Volcon Inc

Previous wording

Beginning in the second quarter of 2024, we began evaluating other potential electric motorcycle offerings. We are determining what features and specifications would be included for new offerings including considering a street legal version that would be dual purpose as an on-road/off-road motorcycle (not highway legal). As of August 5, 2024, we have identified one new model which we are working on developing with a third party manufacturer. We do not have prototypes yet, but once received we will test them to evaluate the feasibility to produce and sell them. We will continue to evaluate other potential two-wheel product offerings throughout the remainder of 2024.

Current wording

Beginning in the second quarter of 2024, we began evaluating other potential electric motorcycle offerings. We are determining what features and specifications would be included for new offerings including considering a street legal version that would be dual purpose as an on-road/off-road motorcycle (not highway legal). We have identified one new model which we are working on developing with a third party manufacturer. We do not have prototypes yet, but once received we will test them to evaluate the feasibility to produce and sell them. We will continue to evaluate other potential two-wheel product offerings throughout the remainder of 2024 and into 2025.

Previous 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.

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. In October 2024, the Company notified the manufacturer of the Stag that the Company intended to terminate the manufacturing agreement between the parties due to breaches of the manufacturing agreement arising from significant costs increases over the original contracted cost, quality issues resulting in significant costs incurred by the Company for rework, manufacturing assistance required to be provided by the Company’s employees to program vehicles, significant delays in production and low production volumes. In response to the Company’s notice of termination, the manufacturer has indicated that it does not believe the assertions set forth in the Company’s notice are accurate and has asserted that it believes the Company lacks good cause to terminate the agreement. In addition, the manufacturer has asserted that it believes the Company has breached the manufacturing agreement and that the manufacturer intends to file a lawsuit claiming direct and consequential damages against the Company, including for lost profits, in an aggregate amount of $26.7 million. The Company intends to vigorously defend any claims brought by the manufacturer.

Previous wording

Beginning in the second quarter of 2024, we began discussions with various third party manufacturers of UTVs to identify models that we could purchase that are electric, or have internal combustion engine versions that could be modified to all electric, and could be branded as Volcon UTVs. These models would be primarily used for utility purposes, have two or three passenger options, a dump bed or flatbed for hauling cargo, with speeds up to 30 miles per hour. These models may also include an enclosed cab with optional air conditioning. As of August 5, 2024, we have signed an agreement with one manufacturer to distribute one of these utility UTV models in North America for five years, which includes a royalty agreement with the manufacturer for them to distribute the vehicle outside of North America. Royalties would commence in the third year of this agreement.

Current wording

Beginning in the second quarter of 2024, we began discussions with various third party manufacturers of UTVs to identify models that we could purchase that are electric, or have internal combustion engine versions that could be modified to all electric. These models would be primarily used for utility purposes, have two or three passenger options, a dump bed or flatbed for hauling cargo, with speeds up to 30 miles per hour. These models may also include an enclosed cab with optional air conditioning.

Previous 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.

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 November 11, 2024, we have 110 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

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.

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 November 11, 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 distributor in Japan to sell our two-wheel vehicles and accessories in their assigned countries/markets. Through the remainder of 2024 and in 2025, we expect to expand our global sales of our vehicles and accessories beyond our current distributor base.

Previous wording

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

Current wording

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

Previous wording

Revenue for the three months ended June 30, 2023, was $519,300 which represents sales of Brats of $384,681, Volcon Youth and Torrot motorcycles of $48,113 and accessories and parts of $24,833 and an adjustment of $67,654 to reduce dealer rebates due to a change in the rebate program for remaining unsold Grunts in dealer inventory.

Current wording

Revenue for the three months ended September 30, 2023, was $487,430 which represents sales of Brats of $686,331, Grunt EVO motorcycles of $37,193, Volcon Youth and Torrot motorcycles of $43,407 and accessories and parts of $52,613 offset by an adjustment of $333,524 to increase dealer rebates due to a change in the rebate program for remaining unsold Grunts in dealer inventory and for discounts to dealers for a reduction in the manufacturer’s suggested retail price for Brats and Volcon Youth motorcycles.

