price of $1 per unit with a
fair value of $43,102 for third party finder’s fees regarding
the convertible loan.





The
loan was non-interest bearing. The fair value of the liability
component was calculated using a market interest rate for an
equivalent non-convertible loan, which the Company determined to be
15%.  The residual amount, representing the value of the
equity conversion option, was included in shareholders equity as
the equity component of the convertible loan. The implicit interest
rate for the convertible loan was 15% per annum. The carrying value
of the liability component was being accreted to the face value of
the convertible loan over the period from issuance to the maturity
date of September 7, 2017.





Unsecured
Convertible Loan issued September 7, 2016
December
31,
2017
December
31,
2016Balance,
beginning
$243,676
-Proceeds from issue
of convertible loan
-
$300,000Amount allocated to
equity on issue of convertible loan
-
(39,130)Convertible loan
issue costs
-
(43,102)Interest accretion
expense
47,763
25,908Conversion to
common shares (Note 13)
(291,439)
-Balance,
ending
$-
$243,676








On July
31, 2017 the Company issued an unsecured convertible loan in the
amount of $1,000,034, convertible into units of the Company at a
price of $1 per unit. Each unit consisted of one common share and
one non-transferable common share purchase warrant with each
warrant entitling the subscriber to acquire one additional share at
a price of $2 per warrant share for a period of five years from
July 31, 2017. On September 30, 2017, the Company issued 100,001
common shares at a price of $1 per share with a fair value of
$100,001 for third party finder’s fees regarding the
convertible loan.





F-17

















The
loan was non-interest bearing. The fair value of the liability
component was calculated using a market interest rate for an
equivalent non-convertible loan, which the Company determined to be
15%. The residual amount, $130,439, representing the value of the
equity conversion option, was included in shareholders equity as
the equity component of the convertible loan. The implicit interest
rate for the convertible loan was 15% per annum. The carrying value
of the liability component was being accreted to the face value of
the convertible loan over the period from issuance to the maturity
date of July 31, 2018.





On
September 29, 2017 the convertible loan was converted by the holder
into 1,000,034 units of the Company at a price of $1 per
unit.





Unsecured
Convertible Loan issued July 31, 2017
December
31,
2017Proceeds from issue
of convertible loan
$1,000,034Amount allocated to
equity on issue of convertible loan
(130,439)Debt issue
costs
(86,958)Interest accretion
expense
21,799finder’s fee
accretion
14,533Conversion to
common shares (Note 13)
(818,969)$-





On
October 17, 2017 the Company issued an unsecured convertible loan
for USD $1,152,289 (CAD $1,441,191), which is convertible by the
holder into units of the Company at a price of USD $3.60 (CAD
$4.4897) per unit. Each unit consists of one common share and one
non-transferable common share purchase warrant with each warrant
entitling the subscriber to acquire one additional share at a price
of USD $7.20 per share for a period of five years from date of
issue. On November 27, 2017, the Company issued 32,008 common
shares at a price of USD $6 (CAD $7.47) per share with a fair value
of USD $192,048 (CAD $244,010) for third party finder’s fees
regarding the convertible loan.





The
convertible loan is denominated in US dollars; however, the
functional currency of the Company is the Canadian dollar.
Consequently, the value of the proceeds on conversion is not fixed
and will vary based on foreign exchange rate movements. The
convertible loan is therefore a derivative liability comprising a
derivative liability relating to the conversion feature and
derivative liability relating to the warrant and each are measured
at fair value at each reporting period. Any changes in fair value
from period to period are recorded as non-cash gain or loss in the
consolidated statement of net loss and comprehensive loss. Upon
issue the fair value of the conversion feature was $708,319 and the
fair value of the warrants was $732,772. $100 was allocated to the
loan.





F-18

















On
November 27, 2017 the convertible loan for USD $1,152,289 (CAD
$1,441,191) was converted by the holder into 320,080 units of the
Company at a price of USD $3.60 (CAD $4.4897) per unit. Upon
conversion the conversion feature was remeasured to fair value and
$377,868 was credited to share capital, along with a gain on
derivative liability of $330,551. Upon conversion, the warrants in
the unit were also recorded as a derivative liability (Note
12).





