Volcon Inc

Previous wording

We are an all-electric, off-road powersports vehicle company developing electric two and four-wheel motorcycles and utility terrain vehicles, or UTVs, also known as side-by-sides, along with a line of upgrades and accessories. In October 2020, we began building and testing prototypes for our future offerings with two off-road motorcycles – the Grunt and the Runt. Our motorcycles feature unique frame designs protected by design patents. Additional utility and design patents have been filed for other aspects of Volcon’s vehicles.

Current wording

We are an all-electric, off-road powersports vehicle company developing electric two-wheeled E-Bikes and motorcycles and four-wheeled and utility terrain vehicles, or UTVs, also known as side-by-sides, along with a line of upgrades and accessories. In October 2020, we began building and testing prototypes for our future offerings with two off-road motorcycles – the Grunt and the Runt. Our motorcycles feature unique frame designs protected by design patents. Additional utility and design patents have been filed for other aspects of Volcon’s vehicles.

Previous wording

In August 2022, we ceased manufacturing of the Grunt and we outsourced the manufacturing of the remaining Grunts and the 2023 Grunt EVO to the same third party manufacturer as the Stag. The 2023 Grunt EVO has replaced the Grunt and has a belt drive rather than a chain drive as well as an updated rear suspension. We began selling the Grunt EVO in the third quarter of 2023.

Current wording

We began selling the Grunt in September 2021. In August 2022, we ceased manufacturing of the Grunt and we outsourced the manufacturing of the remaining Grunts and the 2023 Grunt EVO to the same third party manufacturer as the Stag UTV discussed below. The 2023 Grunt EVO has replaced the Grunt and has a belt drive rather than a chain drive as well as an updated rear suspension. We began selling the Grunt EVO in the third quarter of 2023. We determined in the first quarter of 2024 that we would not develop the Runt for production and terminated efforts to develop this product.

Previous wording

In June 2022, we signed an exclusive distribution agreement with Torrot Electric Europa S.A., referred to herein as Torrot, to distribute their electric motorcycles for youth riders in Latin America. In October 2022, we signed an expanded agreement with Torrot, which superseded the June 2022 agreement, to also be the exclusive distributor of Torrot and Volcon co-branded youth electric motorcycles in the U.S. as well as Latin America. Finally, in December 2022, we signed an expanded agreement with Torrot to be the exclusive distributor of Volcon co-branded youth electric motorcycles in Canada. In June 2023, we wrote down all remaining Torrot branded inventory in the amount of $84,000. In December 2023 we notified Torrot that we were terminating our agreements due to continued lower than expected sales at significantly discounted pricing. In 2023, we wrote down the Volcon co-branded Torrot youth motorcycles by $2,674,352 to reduce their cost to the estimated net realizable value due to lower than expected sales. We have agreed to give Torrot a total of 1,000 Volcon branded Torrot motorcycles originally purchased for $1.8 million, an up front payment of $370,000 and an additional $1.7 million to be paid out at $100,000 per month over 17 months beginning in April 2024 in exchange for unfulfilled 2023 and 2024 unit purchases. As of March 31, 2024, we have Volcon Youth finished goods inventory of approximately $175,000, after reducing these to the estimated net realizable value, of Volcon branded Torrot motorcycles and accessories which we intend to liquidate and we have agreed to give Torrot sales rights in the U.S., Canada and LATAM after June 30, 2024.

Current wording

In January 2023, we began selling Volcon co-branded youth electric motorcycles under a distribution agreement with Torrot Electric Europa S.A. (“Torrot”). In December 2023 we notified Torrot that we were terminating our agreements due to continued lower than expected sales at significantly discounted pricing. In conjunction with a settlement agreement with Torrot we ceased selling these motorcycles as of June 30, 2024.

Previous wording

In July 2022, we expanded our offerings with the introduction of the first of our Volcon UTV models, the Stag. We delivered the first Stag to a customer in February 2024. The Stag is being manufactured by a third party and incorporates electrification units, which include batteries, drive units and control modules provided by General Motors. Beginning in June 2022, we took non-binding pre-production orders which were cancelable prior to delivery. In the third quarter of 2023 we canceled all of the original pre-production orders due to the introduction of multiple models and new pricing. We began taking new pre-production orders for the newly introduced models in the third quarter of 2023, which are limited to the Stag LTD as of March 31, 2024.

