Empery Digital Inc.
For the period ended Mar 31, 2025. Filed May 9, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 9, 2025
EMPD$2.00-3.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001683168-24-007859
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-09.
0001683168-25-003351
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 89 previous paragraphs and 81 current paragraphs.
33 unchanged; 19 reworded; 27 added; 37 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 2 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
We are an all-electric, off-road powersports vehicle company selling Volcon electric two-wheeled E-Bikes and motorcycles, utility terrain vehicles, or UTVs, also known as side-by-sides, and golf carts, along with a line of upgrades and accessories. In January 2025, we also entered into a distribution agreement with a golf cart manufacturer, Super Sonic Company Ltd. (“Super Sonic”) located in Vietnam, and a subsidiary of Odes Industry, to supply golf carts to other companies in the United States who sell golf carts.
Current report
We began selling the Grunt in September 2021 and the Grunt EVO replaced the Grunt in September 2023. Due to the manufacturing cost of the Grunt EVO, we terminated the manufacturing contract for it in December 2024. As of March 31, 2025, we have sold all of the remaining Grunt EVO units.
Current report
We also signed another agreement with Super Sonic to distribute other light UTV models, the VLCN MN1 in the United States. The VLCN MN1 has two models, the MN1 Adventurer, a golf cart style product, which has four seats with a fold down rear seat to accommodate light cargo and the MN1 Tradesman which has two seats with a dump bed for utility purposes.
Current report
Since both the MN1 and HF1 vehicles are manufactured outside of the U.S. we are subject to potential tariffs that could significantly impact our cost to sell these vehicles in the U.S. We are currently evaluating options to sell these vehicles in countries outside the U.S. through distributors.
Current report
Distribution and Supplier Agreements
Current report
Exclusive Distribution Agreement
Current report
In January 2025, we signed an exclusive distribution agreement (the “Distribution Agreement”) with the manufacturer of the MN1s to distribute their golf carts in the United States and its territories. Super Sonic appointed us to act as their exclusive distributor of certain of their golf cart products (the “Products”), in the U.S. Super Sonic agreed to recommend us as the sole provider for all Products to all their customers in the U.S. Super Sonic has the right to sell non-Volcon branded Products to other customers and shall pay 5% of the order price to us. Before the end of June 2025, we agreed to provide a procurement plan, and if we fail to meet the minimum purchase requirement described in the procurement plan for two consecutive months, Super Sonic shall have the right to immediately terminate the Distribution Agreement. During the term of the Distribution Agreement, to the extent we sell any Volcon-branded products (the “Volcon Products”) that are similar to the Products, we agreed to provide Super Sonic with a right of first refusal to manufacture the Volcon Products. We may be required to issue our common stock, warrants to purchase our common stock and the right to appoint a director to our board of directors if certain golf cart sales volumes are attained.
Current report
Supply Agreement
Current report
On February 24, 2025, we entered into a supply agreement with Venom-EV LLC (“Venom”) to supply Venom with certain golf carts. This agreement was amended and restated on April 25, 2025 (the “Supply Agreement”). The Supply Agreement allows Venom to purchase up to $2 million of golf carts with payment terms of the earlier of 100 days from the date the golf carts are shipped from the manufacturer’s facility or upon sale to Venom’s dealers or to consumers. These golf carts will be purchased through a manufacturer specified in the Supply Agreement and we will receive consideration of the cost of the golf carts plus a five percent margin. We received an initial order from Venom for $2.0 million golf carts and paid a deposit to the manufacturer of $0.6 million on May 2, 2025. The remaining $1.4 million will be paid as golf carts are completed and ready for shipment which is expected to be in the second quarter of 2025.
Current report
Dealers
Current report
Consumers
Current report
International Distributors
Current report
Revenue for the three months ended March 31, 2025 was $736,049 which represents sales of Grunt EVOs of $304,905, Brats of $99,458, HF1s of $142,121, MN1-Adventurers of $91,717, MN1-Tradesman of $33,799, and accessories and parts of $24,345.
Current report
Revenue for the three months ended March 31, 2024 was $1,033,548 which represents sales of Grunt EVOs of $329,617, Stag of $39,999, Brats of $532,806, Volcon Youth of $93,757, and accessories and parts of $34,103.
Current report
Cost of goods sold for the three months ended March 31, 2025 was $781,383, including payroll costs of $86,254 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $123,863. Product costs were $224,281 for Grunt EVOs, $119,789 for Brats, $126,101 for HF1s and $131,437 for MN1s.