Previous wording

Cost of goods sold for the six months ended June 30, 2024 were $4,735,009, including payroll costs of $166,786 for employees performing product fulfillment, logistics management, and service and warranty. Product costs for Brats and Grunt EVOs, sold during the period were $804,174 and $636,542, respectively. Stag product costs were $719,515, which includes an expense of $112,168 for the already delivered and future delivery of vehicles to a customer where the Company agreed to provide additional units at a sales price less than the manufactured cost of the units and, due to the settlement agreement with Torrot, the remaining Youth finished goods inventory of $57,262 was written off as Volcon can no longer sell Torrot/Volcon Youth finished goods after June 30, 2024. Facilities costs related to operations were $210,926. Loss on disposal of Stag tooling, as noted above, was $466,481 and in the first quarter of 2024, the Company recorded a loss on disposal in the amount of $155,621 for the write off of Grunt EVO tooling. As discussed above, the Company recognized an expense of $1,117,429 for a settlement with a vendor.

Current wording

Cost of goods sold for the nine months ended September 30, 2024 were $15,029,729 including payroll costs of $211,955 for employees performing product fulfillment, logistics management, and service and warranty. Product costs for Brats and Grunt EVOs, sold during the period were $1,105,054 and $1,515,175 (before the finished goods inventory write down discussed below), respectively. Volcon Youth product costs were $186,813 before the additional expense of $81,911 for the write down of all Volcon Youth inventory as the Company could no longer sell Volcon Youth motorcycles or parts after June 30, 2024. Stag product costs were $944,299, which includes an expense of $112,168 for the already delivered and future delivery of vehicles to a customer where the Company agreed to provide additional units at a sales price less than the manufactured cost of the units. As noted above, the Company also wrote off all Stag parts inventory and prepaid inventory deposits resulting in an expense of $8,712,644. The Company also recognized an expense of $976,420 for a settlement agreement with a vendor who supplies certain suspension components for the Stag. The Company also wrote down the Grunt EVO finished goods inventory by $535,013 due to the Company lowering the sales price to dealers and distributors. The Company recorded a loss on disposal of assets of $817,736 primarily related to Stag, Grunt EVO and Runt tooling. The Company also recorded $175,000 as an offset to expenses for the partial recovery of a previously written off prepaid inventory deposit.

Previous wording

Cost of goods sold for the three months ended June 30, 2023 were $334,647 including payroll costs of $280,240 and stock-based compensation of $149,601 for employees performing warehouse and logistics management and quality control testing of Brats and Volcon Youth Motorcycles. Product costs for Brats and Volcon Youth sold during the period were $229,024 and $59,730, respectively. We recorded expense of $85,245 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 $146,370 the Company was recording for excess quantities of raw materials that it was no longer obligated to purchase by paying these fees. Facilities costs were $88,846 for our warehouse facility and third party warehousing costs. 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. The Company also recorded a credit of $198,120 due to our third party manufacturer of the Grunt EVO agreeing to take approximately $1.4 million of inventory, which was previously reduced to its estimated net realizable value, and gave the Company a credit of $1,600 for the first 1,000 Grunt EVOs we purchase. Finally, the Company recorded an expense of $84,000 to write off excess and obsolete Torrot inventory which was on hand as of June 30, 2023.