Current wording

In July 2022, we announced we were expanding our offerings with the introduction of the first of our Volcon UTV models, the Stag. We delivered the first Stag to a customer in February 2024. The Stag is being manufactured by a third party and incorporates electrification units, which include batteries, drive units and control modules provided by General Motors. Beginning in June 2022, we took non-binding pre-production orders which were cancelable prior to delivery. We are currently taking pre-production orders for the Stag LTD, which is a four passenger, high performance and utility UTV.

Previous wording

Initially, we began to sell and distribute the Grunt and related accessories in the United States on a direct-to-consumer sales platform. However, we terminated our Grunt direct-to-consumer sales platform in November 2021. Beginning in November 2021, we began negotiating dealership agreements with powersports dealers to display and sell our vehicles and accessories. Customers can now, or will soon be able to, buy our vehicles and accessories directly from a local dealership. Some of these dealers will also provide warranty and repair services to customers. As of May 3, 2024, we have 105 active dealers. Dealers can order any of our available products provided they are current on their accounts receivable and are within their established credit limit. We are offering dealers payment terms 30 to 90 days to make larger purchases of our vehicles. We have entered into an accounts receivable factoring arrangement to allow the Company the ability to generate cash for working capital. We have agreements with third party financing companies to provide financing to qualified customers of each dealer. There is no recourse to the Company or the dealer if the dealer’s customer defaults on the financing agreement with the third party.

Current wording

We initially sold the Grunt directly to consumers but ceased in November 2021. Since November 2021, we have sold the Grunt, Grunt EVO, Stag and related accessories through powersports dealers. As of August 5, 2024, we have 105 active dealers. Dealers can order any of our available products provided they are current on their accounts receivable and are within their established credit limit. We are offering dealers payment terms of 30 to 90 days to make larger purchases of our vehicles. We have entered into an accounts receivable factoring arrangement to allow us the ability to generate cash for working capital. We have agreements with third party financing companies to provide financing to qualified customers of each dealer. There is no recourse to us or the dealer if the dealer’s customer defaults on the financing agreement with the third party. We also sell the Brat to some powersports dealers as well as bicycle retailers and directly to consumers through our website, where consumers can have the Brat delivered to a location of their choosing in the continental U.S. Beginning in the first quarter of 2024, we began selling the Grunt EVO through our website where continental U.S. customers can pay a deposit and complete their purchase at one of our U.S. powersports dealer locations. Grunt EVO customers who are not located in a state where we have a powersports dealer or within a reasonable distance from a powersports dealer in their state, can have the Grunt EVO shipped directly to a location they specify.

Previous wording

We sell our vehicles internationally through importers. Each importer buys vehicles by the container and sells vehicles and accessories to local dealers or directly to consumers. Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country. In October 2023, we made a decision to postpone expanding our dealer network in Canada for the foreseeable future and we have terminated the employment of our Canadian regional sales managers. As of March 31, 2024, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, one importer in New Zealand, and one importer in Australia to sell our vehicles and accessories in their assigned countries/markets. In 2024, we expect to expand our global sales of our vehicles and accessories beyond our current distributor base.

Current wording

In addition to selling our two-wheeled vehicles through powersports dealers, bicycle retailers and direct to consumers through our website, we also sell them internationally through importers. Each importer buys vehicles by the container and sells vehicles and accessories to local dealers or directly to consumers. Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country. As of August 5, 2024, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, one importer in New Zealand, and one importer in Australia to sell our two wheel vehicles and accessories in their assigned countries/markets. In 2024, we expect to expand our global sales of our vehicles and accessories beyond our current distributor base.

Previous wording

The estimated fulfillment of all orders we have received assumes that our third party manufacturers can successfully meet our order quantities and deadlines. If they are unable to satisfy orders on a timely basis, our customers may cancel their orders.