Current report
Cost of goods sold for the three months ended March 31, 2024 was $1,621,580, including payroll costs of $94,320, which was partially offset by a stock-based compensation benefit of $10,641, for employees performing product fulfillment, logistics management, and service and warranty. Product costs were $343,981 for Grunt EVOs,$228,893 for the Stag which included costs for the one Stag sold in the amount of $43,412 and $10,429 for customized inventory related to the sale of the Stag, $582,550 for Brats and $42,311 for Volcon Youth. Also Included in the Stag product costs is $95,548 of expense related to accruing a loss on sales of units to a customer who initially ordered models that we will not be producing. The Company offered to substitute additional units of the Stag LTD at no additional charge to replace those units. Also relating to Stag costs is $52,503 in inbound freight and tariffs for Stag raw materials. Facilities costs for the three months ended March 31, 2024 were $105,950 for our warehouse facility and third party warehousing costs.
Current report
For the remainder of 2025 we expect revenue to increase due to the expected increase in sales of our products. We expect product costs to increase due to increased sales as well as increased tariffs since our products are manufactured outside the U.S. but it is difficult to predict in the current political environment. Product cost savings may be realized if the third party manufacturer for our vehicles can source or manufacture parts at a lower cost.
Current report
Sales and marketing expenses were $510,957 for the three months ended March 31, 2025 and were primarily related to expenses associated with promoting our products and brand of $101,517 employee payroll costs of $198,319, and professional fees of $72,551 for fees paid to a third party distributor, third- party sales consultants and legal fees.
Current report
Product development expenses were $388,523 for the three months ended March 31, 2025 and were primarily related to expenses associated with employee payroll costs of $249,354, and facilities costs of $56,782.
Current report
Product development expenses were $814,945 for thethree months ended March 31, 2024 and were primarily related to expenses associated with employee payroll costs of $436,902, stock-based compensation of $42,604 for share-based awards granted to employees, facilities costs of $63,856, travel costs primarily related to beginning production of Stag of $53,326 and prototype costs of $91,925.
Current report
General and administrative expenses were $1,561,657 for the three months ended March 31, 2025, and were primarily related to expenses associated with employee payroll costs of $550,402, professional fees of $260,187 (including auditor fees of $77,250, legal fees of $58,697 and consulting fees of $124,240), software costs of $123,629, insurance costs of $450,388, and board compensation expense of $50,000.
Current report
General and administrative expenses were$2,080,794 for the three months ended March 31, 2024, 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 report
Interest and other income/expenses for the three months ended March 31, 2025 was insignificant.
Current report
Net cash used in operating activities was $3.6 million for the three months ended March 31, 2025 and includes all of our operating costs, except non-cash costs of depreciation and amortization, loss on change in derivative financial liabilities and stock-based compensation, all of which were insignificant for the period. Significant uses/contributions of cash used in operating activities includes a decrease of $0.4 million in inventory and inventory deposits, an increase of $0.4 million in prepaid assets, a decrease of $0.2 million in accounts payable, and a decrease of $0.7 million in accrued liabilities primarily due to payments on vendor settlements, $0.1 million used to pay our lease liabilities and $0.2 million for fulfillment of sales where customers had previously placed deposits.
Current report
Cash provided by financing activities for the three months ended March 31, 2025, was $19.1 million and was primarily related to proceeds of $8.8 million from the sale of our common stock from the At the Market offering, proceeds of $10.7 million from the sale of common stock units and prefunded warrant units, partially offset by share repurchases of $0.4 million.
Current report
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.
Removed paragraphs (37)
Previous report
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 report
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 report
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 report
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 report
Pursuant to the manufacturing agreement, the manufacturer has 60 days to cure the breaches indicated in the notice of termination, to the extent the breaches are curable. The Company asked the manufacturer to provide a plan for curing its breaches and to provide assurances that the manufacturer would be able to perform. The manufacturer has not responded to this request from the Company. The Company evaluated the probability that the manufacturer could remediate the breach within 60 days of notification and concluded that it would not be probable. Therefore the Company has written down all of the Stag parts inventory as the Company does not believe that it would be able to recover the inventory since it is in the manufacturer’s possession and even it could the Company does not believe that it could find another manufacturer who could build the Stag without the Company incurring additional significant costs to have the manufacturer set up a production facility. In addition, the Company wrote off all prepaid deposits and advances paid to vendors and the manufacturer of the Stag. The total write off related to Stag inventory, prepaid inventory and advances was $8,712,644. Notwithstanding the foregoing, in the unlikely event the manufacturer is able to cure the breaches set forth in the notice of termination, the Company would continue to sell the Stag in accordance with the terms of the manufacturing agreement.