Current wording

Cost of goods sold for the three months ended September 30, 2023 were $3,542,468 including payroll costs of $287,117 and stock-based compensation of $131,526 for employees performing warehouse and logistics management and quality control testing. Product costs for Brats, Grunt EVOs, and Volcon Youth sold during the period were $555,265, $96,332 and $40,018 (before net realizable value write down), respectively. We recorded a write down of Volcon Youth motorcycles of $1,622,262 to reduce their costs to the expected net realizable value. We recorded an expense of $19,500 related to fees paid to cancel purchase orders to reduce raw material quantities. Facilities costs were $126,501 for our warehouse facility and third party warehousing costs. The Company also recorded an expense of $350,000 due to a reduction of the credit per Grunt EVO our third party manufacturer will provide for inventory previously provided to it. The credit was reduced to $1,250 from $1,600 due to inventory provided by the Company that is in excess of the 1,000 units. Future credits could be received if the Company has the third party manufacturer build more than 1,000 units.

Previous 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.

Current wording

Cost of goods sold for the nine months ended September 30, 2023, were $5,107,096. Costs include payroll costs of $969,461 and stock-based compensation of $487,605 for share-based awards for employees performing warehouse and logistics management and quality control testing. Product costs for Brats, Grunts, Grunt EVOs, and Volcon Youth, sold during the period were $1,150,905, $459,690, $97,051, and $295,427 (before inventory write down), respectively. We recorded write downs of Volcon Youth and Torrot Youth motorcycles of $1,622,262 to reduce the inventory value to its expected net realizable value. We recorded expense of $158,252 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 $198,061 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 September 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 $337,658 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 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.

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 Brat and Grunt EVOs. To the extent the new products, the MN1s and HF1s, arrive and sales begin before the end of 2024, revenue and costs of sales may also increase. 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 $543,671 for the three months ended June 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $193,344, employee payroll costs of $121,187, which was partially offset by stock-based compensation benefit of $67,001. Professional fees for legal and consulting services were $64,412. Travel expenses related to roadshows showcasing the Stag and EVO were $21,453 and facilities costs were $23,514. Depreciation expense was $27,674 and bad debt expense was reduced by $30,426 due to collection of previously expensed customer accounts.

Current wording

Sales and marketing expenses were $1,774,927 for the nine months ended September 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $570,398, employee payroll costs of $677,993, including $112,500 for severance costs for our former Chief Marketing Officer and stock-based compensation of $21,983. Travel expenses related to roadshows showcasing the Stag and EVO were $68,671, facilities costs were $77,041, professional fees for legal and consulting services were $147,186 and depreciation expense was $93,810.

Previous 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.

Current wording

For the three months ended September 30, 2023, sales and marketing expenses were $1,870,532 and include $683,349 for promoting our products and brand, $816,564 for employee payroll costs, stock-based compensation expense of $134,073 for share-based awards granted to employees and consultants, $43,684 related to facilities costs, and travel costs of $79,500 primarily related to costs incurred for travel to build our dealer and distributor network and to attend events to promote our products. Bad debt expense was $15,792 and legal and consulting fees were $15,577.

Previous wording

Sales and marketing expenses were $4,169,987 for the six months ended June 30, 2023 and were primarily related to expenses associated with promoting our products and brand of $1,556,303, employee payroll costs of $1,506,591, stock-based compensation of $544,872 for share-based awards granted to employees and consultants, and travel costs of $180,277 primarily related to costs incurred for travel to build our dealer network. Facilities costs were $85,137. Bad debt expense was $51,198 and legal and consulting fees mainly related to entering into international distribution agreements were $141,223.

Current wording

Sales and marketing expenses were $6,040,519 for the nine months ended September 30, 2023 and were primarily related to expenses associated with promoting our products and brand of $2,239,652, employee payroll costs of $2,323,155, stock-based compensation of $678,944 for share-based awards granted to employees and consultants, and travel costs of $259,777 primarily related to costs incurred for travel to build our dealer and distributor network and to attend events to promote our products. Facilities costs were $128,821. Bad debt expense was $66,990 and legal and consulting fees mainly related to entering into international distribution agreements were $156,846.

Previous 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.

Current wording

We expect sales expenses to increase slightly as we begin expanding our international distributors and selling commissions for increased sales of Brats, Grunt EVOs and to the extent the new products, the MN1s and HF1s, arrive and sales begin before the end of 2024. We expect marketing expenses to increase when we launch new products.