Unsecured
Convertible Loan issued October 17, 2017
December
31,
2017Proceeds from issue
of convertible loan (USD $1,152,289)
$1,441,191Amount allocated to
fair value of conversion feature
(708,319)Amount allocated to
fair value of warrants
(732,772)Conversion to
common shares (Note 13)
(100)$-





12.
 Derivative
liability





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





During
the year ended December 31, 2017 the Company issued 2,000,595
warrants exercisable at prices from US$1 to US$11.70, expiring
between September 30, 2019 to October 31, 2024.





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





December
312017Balance,
beginning
$-Warrants
issued
3,469,421Changes in fair
value of derivative liabilities
186,269Balance,
ending
$3,655,690





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





At
Issue
December
312017Fair value of
related warrants outstanding
$3,469,421
$3,655,690Risk-free interest
rate
1.52%
1.66%Expected term (in
years)
3.04
2.44Expected share
price volatility
60%
60%








F-19

















13.
 Share
capital





Authorized share capital





Unlimited
number of common shares without par value.





On June
22, 2016, the Company completed a stock split of one pre-split
common share for five post-split shares. All information related to
common shares, options and warrants presented in these financial
statements and accompanying notes have been retroactively adjusted
to reflect the increased number of common shares resulting from the
stock split.





Issued share capital





At
December 31, 2017 the Company had 47,588,209 issued and outstanding
common shares (2016 – 41,783,587).





During
the year ended December 31, 2016, the Company issued 13,575,200
common shares for gross proceeds of $8,375,519, with unit prices
ranging from $0.3634 to $1.00. As the fair value of certain units
issued was less than the fair value a share-based payment expense
of $3,264,681 was recorded. Share issue costs related to these
issuances was $1,604,486 and includes 1,273,512 common shares
issued for finder’s fees with a fair value of $823,512. The
Company also received $51,500 as subscriptions for common
shares.





During
the year ended December 31, 2016, the Company issued 26,250 common
shares for finder’s fees with a fair value of
$26,250.





During
the year ended December 31, 2016, the Company issued 125,000 common
shares in partial settlement a shareholder loan in the amount of
$50,000.





During
the year ended December 31, 2017, the Company issued 3,820,499
common shares for gross proceeds of $12,022,308, with unit or share
prices ranging from $0.15 to USD $6.00 (CAD $7.47). Share issue
costs related to these issuances was $1,466,442 and includes
214,009 common shares issued for finder’s fees with a fair
value of $709,521. The Company also received $750,000 as a
subscription for common shares at a price of $.85 per share (Note
22).





During
the year ended December 31, 2017, the Company issued 150,000 common
shares for services with a fair value of $811,308 and warrants to
acquire 45,045 common shares for services with a fair value of
$274,408.





During
the year ended December 31, 2017, upon the conversion of
convertible loans with a carrying value of $1,657,846 the Company
issued 1,620,114 common shares (Note 11).





Basic and fully diluted loss per share





The
calculation of basic and fully diluted loss per share for the year
ended December 31, 2017 was based on the loss attributable to
common shareholders of $11,366,371 (2016 $8,973,347) and the
weighted average number of common shares outstanding of 43,636,629
(2016 32,684,868). Fully diluted loss per share did not include the
effect of stock options and warrants as the effect would be
anti-dilutive.





Stock options





The
Company has adopted an incentive stock option plan, which provides
that the Board of Directors of the Company may from time to time,
in its discretion, grant to directors, officers, employees and
technical consultants to the Company, non-transferable stock
options to purchase common shares, provided that the number of
common shares reserved for issuance will not exceed 60,000,000.
Such options will be exercisable for a period of up to 7 years from
the date of grant. Options may be exercised no later than 90 days
following cessation of the optionee’s position with the
Company.





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





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





F-20

















The
changes in options during the years ended December 31, 2017 and
2016 are as follows:





December
31, 2017
December
31, 2016Number
of options
Weighted
average exercise price
Number
of options
Weighted
average exercise priceOptions
outstanding, beginning
56,175,000
$0.19
56,150,000
$0.19Options
granted
1,120,000
1.00
100,000
0.85Options
exercised
(12,500)
0.15
-
-Options expired and
forfeited
(85,000)
1.00
(75,000)
0.40Options
outstanding, ending
57,197,500
$0.20
56,175,000
$0.19








Details
of options outstanding as at December 31, 2017 are as
follows:





Exercise
price
Weighted
average contractual life
Number
of options
outstanding
Number
of options
exercisable$0.15
4.45
years
45,000,000
29,062,500$0.15
4.62
years
2,662,500
1,616,146$0.40
4.94
years
8,400,000
4,375,000$0.40
5.18
years
25,000
11,458$1.00
5.47
years
50,000
19,792$1.00
6.13
years
960,000
159,375$1.00
6.61
years
100,000
-4.57
years
57,197,500
35,244,271








The
weighted average grant date fair value of options granted during
the year ended December 31, 2017 was $0.74 (2016 $0.63). The fair
value was calculated using the Black-Scholes option pricing model
using the following weighted average assumptions:





Year
ended December 31, 2017Expected life of
options
5
yearsAnnualized
volatility
60%Risk-free interest
rate
1.02% - 1.43%Dividend
rate
0%





During
the year ended December 31, 2017, the Company recognized
stock-based compensation expense of $889,511 (2016 -
$1,461,189).





F-21

















Warrants





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





The
changes in warrants during the years ended December 31, 2017 and
2016 are as follows:





December
31, 2017
December
31, 2016Number
of warrants
Weighted
average exercise price
Number
of warrants
Weighted
average exercise priceWarrants
outstanding, beginning
18,533,587
$1.64
1,933,625
$0.66Warrants
issued
5,185,129
4.91
16,599,962
1.75Warrants
exercised
(5,000)
2.00
-
-Warrants
outstanding, ending
23,713,716
$2.35
18,533,587
$1.64








At
December 31, 2017, all warrants outstanding were exercisable.
Details of warrants outstanding as at December 31, 2017 are as
follows:





Exercise
price
Weighted
average contractual life
Number
of warrants outstanding$0.40 CAD - $2.00
CAD
3.35
years
21,723,121$1.00 USD - $12.00
USD
0.26
years
2,000,595








The
fair value of the warrants issued as part of the third party
finder’s fee at issue date on March 29, 2017 was $3,223 as
calculated using the Black-Scholes option pricing model with the
same assumptions used for stock options.





The
fair value of the warrants issued for consulting services at issue
date on September 30, 2017 was $274,407 as calculated using the
Black-Scholes option pricing model using the following weighted
average assumptions:





Year
ended December 31, 2017Expected
life of warrants
2
yearsAnnualized
volatility
60%Risk-free
interest rate
1.52%Dividend
rate
0%








F-22

















14.
 Reserves





Share-based payment reserve





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





Equity component reserve





The
equity payment reserve records items recognized as the equity
component of convertible loans until such time that the loans are
converted, at which time the corresponding amount will be
transferred to share capital. If the loans are repaid, the amount
remains in the equity payment reserve account.





15.
 General
and administrative expenses








December
31,
2017
December
31,
2016Rent
$269,716
$141,957Office
expenses
345,986
113,158Legal and
professional
912,347
643,725Consulting
fees
405,176
186,437Investor
relations
113,256
-Salaries
326,770
120,558$2,373,251
$1,205,835





16.
 Research
and development expenses





December 31,
2017
December
31,
2016Labour
$1,971,946
$1,715,562Materials
2,763,355
1,266,730Government
grants
(304,914)
(203,997)$4,430,387
$2,778,295








F-23




















17.
 Sales
and marketing expenses





December 31,
2017
December
31,
2016Consulting
$143,275
$35,847Marketing
182,723
93,345Salaries
305,383
80,263$631,381
$209,455





18.
 Segmented
information





The
Company operates in two reportable business segments in
Canada.





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





●
 Electric Vehicles
– development and manufacture of electric vehicles for mass
markets, and





●
 Custom build
vehicles – development and manufacture of high end custom
built vehicles.