Current wording

We outsource the manufacturing of all of our vehicles and accessories to third party manufacturers and suppliers. The estimated fulfillment of all two-wheeled and UTV orders we have received, or will receive, assumes that our third party manufacturers can successfully meet our order quantities and deadlines. We have experienced delays due to our third party manufacturers being unable to timely meet our order deadlines, and there is no assurance that we will not experience delays in the future until such time as we are able to source products from multiple manufacturers or from larger, more established manufacturers. If they are unable to satisfy orders on a timely basis, our customers may cancel their orders. Also, due to the limited number of third party manufacturers who manufacture our products, if any one of them experiences financial hardship and cannot manufacture our products, our customers may cancel their orders which will harm our sales. All of our products are manufactured internationally. If there is a change in import laws, including an increase in tariffs, the cost of our products will increase. We could also experience delays in receiving shipments of our products if there are delays in getting carriers to ship our products or delays at the port of entry.

Previous wording

The following financial information is for the three months ended March 31, 2024 and 2023.

Current wording

The following financial information is for the three and six months ended June 30, 2024 and 2023.

Previous wording

Revenue for the three months ended March 31, 2023, was $1,170,458 which represents sales of Grunts of $170,388, Brats of $657,516, Volcon Youth of $212,365 and accessories and parts of $127,496.

Current wording

Revenue for the six months ended June 30, 2023, was $1,689,758 which represents sales of Grunts of $170,388, Brats of $1,042,198, Volcon Youth of $260,479 and accessories and parts of $151,980.

Previous wording

Cost of goods sold for the three months ended March 31, 2023 were $1,229,981 including labor costs of $402,104 for employees and contractors performing assembly and quality control testing of Grunts and stock-based compensation of $206,477 for share-based awards for employees. Part costs for Grunts sold during the period was $165,842. We paid $53,507 for fees owed to cancel purchase orders to reduce raw material quantities ordered to expected demand. Facilities costs were $122,311 for our warehouse facility and third party warehousing costs. Net inbound and outbound shipping costs, duties and tariffs for inventory purchases and shipments to customers was a credit of $278,774 primarily due to the reversal of an accrual for shipping costs and tariffs expected to be incurred to ship our Grunt raw materials and work-in-process inventory to our third party manufacturer in Mexico which was no longer needed once manufacturing was moved to Arizona.

Current wording

Cost of goods sold for the six months ended June 30, 2023, were $1,564,628. Costs include payroll costs of $682,343 and stock-based compensation of $356,079 for share-based award for employees performing warehouse and logistics management and quality control testing of Brats and Volcon Youth Motorcycles. Product costs for Brats, Volcon Youth and Grunts sold during the period were $595,640, $255,409, and $163,985, respectively. We recorded expense of $138,752 related to fees paid to cancel purchase orders to reduce raw material quantities, which was offset by a reduction in the net realizable valuation expense of $179,670; the Company was recording for excess quantities of raw materials that it was no longer obligated to purchase by paying these fees. Also, the one-year warranty for parts and labor on Grunts sold prior to June 30, 2022 expired (excluding the battery which is warranted for 2 years) and an adjustment to reduce the warranty accrual in the amount of $459,800 was recorded which reduced cost of goods sold. Facilities costs were $211,157 for our warehouse facility and third party warehousing costs. Shipping costs were reduced by $347,729 due to the reversal of an accrual for shipping costs and tariffs expected to be incurred to ship our Grunt raw materials and work-in-process inventory to our third party manufacturer in Mexico which was no longer needed.

Previous wording

For the remainder of 2024 we expect revenue and cost of goods sold, to increase due to the expected increase in sales of the Grunt EVO and Stag. Additional cost savings may be realized if the third party manufacturer can source or manufacture parts at a lower cost. The increase in costs for products will partially be offset by reductions in cost for salaries and benefits due to reductions in headcount completed in 2023.

Current wording

For the remainder of 2024 we expect revenue and cost of goods sold to increase due to the expected increase in sales of the Grunt EVO and Stag. Additional cost savings may be realized if the third party manufacturer for these vehicles can source or manufacture parts at a lower cost. The increase in costs for products will partially be offset by reductions in cost for salaries and benefits due to reductions in headcount completed in 2023.