Previous wording

Product development expenses were $1,620,495 for the six months ended June 30, 2024 and were primarily related to expenses associated with employee payroll costs of $831,534, stock-based compensation of $126,337 for share-based awards granted to employees, facilities costs of $124,067, prototype costs of $206,706 and professional fees related to product development in the amount of $62,909. Travel expenses were $86,590 and depreciation expense was $69,381.

Current wording

Product development expenses were $2,148,847 for the nine months ended September 30, 2024 and were primarily related to expenses associated with employee payroll costs of $1,345,848, including stock-based compensation of $126,337 for share-based awards granted to employees, facilities costs of $184,019, prototype costs of $203,287 and professional fees related to product development in the amount of $64,581, travel expenses of $126,921 and depreciation expense of $85,646.

Previous 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.

Current wording

For the three months ended September 30, 2023, product development expenses totaled $2,983,198 and primarily relate to expenses associated with employee payroll costs of $426,332, stock-based compensation of $80,759 for share-based awards granted to employees, professional fees of $274,389 for consultants assisting with product design and programming, prototype vehicles and parts costs of $2,003,330, facilities costs of $49,879 and $38,000 for supplies and software.

Previous wording

Product development expenses were $2,953,083 for the six months ended June 30, 2023 and were primarily related to expenses associated with employee payroll costs of $939,509, stock-based compensation of $308,971 for share-based awards granted to employees and consultants, professional fees of $367,083 for product design, prototype vehicles and parts costs of $980,268, including $70,173 in tooling costs, shipping costs of $45,836 related to shipping prototypes, $87,424 for supplies and software and facilities cost of $93,306

Current wording

Product development expenses were $5,936,280 for the nine months ended September 30, 2023 and were primarily related to expenses associated with employee payroll costs of $1,365,841, stock-based compensation of $389,729 for share-based awards granted to employees and consultants, professional fees of $570,364 for consultants assisting with product design and programming, prototype vehicles and parts costs of $2,913,425, tooling costs of $70,173 for prototype parts, testing costs of $143,072 to complete testing of vehicles including any required regulatory tests, shipping costs of $56,133 related to shipping prototypes, $133,571 for supplies and software and facilities costs of $143,185.

Previous 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.

Current wording

We expect the remaining 2024 and 2025 product development costs related to employee costs to remain consistent with the quarter ended September 30, 2024. We expect costs for design and development costs related to the Grunt EVO to decrease since it is in production and we have received all units from the manufacturer. We expect design and development costs to increase for development of the HF1 and the MN1 and motorcycle lineup being considered for future release.

Previous wording

For the six months ended June 30, 2024, general and administrative expenses were $4,088,308 and were primarily related to expenses associated with employee payroll costs of $1,106,415, stock-based compensation of $159,390 for share-based awards granted to employees, professional fees of $602,774 (including legal fees of $291,095, tax and accounting fees of $58,305 and audit fees of $170,100), software costs of $293,613, insurance costs of $1,319,215, public company expense costs of $204,375 and annual and special shareholder meeting costs of $133,531.

Current wording

For the nine months ended September 30, 2024, general and administrative expenses were $6,005,020 and were primarily related to expenses associated with employee payroll costs of $1,808,888, including stock-based compensation of $159,388 for share-based awards granted to employees, professional fees of $863,220 (including legal fees of $434,292, tax and accounting fees of $77,155 and audit fees of $193,275), software costs of $423,018, insurance costs of $1,983,672, annual and special shareholder meeting costs of $133,531 and other public company expense costs of $243,342.

Previous wording

For the three months ended June 30, 2023, general and administrative expenses were $1,568,700 and were primarily related to expenses associated with employee payroll costs of $526,478, stock-based compensation of $142,301 for share-based awards granted to employees and consultants, professional fees of $228,199 (including legal fees of $127,906 for legal services and tax and audit fees of $31,827 and recruiting fees of $29,500), software costs of $83,936, insurance costs of $333,220, other public company expenses of $60,065 and the annual stockholders meeting cost $87,315.