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





Year
ended Dec 31, 2017
Year
ended December 31, 2016Electric
Vehicles
Custom
Built Vehicles
Electric
Vehicles
Custom
Built VehiclesRevenue
$-
$109,173
$-
$-Gross
profit
-
45,223
-
-Operating
expenses
9,473,794
60,585
8,942,022
-Other
items
1,879,208
(1,992)
31,325
-Net and
comprehensive loss
11,353,002
13,370
8,973,347
-Inventory
-
232,903
-
-Plant and
equipment
$1,370,350
$23,333
$225,269
$-





F-24

















19.
 Related
party transactions





Related party balances





The
following amounts are due to related parties





December
31,
2017
December
31,
2016Shareholder
loan
$10,383
$-Due to related
parties (Note 7)
16,814
79,904$27,197
$79,904





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





Key management personnel compensation





December
31,
2017
December
31,
2016Consulting
fees
$185,000
$136,500Salary
280,167
45,000Deferred salary for
CEO
-
30,000Stock-based
compensation
659,228
1,238,013$1,124,395
$1,449,513





F-25

















20.
 Financial
instruments and financial risk management





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





Credit risk





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





Liquidity risk





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





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





The
following is an analysis of the contractual maturities of the
Company’s non-derivative financial liabilities as at December
31, 2017 and 2016:





At December 31,
2017
Within
one year
Between
one and five years
More
than
five
yearsBank
loan
$123,637
$-
$-Trade
payables
474,334
-
-Customer
deposits
447,071
-
-Convertible
loan
-
-
-Shareholder
loan
10,383Promissory
note
1,500,000
-
-$2,555,425
$-
$-








At December 31,
2016
Within
one year
Between
one and five years
More
than
five
yearsTrade
payables
$150,305
$-
$-Customer
deposits
169,500
-
-Shareholder
loan
243,676
-
-$563,481
$-
$-





Foreign exchange risk





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





F-26

















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





December
31,
2017
December
31,
2016Cash and cash
equivalents
$5,596,635
$98,762Trade
payables
(138,794)
(4,804)$5,457,841
$93,958





Based
on the above net exposures, as at December 31, 2017, a 10% change
in the US dollars to Canadian dollar exchange rate would impact the
Company’s net loss by $545,784 (2016 - $9,396).





Interest rate risk





Interest
rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company is exposed to interest rate risk on its
cash equivalents as these instruments have original maturities of
twelve months or less and are therefore exposed to interest rate
fluctuations on renewal. A 1% change in market interest rates would
have an impact on the Company’s net loss of $18,950 for the
year ended December 31, 2017 (2016 - $32,499).





Classification of financial instruments





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





December
31,
2017
December
31,
2016Loans and
receivables:Cash
and cash equivalents
$8,610,996
$3,916,283Other
receivables
243,639
271,284$8,854,635
$4,187,567








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





December
31,
2017
December
31,
2016Non-derivative
financial liabilities:Bank
loan
$123,637
$-Trade
payable
474,334
150,305Customer
deposits
447,071
169,500Convertible
loan
-
243,676Shareholder
loan
10,383
-Promissory
note
1,500,000
-Derivative
financial liabilities:Warrant derivative
liability
3,655,686
-$6,2711,111
$563,481








Fair value





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





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





●
 Level 1 –
Unadjusted quoted prices in active markets for identical assets or
liabilities;





●
 Level 2 –
Inputs other than quoted prices that are observable for the asset
or liability either directly or indirectly; and





●
 Level 3 –
Inputs that are not based on observable market data.





Financial
liabilities measured at fair value at December 31, 2017 consisted
of the derivative liability, which is measured using level 3
inputs.





F-27

















The
fair value of the derivative liability was calculated using the
Black-Scholes Option Pricing Model using historical volatility as
an estimate of future volatility. At December 31, 2017, if the
volatility used was increased by 10% the impact would be an
increase to the derivate liability of $482,021 with a corresponding
increase in the net and comprehensive loss.





21.
 Capital
management





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





22.
 Subsequent
events





On
January 5, 2018, the Company completed a private placement of
1,000,000 common shares at a price of $0.85 per share for gross
proceeds of $850,000. The Company incurred share issue costs of
$85,000 relating to this private placement.





On
January 5, 2018 the Company granted stock options to acquire
835,000 common shares of the Company at an exercise price of USD
4.80 per share for a period of 7 years. The options vest over a
period of 4 years.





On
January 5, 2018, the Company completed a private placement of
400,000 units at a price of USD $4.20 per unit for gross proceeds
of USD $1,680,000 (CAD $2,092,456). Each unit consists of one
common share and one non-transferable common share purchase warrant
with each warrant entitling the subscriber to acquire one
additional share at a price of USD $8.40 per warrant share until
January 21, 2019. The Company incurred share issue costs of USD
$201,600 (CAD $248,874) relating to this private
placement.





On
January 28, 2018 the promissory note for $1,500,000 relating to the
acquisition of Intermeccanica (Note 7) was paid in
full.