Previous wording

Sales and marketing expenses were $760,564 for the three months ended March 31, 2024 and were primarily related to expenses associated with promoting our products and brand of $215,429, employee payroll costs of $453,191, including $112,500 for severance costs for our former chief marketing officer (“CMO”), which was partially offset by stock-based compensation benefit of $55,071 for cancelation of unvested share based awards to the CMO and other marketing employees whose positions were eliminated in the period and the CMO’s unvested share based awards.

Current wording

Sales and marketing expenses were $1,304,235 for the six months ended June 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $408,773, employee payroll costs of $574,378, including $112,500 for severance costs for our former Chief Marketing Officer (“CMO”), which was partially offset by stock-based compensation benefit of $55,071 for cancelation of unvested share based awards to the CMO and other marketing employees whose positions were eliminated in the period. Travel expenses related to roadshows showcasing the Stag and EVO were $51,966 and facilities costs were $52,803. Professional fees for legal and consulting services were $84,336. Depreciation expense was $49,935 and bad debt expense was reduced by $16,378 due to collection of previously expensed customer accounts.

Previous wording

For the three months ended March 31, 2023, sales and marketing expenses were $1,789,370 and include $588,321 for promoting our products and brand, $723,362 for employee payroll costs, stock-based compensation expense of $311,759 for share-based awards granted to employees and consultants, $38,452 related to facilities costs, and travel costs of $71,243 primarily related to costs incurred for travel to build our dealer and distributor network.

Current wording

For the three months ended June 30, 2023, sales and marketing expenses were $2,380,617 and include $967,982 for promoting our products and brand, $783,229 for employee payroll costs, stock-based compensation expense of $233,113 for share-based awards granted to employees and consultants, $46,685 related to facilities costs, and travel costs of $109,035 primarily related to costs incurred for travel to build our dealer and distributor network. Bad debt expense was $70,383 and legal and consulting fees related to entering into international distribution agreements were $116,447.

Previous wording

We also expect sales expenses to increase as we begin expanding our international distributors and selling commissions for increased sales of Grunt EVOs and the Stag offset by overall lower expenses as we seek to reduce costs.

Current wording

We also expect sales expenses to increase slightly as we begin expanding our international distributors and selling commissions for increased sales of Grunt EVOs and the Stag. We expect marketing expenses to increase when we launch new products.

Previous wording

Product development expenses relate to development and testing of our products and process to manufacture these products.

Current wording

Product development expenses relate to the development and testing of our products and process to manufacture these products.

Previous wording

For the three months ended March 31, 2023, product development expenses totaled $1,786,351 and primarily relate to expenses associated with employee payroll costs of $507,676, stock-based compensation of $208,592 for share-based awards granted to employees and consultants, professional fees of $81,651 for digital consultants, $37,500 for recruiting fees, research and development costs of $266,829, prototype parts and tooling costs of $543,616, facilities cost of $47,823 and $50,634 for supplies, parts and software.

Current wording

For the three months ended June 30, 2023, product development expenses totaled $1,166,732 and primarily relate to expenses associated with employee payroll costs of $431,833, stock-based compensation of $100,379 for share-based awards granted to employees and consultants, prototype vehicles and parts costs of $384,479, facilities costs of $45,482 and $49,497 for supplies and software.

Previous wording

We expect 2024 product development costs related to employee costs to remain consistent with 2023. We expect costs to decrease for design and development costs and costs related to prototype costs for the current version of the Stag since the Stag is in production. We expect costs for design and development costs related to the Grunt EVO to decrease since it is in production. We expect design and development costs to increase for development of other versions of our UTV and motorcycle lineup being considered for future release.

Current wording

decrease for design and development costs and costs related to prototype costs for the current version of the Stag since the Stag is in production. We expect costs for design and development costs related to the Grunt EVO to decrease since it is in production. We expect design and development costs to increase for development of other versions of our UTV and motorcycle lineup being considered for future release.