Current wording

For the three months ended September 30, 2023, general and administrative expenses were $1,544,344 and were primarily related to expenses associated with employee payroll costs of $509,914, stock-based compensation of $194,171 for share-based awards granted to employees and consultants, professional fees of $161,523 (including legal fees of $61,201 for legal services and tax and audit fees of $71,008), software costs of $93,190, insurance costs of $339,714, facilities costs of $131,974, which includes $85,756 of lease termination costs, other public company expenses of $23,555 and the special stockholders meeting cost $104,840.

Previous wording

For the six months ended June 30, 2023, general and administrative expenses were $3,458,791 and were primarily related to expenses associated with employee payroll costs of $1,139,459, stock-based compensation of $472,906 for share-based awards granted to employees and consultants, professional fees of $503,940 (including legal fees of $214,881, tax and audit fees of $187,177 and recruiting fees of $29,500), software costs were $235,394, insurance costs of $683,191, and other public company expenses were $140,754.

Current wording

For the nine months ended September 30, 2023, general and administrative expenses were $5,003,135 and were primarily related to expenses associated with employee payroll costs of $1,649,373, stock-based compensation of $667,077 for share-based awards granted to employees, professional fees of $665,463 (including legal fees of $276,082, tax and audit fees of $258,185 and recruiting fees of $30,098), software costs were $328,584, insurance costs of $1,022,905, facilities costs of $214,488, which includes $85,756 of lease termination costs, annual and special shareholder meeting costs of $192,155 and other public company expenses were $164,308.

Previous wording

We expect general and administrative expenses to remain consistent with the second quarter of 2024 over the next several quarters. Costs such as product liability insurance may increase due to the introduction of new products.

Current wording

We expect general and administrative expenses to remain consistent over the next several quarters. Costs such as product liability insurance may increase due to the introduction of new products.

Previous 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.

Current wording

Interest and other income/expenses for the nine months ended September 30, 2024 was $18,384,692. 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. We recognized a loss of $1,470,554 when we repaid the outstanding principal of the May 2024 Notes with the proceeds received from our July 2024 equity offering. Non-cash interest expense of $238,965 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2024 Notes until they were repaid. We recorded a loss on the change in the estimated fair value of the Series A and Series B Warrant liabilities of $14,839,326 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 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).

Current wording

Interest and other income/expenses for the three and nine months ended September 30, 2023 were $1,874,785 and $21,745,717, respectively. A loss on extinguishment of the Convertible Notes of $22,296,988 was recognized in the nine months ended September 30, 2023 (see Note 6 to the consolidated financial statements). Non-cash interest expense of $1,130,837 and $4,516,041 was recognized for the amortization of debt issuance costs and accretion of principal on the Convertible Notes issued in August 2022 prior to extinguishment of the Convertible Notes and for the May 2023 Notes for the three and nine months ended September 30, 2023, respectively. A (loss) gain on the change in the valuation of derivative financial liabilities of ($684,994) and $5,107,794 was recognized in the three and nine months ended September 30, 2023 (see Note 8 to the consolidated financial statements).

Previous wording

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

Current wording

Net loss for the three and nine months ended September 30, 2024, was $13,638,478 and $40,292,940, respectively.

Previous wording

Net loss for the three and six months ended June 30, 2023, was $23,028,194 and $30,327,663, respectively.

Current wording

Net loss for the three and nine months ended September 30, 2023, was $11,327,896 and $41,655,559, respectively.

Previous 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.

Current wording

On September 30, 2024, we had cash and restricted cash of $5.9 million, including $0.1 million of restricted cash, and we had a working capital of $4.5 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 net proceeds of $10.8 million and $2.9 million was used to repay the principal on the May 2024 Notes.

Previous 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.