On
January 29 2018, the Company completed a private placement of
114,274 common shares at a price of $5.18 per unit for gross
proceeds of $591,941. On January 29, 2018, the Company issued 4,571
common shares at a price of $5.18 per share for third party
finder’s fees relating to this private placement.
Additionally, the Company paid third party finder’s fees of
$35,516 relating to this private placement.





On
February 19, 2018 the Company issued 12,395 common shares pursuant
the exercise of stock options at $1 per share for proceeds of
$12,395.





F-28














UNAUDITED PRO FORMA COMBINED
 
 FINANCIAL INFORMATION AS OF DECEMBER 31,
2017
 
 Electrameccanica Vehicles Corp., (“EMV”) will account
for the Acquisition as an acquisition under the purchase method of
accounting. Pursuant to this method, the aggregate consideration
paid by Electrameccanica in connection with the acquisition will be
allocated to Intermeccanica International Inc. (“IMI”)
assets and liabilities based on their fair values. IMI's assets,
liabilities and results of operations will be consolidated with the
assets, liabilities and results of operations of Electrameccanica
after consummation of the acquisition.
 
 We have presented below the Statement of Comprehensive Loss of
Electrameccanica as December 31, 2017, assuming that the
acquisition of IMI, had occurred as of January 1, 2017. The
unaudited pro forma combined the Statement of Comprehensive Loss
should be read in conjunction with the unaudited financial
statements and related notes and "Management Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this proxy statement.
 
 The pro forma information is based on the historical financial
statements of the Company, IMI after giving effect to the
Acquisition and applying the estimates, assumptions and adjustments
described in the accompanying notes to the unaudited pro forma
combined the Statement of Comprehensive Loss..
 
 The unaudited pro forma combined the Statement of Comprehensive
Loss is for illustrative purposes only and should not be relied
upon as indicative of the historical financial position that would
have occurred had the acquisition of IMI happened as of the date
indicated.
 
 No pro-forma statement of financial position is presented below as
the audited statement of financial position included in the audited
financial statements of the Company at December 31, 2017 are
included elsewhere in this registration statement and reflect the
financial position of the combined entities at December 31,
2017.
 
 F-29
 
 
 
 
 UNAUDITED PRO FORMA COBMINED STATEMENTS OF COMPREHENSIVE
LOSS
 
 Year
Ended December 31, 2017Note
IMI
EMV
Adjustments
TotalRevenue
1
1,179,595
-
(501,461)
678,134Cost
of revenue
2
758,948
-
(385,971)
372,977Gross
profit

420,647
-
(115,490)
305,157Operating
expensesAmortization

26,142
122,468

148,610General and
administrative expenses
4
373,947
2,314,714
(95,941)
2,592,720Research and
development expenses
3
-
4,358,285
(19,521)
4,338,764Sales and marketing
expenses

4,432
630,999

635,431Stock-based
compensation expense

-
889,511

889,511Share-based payment
expense

-
1,085,716

1,085,716(404,521)
(9,401,693)
(115,462)
(9,690,752)Income/(Loss)
before other items

16,126
(9,401,693)
(28)
(9,385,595)Other
itemsAccretion interest
expense

-
69,561

69,561Changes in fair
value of warrant derivative

-
186,269

186,269Finder’s fee
on convertible loan

-
258,542

258,542Impairment of
goodwill
5
-
-
1,342,794
1,342,794Foreign exchange
(gain)/loss

(11,806)
22,068

10,262Net
and comprehensive loss

$27,932
$(9,938,133)
$(1,342,766)
(11,253,023)
 
 
 
 Pro Forma Adjustments
 
 Note 1
– Revenue adjustment related to the elimination of
intercompany revenue for the year ended December 2017 was
$501,461
 
 Note 2
– Cost of sales adjustment related to the elimination of
intercompany cost of sales for the year ended December 31, 2017 was
$385,971.
 
 Note 3
– Expense adjustment related to the elimination of
intercompany expenses for the year ended December 31, 2017 was
$95,941.
 
 Note 4
– Research and development expenses adjustment related to the
elimination of intercompany research and development expenses for
the year ended December 31, 2017 was $19,521.
 