Previous wording

For the three months ended March 31, 2024, general and administrative expenses were $2,080,794 and were primarily related to expenses associated with employee payroll costs of $579,363, stock-based compensation of $21,187 for share-based awards granted to employees, professional fees of $412,715 (including legal fees of $195,377, tax and accounting fees of $23,200 and audit fees of $146,925), software costs of $141,551, insurance costs of $662,927, and public company expense costs of $102,721.

Current wording

For the three months ended June 30, 2024, general and administrative expenses were $2,007,514 and were primarily related to expenses associated with employee payroll costs of $527,052, stock-based compensation of $138,203 for share-based awards granted to employees, professional fees of $190,059 (including legal fees of $95,718, tax and accounting fees of $35,105 and audit fees of $23,175), software costs of $152,062, insurance costs of $656,288, public company expense costs of $101,653 and annual meeting costs of $94,982.

Previous wording

Interest and other income/expenses for thethree months ended March 31, 2024 was $21,803,709. Non-cash interest expense of $314,838 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes through the date these notes were exchanged for Preferred Stock. We recorded a loss on the conversion of some of these notes of $333,544 and a loss from the exchange of these notes for Preferred Stock of $1,314,064. We recorded a loss on the change in the estimated fair value of the Series A and Series B Warrant liabilities of $20,004,342 which was partially offset by a gain of $165,355 from the exercise of some of the Series B Warrants.

Current wording

Interest and other income/expenses for the six months ended June 30, 2024 was $16,880,826. Non-cash interest expense of $314,838 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes through the date these notes were exchanged for Preferred Stock in March 2024. We recorded a loss on the conversion of some of these notes of $333,544 and a loss from the exchange of these notes for Preferred Stock of $1,314,065. Non-cash interest expense of $183,819 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2024 Notes. We recorded a loss on the change in the estimated fair value of the Series A and Series B Warrant liabilities of $14,727,696 which was partially offset by a gain of $165,355 from the exercise of some of the Series B Warrants.

Previous wording

Interest and other income/expenses for the three months ended March 31, 2023 were $1,774,134. Non-cash interest expense of $1,776,636 was recognized for the amortization of debt issuance costs and accretion of principal on the Convertible Notes issued in August 2022.

Current wording

Interest and other income/expenses for the three and six months ended June 30, 2023 were $18,096,798 and $19,870,932, respectively. A loss on extinguishment of the Convertible Notes of $22,296,988 was recognized in the three and six months ended June 30, 2023 (see Note 6 to the consolidated financial statements). Non-cash interest expense of $1,136,997 and $2,913,632 was recognized for the amortization of debt issuance costs and accretion of principal on the Convertible Notes issued in August 2022 for the three and six months ended June 30, 2023, respectively. In addition, non-cash interest expense of $471,572 was recognized for the amortization of debt issuance costs and accretion of principal on the New Notes and Exchange Notes issued in May 2023 in the three and six months ended June 30, 2023. A gain on the change in the valuation of derivative financial liabilities of $5,792,788 was recognized in the three and six months ended June 30, 2023 (see Note 8 to the consolidated financial statements).

Previous wording

Non-cash interest expense will no longer be recognized on the May 2023 Notes in the future due to the exchange of the May 2023 Notes for Series A Convertible Preferred Stock. Gains or losses from the change in the estimated fair value of the Series A and Series B Warrants will occur primarily based on changes in our common stock price and if the number of warrants adjusts if we complete additional equity issuances or additional reverse stock splits as specified in the terms of these warrant agreements.

Current wording

Non-cash interest expense will no longer be recognized on the May 2023 Notes in the future due to the exchange of the May 2023 Notes for Series A Convertible Preferred Stock. Non-cash interest expense will no longer be recognized on the May 2024 Senior Notes after repayment of these notes in July 2024 with the proceeds from the sale of common stock.

Previous wording

Net loss for the three months ended March 31, 2024 was $26,048,044. Net loss for the three months ended March 31, 2023, was $7,299,469.

Current wording

Net loss for the three and six months ended June 30, 2024, was $606,418 and $26,654,462, respectively.

Previous wording

On March 31, 2024, we had cash and restricted cash of $3.6 million, including $0.1 million of restricted cash, and we had working capital of $2.2 million. Since inception we have funded our operations from proceeds from debt and equity sales.