Current wording

Net cash used in operating activities was $12.3 million for the nine months ended September 30, 2024 and includes all of our operating costs except depreciation and amortization of $0.3 million, write down of Stag, Grunt EVO and Volcon Youth inventory and inventory deposits of $9.1 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 $0.6 million, loss on change in derivative financial liabilities of $14.8 million, losses on conversion and exchange of Convertible Notes of $1.6 million, $1.5 million loss on repayment of the May 2024 Notes, $0.8 million from the loss on disposal of fixed assets, and stock based compensation of $0.3 million. 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 $1.0 million in prepaid inventory deposits primarily for purchases of Stag raw materials, a decrease of $0.6 million in accounts payable, and an increase of $0.5 million in accrued liabilities primarily due to the vendor settlement noted above and $0.6 million used to pay our lease liabilities. As of September 30, 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.

Previous 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.

Current wording

Net cash used in operating activities was $16.8 million for the nine months ended September 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 financial liabilities, loss on extinguishment of Convertible Notes, bad debt expense and gain on sale of assets and loss on lease termination. Cash used in operating activities includes a decrease in accounts receivable of $0.6 million for collections net of sales, increases in inventory of $3.2 million due to the purchase of Brats, Volcon Youth motorcycles and purchases of batteries for the Stag offset by the transfer of Grunt inventory of $1.4 million to one of our third party manufacturers, an increase of $2.4 million in accounts payable primarily due to purchases of batteries for the Stag and amounts due to our third party manufacturer of the Stag and Grunt EVO, a decrease of $0.3 million in accrued liabilities due reversal of an accrual for anticipated shipping and tariffs related to shipping raw material and subassembly inventory for the Grunt to our third party manufacturer. As of September 30, 2023 we have $0.2 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 $0.2 million for the six months ended June 30, 2024, primarily consisting of $0.3 million of purchases of equipment and tooling offset by $0.1 million received from an insurance settlement for a vehicle that was totaled in the period.

Current wording

Net cash used in investing activities was $0.2 million for the nine months ended September 30, 2024, primarily consisting of $0.3 million of purchases of equipment and tooling offset by $0.1 million received from an insurance settlement for a vehicle that was totaled in the period.

Previous 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.

Current wording

Net cash used in investing activities was $0.7 million for the nine months ended September 30, 2023, consisting of $0.8 million of purchases of equipment and tooling offset by proceeds of $0.1 million received for the sale of two vehicles.

Previous 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.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024, was $10.2 million and was primarily related to the net proceeds from the issuance of common stock and pre funded warrants in July 2024 for net proceeds of $10.8 million and net proceeds from the issuance May 2024 Senior Notes and May 2024 Note Warrants of $2.3 million offset by the repayment of the May 2024 Senior Notes of $2.9 million.

Previous wording

Cash provided by financing activities for the six months ended June 30, 2023, was $7.9 million and was related primarily to proceeds from the public offering of 6 million shares of our common stock for net proceeds of $4.0 million and issuance of convertible notes in a private offering with a principal amount of $4.9 million and net proceeds of $3.9 million. In addition, we used $0.1 million from proceeds received from the sale of two vehicles to pay off the related notes payable on the vehicles.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2023, was $9.0 million and was related primarily to proceeds from the public offerings of 42 shares of our common stock for net proceeds of $4.6 million and issuance of convertible notes in a private offering with a principal amount of $4.9 million and net proceeds of $3.9 million. We also received proceeds of $0.5 million from proceeds from the exchange of 11 warrants for new warrants . In addition, we used $0.1 million from proceeds received from the sale of two vehicles to pay off the related notes payable on the vehicles.

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 June 30, 2024, we had incurred an accumulated deficit of $147.5 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 September 30, 2024, we had incurred an accumulated deficit of $161.1 million since inception.

Previous 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.

Current wording

Management anticipates that our cash on hand as of September 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 nine months ended September 30, 2024. To continue our operations, we currently estimate that we will need to obtain additional funding by the first 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.