 Note 5
- The Company performed an impairment test of the goodwill. The
recoverable amount of the Intermeccanica cash-generating unit was
determined to be $1,157,206 based on its fair value less costs to
sell. The difference of $1,342,794 has been recorded as an
impairment in net loss.
 
 On
October 18, 2017 the Company completed the acquisition of all of
the outstanding shares of IMI, a developer and manufacturer of high
end custom built vehicles and the contract assembler of the
Company’s electric vehicles located in Greater Vancouver, BC.
The acquisition of Intermeccanica is expected to accelerate the
Company’s manufacture and delivery of its vehicles to
customers, and the Company will develop and manufacture electric
versions of Intermeccanica’s custom built
vehicles.
 
 Total
purchase consideration was $2,500,000. In addition to an initial
payment of $100,000 in 2016, an additional $200,000 was paid prior
to acquisition. On October 18, 2017 the Company paid $700,000, and
entered into a Promissory Note (the “Note”) for the
balance of $1,500,000. The Note bears interest at 5% per annum, and
was payable in installments of $500,000 plus accrued interest on
the 6th,
12th and
18th month
after purchase. Under the Note if the Company raises at least $10
million by way of equity or debt after October 18, 2017 the unpaid
portion of the Note shall be paid within 30 days. The Promissory
Note was secured over the assets of Intermeccanica. The Note was
paid in full on January 28, 2018.
 
 F-30














ITEM 19. EXHIBITS





The
following exhibits are filed as part of this Annual Report on Form
20-F:





ExhibitNumber
Description1.1
Notice of
Articles(1)1.2
Articles(1)4.1
2015 Stock Option
Plan(1)4.2
Joint Operating
Agreement between the Company, Intermeccanica International Inc.
and Henry Reisner, dated July 15, 2015(1)4.3
Amending Agreement
to Joint Operating Agreement, between the Company, Intermeccanica
International Inc. and Henry Reisner, dated September 19,
2016(1)4.4
Executive Services
Agreement between the Company and Jerry Kroll, dated July 1,
2016(1)4.5
Executive Services
Agreement between the Company and Ed Theobald, dated July 1,
2016(1)4.6
Executive Services
Agreement between the Company and Iain Ball, dated July 1,
2016(1)





4.7
Executive Services
Agreement between the Company and Hurricane Corporate Services
Ltd., dated July 1, 2016(1)4.8
Executive Services
Agreement between the Company and Henry Reisner, dated July 1,
2016(1)4.9
Executive Services
Agreement between the Company and Mark West, dated November 1,
2016(2)10.1
Share Purchase
Agreement(3)10.2
Manufacturing
Agreement between Chongqing Zongshen Automobile Co., Ltd. and the
Company, dated September 29, 2017*+10.3
Share Pledge
Agreement between the Company and Jerry Kroll, dated October 16,
2017(2)11.1
Code of Conduct and
Ethics*11.2
Insider Trading
Policy*12.1
Section 302(a)
Certification of CEO*12.2
Section 302(a)
Certification of CFO*13.1
Section 906
Certifications of CEO*13.1
Section 906
Certifications of CFO*15.1
Audit Committee
Charter*15.2
Nominating
Committee Charter*15.3
Compensation
Committee Charter*15.4
Corporate
Governance and Human Resources Committee Charter*15.5
Enterprise Risk
Oversight Committee Charter*15.6
Social Media
Committee Charter*15.7
Regulatory, Foreign Compliance & Government
Affairs Committee
Charter*15.8
Risk and Information Security Committee
Charter*





________________________








Notes:





*
Filed
herewith.+
Portions
of this exhibit have been omitted pursuant to a request for
confidential treatment. Confidential information has been omitted
from the exhibit in places marked “****”and has been
filed separately with the SEC.(1)
Filed as an exhibit
to our registration statement on Form F-1 as filed with the SEC on
October 12, 2016 and incorporated herein by reference.(2)
Filed as an exhibit
to our registration statement on Form F-1/A as filed with the SEC
on December 20, 2016 and incorporated herein by
reference.(3)
Filed as an exhibit
to our report of foreign private issuer on Form 6-K as filed with
the SEC on October 20, 2017 and incorporated herein by
reference.





77




















SIGNATURES





The registrant certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.





Electrameccanica Vehicles Corp.





Date:
April 19, 2018.





By:
/s/ Jerry KrollJerry
KrollPresident
and Chief Executive Officer





78