Previous report
Revenue for the three months ended September 30, 2024, was $1,075,864, which represents sales of Brats of $361,978, Grunt EVOs of $346,189, Stags of $144,901, MN1s of $24,000 and accessories and parts of $137,722.
Previous report
Revenue for the nine months ended September 30, 2024, was $3,050,275 which represents sales of Brats of $1,135,534, Grunt EVOs of $959,953, Stags of $379,787, Volcon Youth of $286,680, MN1s of $24,000 and accessories and parts of $224,522.
Previous report
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 report
Revenue for the nine months ended September 30, 2023, was $2,177,188 which represents sales of Grunt motorcycles of $170,388, Brats of $1,728,528, Grunt EVO motorcycles of $37,193, Volcon Youth of $303,886 and accessories and parts of $204,593 offset by an adjustment of $269,218 to increase dealer rebates due to a change in the rebate programs during the period 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 report
Cost of goods sold for the three months ended September 30, 2024 were $10,294,720, including payroll costs of $56,996 for employees performing product fulfillment, logistics management, and service and warranty. Product costs for Brats, MN1s, and Grunt EVOs sold during the period were $300,880 (before the write down of inventory as discussed below), $22,900, and $878,633, respectively. Stag product costs were $224,784 before the write off of Stag inventory and prepaid deposits. As discussed above in “Overview – Utility Terrain Vehicles (UTVs)”, the Company wrote off all Stag parts inventory, including prepaid inventory deposits resulting in expense of $8,712,644. 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. Offsetting expenses includes an adjustment of $136,121 to the vendor settlement for Stag suspension components recorded in the three months ended June 30, 2024 after auditing the inventory quantities and costs. The Company also recorded $175,000 as an offset to expenses for the partial recovery of a previously written off prepaid inventory deposit. Facilities costs related to operations were $98,254. Loss on disposal of Runt tooling and other equipment was $195,635.
Previous report
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 report
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 report
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 report
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 report
Sales and marketing expenses were $470,692 for the three months ended September 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $161,625, employee payroll costs of 91,684, which includes stock-based compensation expense of $10,053. Professional fees for legal and consulting services were $62,850.
Previous report
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 report
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 report
Product development expenses were $528,352 for the three months ended September 30, 2024 and were primarily related to expenses associated with employee payroll costs of $387,976, facilities costs of $59,952, and travel expenses of $40,331.
Previous report
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 report
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 report
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 report
For the three months ended September 30, 2024, general and administrative expenses were $1,916,712 and were primarily related to expenses associated with employee payroll costs of $543,084, professional fees of $260,447 (which includes legal fees of $143,197), software costs of $129,404, travel costs of $52,121, facilities costs of $53,530 and insurance costs of $664,457.
Previous report
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 report
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 report
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 report
Interest and other income/expenses for the three months ended September 30, 2024 was $1,503,866. 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 $55,146 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 gain on the change in the estimated fair value of the Series A Warrant liability of $53,724.
Previous report
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 report
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 report
Net loss for the three and nine months ended September 30, 2023, was $11,327,896 and $41,655,559, respectively.
Previous report
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 report
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 report
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 report
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Previous report
Derivative Warrant Liabilities
Previous report
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including conversion features of our convertible debt and warrants issued in connection with our convertible debt, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative financial instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
Previous report
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.
Previous report
The modification of the Series B Warrants fixed the number of warrants. One of the provisions of the modification also included a provision that allowed a Series B Warrant holder to cashless exercise the warrant and receive .81 of a share of common stock. We calculated the fair value of the Series B Warrants on the date of the modification based on the modified terms. The Series B Warrant valuation was based on our closing stock price on the modification date multiplied by .81. We recognized a gain in the statement of operations for the three and six months ended June 30, 2024 and reclassified the liability to equity.
Reworded paragraphs (19)
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). 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.
