Volcon Inc

****Except as set forth below, there have been no material changes to the risk factors included in the Form 10-K filed with the SEC on March 28, 2024, which is accessible on the SEC’s website at www.sec.gov.

Our ability to continue as a going concern requires that we obtain sufficient funding to finance our operations in the near-term.

We anticipates that our cash on hand as of March 31, 2024 plus the cash expected to be generated from operations will not be sufficient to fund planned operations into the third quarter of 2024, and we will be required to raise additional funds prior to such date. We can provide no assurance that such funding would be available to us on acceptable terms, or at all. If we fail to raise additional proceeds, we will be required to modify or cease our operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

If we fail to satisfy all applicable continued listing requirements of the Nasdaq Capital Market prior to June 24, 2024 our common stock will be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.

On December 19, 2023, we were notified by the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) that we were not in compliance with Nasdaq’s Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days. On January 4, 2024, the Staff notified us that the market value of its listed securities had been below the minimum $35,000,000 required for continued listing as set forth in Nasdaq’s Listing Rule 5550(b)(2) for the previous 180 calendar days and served as an additional basis for delisting.

We submitted a hearing request to Nasdaq’s Hearings Department, which stayed the suspension of our common stock. The hearing was held on March 26, 2024. On April 2, 2024, we received notification from the Nasdaq Hearings Panel (“Panel”) that it has granted an extension until June 24, 2024, to demonstrate compliance with Listing Rules 5550(a)(2) and 5550(b)(1) (which requires at least $2.5 million in shareholders’ equity), subject to certain conditions.

In the event that our common stock is delisted from Nasdaq and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such an event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange.

We have issued Series B warrants in connection with the public offering completed in November 2023 that have provisions that can increase the number of warrants and reduce the exercise price if we complete certain transactions.

Our public offering completed in November 2023 included Series A and Series B warrants (“Series A Warrants” and “Series B Warrants”) to purchase our common stock with initial exercise prices of $24.75 and $37.80, respectively. As of March 31, 2024, approximately 42,000 and 14.5 million Series A Warrants and Series B Warrants, respectively, remain outstanding and the Series A Warrants have an exercise price of $1.8636 and the Series B Warrants have an exercise price of $0.9059. Series A Warrants may be exercised on an alternative cash basis where each warrant exercised will result in the Company issuing three shares of common stock.

The Series B Warrants provide, subject to certain exemptions, that if we sell or issue, any common stock or convertible securities, at an effective price per share less than the exercise price of the Series B Warrant then in effect, or a Dilutive Issuance, the exercise price of the Series B Warrant will be reduced to an amount equal to the lowest daily volume weighted average price (“VWAP”) during the period commencing five consecutive trading days following the Dilutive Issuance and the number of shares issuable upon exercise of the Series B Warrant shall be proportionally adjusted so that the aggregate exercise price of the Series B Warrant shall remain unchanged.

Further, if at any time on or after the date of issuance there occurs any share split, share dividend, share combination, recapitalization or other similar transaction involving our common stock and the lowest daily VWAP during the five consecutive trading days prior to the date of such event and the five consecutive trading days after the date of such event is less than the exercise price then in effect, then the exercise price shall be reduced to the lowest daily VWAP during such period and the number of warrant shares issuable shall be increased such that the aggregate exercise price payable thereunder, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price on the date of issuance.

As a result of the 1 for 45 reverse stock split we completed on February 5, 2024, the exercise price of approximately 15.8 million Series B Warrants were reset to $1.8646 based on the lowest VWAP over the course of the five day trading period through February 12, 2024 and the new amount of Series B Warrants as of this date became approximately 7.1 million.

As a result of the exchange of the Convertible Notes for Preferred Stock (convertible at $1.33 per share of common stock) in March 2024, the exercise price of the Series B warrants adjusted to $0.91 per share based on the lowest VWAP in the five day trading period through March 12, 2024 and the total number of Series B Warrants adjusted to approximately 14.5 million.

In order to attempt to satisfy the Nasdaq minimum bid price requirement of $1.00 per share described in the previous risk factor, we have asked our shareholders at our annual meeting to be held May 28, 2024 to grant our board the authority to effect a reverse stock split of between 1-for-10 and 1-for-100. Based on our current stock price, we will be required to complete a reverse stock split prior to June 10, 2024 in order satisfy the minimum bid price requirement. As such, it is likely that further adjustments to the Series B Warrant exercise price and number of warrants will occur if we complete another reverse stock split per the terms of the Series B Warrants. In addition, as described above, we will need to raise additional financing in the near-term, which may cause further adjustments to the Series B Warrant exercise price and number of warrants.

Finally, the Series B Warrants provide that the exercise price of such warrants may be decreased at our discretion with the approval of a majority of the warrant holders. In order to induce the exercise of the Series B Warrants, either to raise additional funds from such exercise or simply to eliminate the warrants in order to eliminate the above provisions from causing additional dilution upon the completion of a reverse stock split or new financing, we may agree to reduce the exercise price of the Series B Warrants and such reduction could be significantly lower than the current market price of our common stock.

Although some of the holders of Series A and Series B Warrants have ownership limitations, if and when we do issue additional shares of common stock to holders of the Series A Warrants and Series B Warrants upon the exercise by the holder, such stockholders may resell all, some or none of those shares of common stock at any time or from time to time at their discretion. Resales of our common stock may cause the market price of our securities to drop significantly, regardless of the performance of our business.

In March 2024, we exchanged our outstanding convertible notes for Preferred Stock and a significant number of shares of common stock could be issued upon conversion.

In March 2024, we issued Series A Preferred Stock (the “Preferred Stock”) at $1,000 per share in exchange for $24.7 million principal of convertible notes. The initial conversion price for the Preferred Stock is $1.33 and is convertible at any time. Through May 6, 2024, certain holders of the Preferred Stock converted approximately $10.7 million for approximately 8.1 million shares of common stock. The total number of shares of common stock that could be issued as of May 6, 2024 for the outstanding Preferred Stock on this date is approximately 10.5 million shares.

The conversion price of the Preferred Stock is subject to adjustment if certain events such as a stock split, reverse stock split, or stock dividend occurs, or if we issue equity or convertible instruments at offering prices below the conversion price. In addition, in the event of a change of control or sale of substantially all of the Company’s assets, the Preferred Stock agreement provides for distributions that are either based on the number of common stock shares issuable under these agreements or based on other valuations as defined in the agreement. In order to attempt to satisfy the Nasdaq minimum bid price requirement of $1.00 per share described above, we have asked our shareholders at our annual meeting to be held May 28, 2024 to grant our board the authority to effect a reverse stock split of between 1-for-10 and 1-for-100. Based on our current stock price, we will be required to complete a reverse stock split prior to June 10, 2024 in order satisfy the minimum bid price requirement. As such, it is likely that further adjustments to the Preferred Stock conversion price will occur if we complete another reverse stock split per. In addition, as described above, we will need to raise additional financing in the near-term, which may cause further adjustments to the Preferred Stock conversion price. The reduction of the Preferred Stock conversion price will proportionately increase the number of shares of common stock issuable upon the future conversion of the Preferred Stock.

The Preferred Stock holders may resell all, or some of the shares of common stock underlying the Preferred Stock after conversion, at any time or from time to time at their discretion. Resales of our common stock may cause the market price of our securities to drop significantly, regardless of the performance of our business. The adjustment of the conversion price for the Preferred Stock held by these investors based on the price of future issuances of securities could also limit our ability to raise capital as potential investors may not make an investment in a new issuance of securities if their investment could be immediately diluted due to adjustments in the conversion price or warrant exercise prices.