Current wording

On June 30, 2024, we had cash and restricted cash of $2.2 million, including $0.1 million of restricted cash, and we had a working capital of $7.4 million. Since inception we have funded our operations from proceeds from debt and equity sales. On July 12, 2024, we sold 820,836 shares of common stock at a purchase price of $3.65 per share and pre-funded warrants to purchase 2,466,836 shares of common stock at $3.64999 per pre-funded warrant and received gross proceeds of $11,999,991 with issuance costs estimated to be approximately $1,250,000.

Previous wording

Net cash used in operating activities was $4.5 million for the three months ended March 31, 2024 and includes all of our operating costs except depreciation and amortization of $0.1 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes of $0.3 million, loss on change in derivative financial liabilities of $20.0 million, losses on conversion and exchange of Convertible Notes of $1.6 million and $0.2 million from the loss on disposal of fixed assets. Cash used in operating activities includes an increase in accounts receivable of $0.1 million due to sales to our U.S. dealers, an increase of $0.5 million in prepaid inventory deposits primarily for purchases of Stag raw materials, a decrease of $0.5 million in accounts payable, and an increase of $0.3 million in accrued liabilities. As of March 31, 2024, we have a decrease of $0.3 million in customer deposits, primarily due to orders being fulfilled for two of our Latin American distributors for shipments of Brats and Grunt EVOs paid for previously.

Current wording

Net cash used in operating activities was $8.2 million for the six months ended June 30, 2024 and includes all of our operating costs except depreciation and amortization of $0.2 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes and May 2024 Notes of $0.5 million, loss on change in derivative financial liabilities of $14.9 million, losses on conversion and exchange of Convertible Notes of $1.6 million and $0.6 million from the loss on disposal of fixed assets. Cash used in operating activities includes an increase in accounts receivable of $0.1 million due to sales to our U.S. dealers, an increase of $1.1 million in prepaid inventory deposits primarily for purchases of Stag raw materials, an increase of $0.1 million in accounts payable, and an increase of $1.1 million in accrued liabilities primarily due to the vendor settlement noted above and $0.2 million used to pay our lease liabilities. As of June 30, 2024, we have a decrease of $0.2 million in customer deposits, primarily due to orders being fulfilled for two of our Latin American distributors for shipments of Brats and Grunt EVOs paid for previously.

Previous wording

Net cash used in operating activities was $6.5 million for the three months ended March 31, 2023 and includes all of our operating costs except stock-based compensation, write-down of inventory, depreciation and amortization, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes, and gain on sale assets and leases. Cash used in operating activities includes a decrease in accounts receivable of $0.2 million for collections net of sales, increases in inventory of $0.5 million and inventory deposits of $0.8 million as we made purchases and deposits for Brats and Volcon Youth motorcycles, a decrease of $0.5 million for both accounts payable and accrued liabilities due to timely payment of outstanding amounts due and a reversal of an accrual for anticipated shipping and tariffs related to shipping raw material and subassembly inventory to our third party manufacturer in Mexico as final assembly was moved to Arizona.

Current wording

Net cash used in operating activities was $10.6 million for the six months ended June 30, 2023 and includes all of our operating costs except stock-based compensation, write-down of inventory, depreciation and amortization, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes and May 2023 Notes, gain on change in derivative liabilities, loss on extinguishment of Convertible Notes, bad debt expense and gain on sale of property and equipment. Cash used in operating activities includes a decrease in accounts receivable of $0.6 million for collections net of sales, decreases in inventory of $0.8 million due to the transfer of inventory to one of our third party manufacturers and an increase inventory deposits of $1.9 million as we made purchases and deposits for Brats and Volcon Youth motorcycles, a decrease of $0.4 million in accounts payable and $0.6 million in accrued liabilities due to payment of outstanding amounts due and a reversal of an accrual for anticipated shipping and tariffs related to shipping raw material and subassembly inventory to our third party manufacturer as it was no longer necessary. We received $0.3 million in customer deposits, primarily from two of our Latin America distributors as prepayment for shipments of Brats and Grunt EVOs.