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 received prototypes in February 2025 and we are testing them to evaluate the feasibility to produce and sell them. Provided testing is successful and whether the product cost, including tariffs, allow for us to sell this product, we expect to start selling this product in the second half of 2025.
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. 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.
Current wording
Beginning in the second quarter of 2024, the Company began discussions with various third party manufacturers of electric UTVs to identify models that we could purchase. 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
In the three months ended September 30, 2024, we have signed an agreement with a manufacturer to distribute one of these utility UTV models, the VLCN HF1 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. We have also signed another agreement with a different manufacturer to distribute other light UTV models, the VLCN MN1 in the United States.
Current wording
During 2024, we signed an agreement with a manufacturer to distribute one of these utility UTV models, the VLCN HF1 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.
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 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.
Current wording
We sell our products through powersports dealers, bicycle retailers, and golf cart dealers. As of May 5, 2025, we have 129 active powersports dealers, 20 active bicycle dealers and 14 golf cart dealers. For dealers who qualify for credit, we offer dealers payment terms of 30 to 90 days to make larger purchases of our vehicles provided their order is within their established credit limit. For dealers that do not qualify for credit, they must pay for their order prior to shipment. Powersports dealers can order any of our available products, bicycle retailers can order the Brat, and golf cart dealers can order either version of the MN1. 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 dealers or customers purchasing from our website. There is no recourse to us or the dealer if the customer defaults on the financing agreement with the third party.
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 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.
Current wording
We also sell our two-wheel products internationally through importers. Each importer buys vehicles by the container and sells vehicles and accessories to local dealers or directly to consumers. Payment for orders is required in advance of shipment, except in a few limited instances. Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country. As of May 5, 2025, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, and one importer each in New Zealand, Australia and Japan to sell our two-wheel vehicles and accessories in their assigned countries/markets. In 2025, we expect to expand our global sales of our vehicles and accessories beyond our current distributor base and offer our four-wheel products to these customers.
Previous 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.
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. Due to the change in tariffs announced in April 2025, the cost of our products will increase and could increase further if additional changes in import laws or tariffs occur. 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 and nine months ended September 30, 2024 and 2023.
Current wording
The following financial information is for the three months ended March 31, 2025 and 2024.
Previous 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.
Current 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 cancellation 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.
Previous 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.
Current wording
For the remainder of 2025 we expect sales expenses to increase as we begin expanding our international distributors and selling commissions for increased sales of our products. We expect marketing expenses to increase to promote the MN1 and HF1 products and to launch the two-wheel motorcycle that will replace the Grunt EVO.
Previous 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.
Current wording
For the remainder of 2025 we expect product development costs related to employee costs to remain consistent with the quarter ended March 31, 2025 and we expect an increase in prototype expenses as we develop the dual sport motorcycle.
Previous 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.
Current wording
For the remainder of 2025 we expect general and administrative expenses to remain consistent. Costs such as product liability insurance may increase due to the introduction of new products and increased sales.
Previous 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.
Current 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.
Previous wording
Net loss for the three and nine months ended September 30, 2024, was $13,638,478 and $40,292,940, respectively.
Current wording
Net loss for the three months ended March 31, 2025 was $2,460,430. Net loss for the three months ended March 31, 2024, was $26,048,044.
Previous 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.
Current wording
On March 31, 2025, we had cash, cash equivalents and restricted cash of $17.7 million, including $0.1 million of restricted cash, and we had working capital of $16.4 million. Since inception we have funded our operations from proceeds from debt and equity sales.
Previous 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.
Current 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.
Previous 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.
Current wording
Net cash used in investing activities was $0.2 million for the three months ended March 31, 2025, primarily consisting of purchases of equipment and tooling.
Previous 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.
Current 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.
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 September 30, 2024, we had incurred an accumulated deficit of $161.1 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 March 31, 2025, we had incurred an accumulated deficit of $168.8 million since inception.
Previous 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.
Current wording
Management anticipates that our cash and cash equivalents on hand as of March 31, 2025 will not be sufficient to fund planned operations beyond one year from the date of the issuance of the financial statements as of and for the three months ended March 31, 2025. We do not have any current commitments for future 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 financing, we will be required to modify or curtail our operations. These factors raise substantial doubt regarding our ability to continue as a going concern.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
We will continue to evaluate other potential two-wheel product offerings throughout 2025.
Current report — wording carried from elsewhere
Consumers can purchase the Brat from our website and have it delivered to a location of their choosing in the continental U.S.