Previous wording

Net cash used in investing activities was $0.1 million for the three months ended March 31, 2024, primarily consisting of $0.1 million of purchases of equipment and tooling. Net cash used in investing activities was $0.2 million for the three months ended March 31, 2023, consisting of $0.3 million of purchases of equipment and tooling offset by proceeds received of $0.1 million for the sale of two vehicles.

Current wording

Net cash used in investing activities was $0.3 million for the six months ended June 30, 2023, consisting of $0.4 million of purchases of equipment and tooling offset by proceeds received of $0.1 million for the sale of two vehicles.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024, was $0.1 million and was primarily related to proceeds from the exercise of Series B Warrants.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024, was $2.3 million and was primarily related to the net proceeds from the issuance of the May 2024 Senior Notes and May 2024 Note Warrants.

Previous wording

Our continuation as a going concern is dependent upon our ability to attain profitable operations and if necessary, obtain continued financial support from the issuance of debt or equity. As of March 31, 2024, we had incurred an accumulated deficit of $146.9 million since inception.

Current wording

Our continuation as a going concern is dependent upon our ability to attain profitable operations and if necessary, obtain continued financial support from the issuance of debt or equity. As of June 30, 2024, we had incurred an accumulated deficit of $147.5 million since inception.

Previous wording

Management 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 during the near term and not beyond one year from the date of the issuance of the financial statements as of and for the three months ended March 31, 2024. To continue our operations in the near term we will be required to raise additional financing prior to the third quarter of 2024. We do not have commitments for any such financing, and there can be no assurance that such additional funding would be available to the Company on acceptable terms, or at all. If we are unable to raise additional near-term financing, we will be required to modify or cease our operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

Current wording

Management anticipates that our cash on hand as of June 30, 2024 plus the net proceeds from the equity offering completed in July 2024 and cash expected to be generated from operations will not be sufficient to fund planned operations during the near term and not beyond one year from the date of the issuance of the financial statements as of and for the three and six months ended June 30, 2024. To continue our operations, we currently estimate that we will need to obtain additional funding by the second quarter of 2025. We do not have commitments for any such financing, and there can be no assurance that such additional funding would be available to the Company on acceptable terms, or at all. If we are unable to raise additional near-term financing, we will be required to modify or cease our operations. These factors raise substantial doubt regarding our ability to continue as a going concern.

Previous wording

We account for the Series A Warrants and Series B Warrants issued in connection with the November 2023 Common Units and Pre-funded Warrant Units as financial liabilities in accordance with ASC 815. Accordingly, we recognize these financial liabilities at fair value initially and adjust them to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised or until warrant exercise price and number of warrants become fixed, and any change in fair value is recognized in the statement of operations. The fair value of these financial instruments were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value was also estimated using a Monte Carlo simulation model as of March 31, 2024. In addition, we made a probability assessment as to whether our stockholders would approve the adjustment of the exercise prices of the financial liabilities. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. The Series A Warrants and Series B Warrants are classified as current liabilities as the timing of their exercise is at the discretion of the warrant holders and the warrants were fully vested as of the date they were issued.

Current wording

We account for the Series A Warrants (and the Series B Warrants until May 17, 2024 when they were modified) issued in connection with the November 2023 Common Units and Pre-funded Warrant Units as a financial liability in accordance with ASC 815. Accordingly, we recognized these financial liabilities at fair value initially and adjust it to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised or until warrant exercise price and number of warrants become fixed (as was the case with the Series B Warrants upon modification), and any change in fair value is recognized in the statement of operations. The fair value of these financial instruments were initially measured at fair value using a Monte Carlo simulation model. The Series A Warrant measurement was changed once the shareholders approved the alternative cashless exercise provision of the Series A Warrants to allow a holder to cashless exercise the warrant and receive three shares of common stock. The measurement of the Series A Warrants is now based on the closing price of the Company’s common stock multiplied by three. The Series A Warrants are classified as current liabilities as the timing of their exercise is at the discretion of the warrant holders and the warrants were fully vested as of the date they were issued.