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What changed in Empery Digital Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Empery Digital Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+251 added−304 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-28)

Top changes in Empery Digital Inc.'s 2024 10-K

251 paragraphs added · 304 removed · 145 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

111 edited+73 added−106 removed113 unchanged
Biggest changeEven if the reverse stock split has a positive effect on the market price for shares of our common stock, performance of our business and financial results, general economic conditions and the market perception of our business, and other adverse factors which may not be in our control could lead to a decrease in the price of our common stock following the reverse stock split. 22 Furthermore, even if the reverse stock split does result in an increased market price per share of our common stock, the market price per share following the reverse stock split may not increase in proportion to the reduction of the number of shares of our common stock outstanding before the implementation of the reverse stock split.
Biggest changeEven if the reverse stock split has a positive effect on the market price for shares of our common stock, performance of our business and financial results, general economic conditions and the market perception of our business, and other adverse factors which may not be in our control could lead to a decrease in the price of our common stock following the reverse stock split.
We have resolved some conflicts and potential conflicts that have arisen with regard to the use and registration of our trademarks through coexistence agreements and the submission of arguments.
We have resolved some conflicts and potential conflicts that have arisen with regard to the use and registration of our trademarks through coexistence agreements and the submission of arguments.
Increased competition could result in lower vehicle sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition, and operating results. 13 We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs.
Increased competition could result in lower vehicle sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which could harm our business, prospects, financial condition, and operating results. We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs.
Endo, they are each entitled to a payment of 5% of the gross proceeds from any merger, sale or change of control transaction (as determined by the board of directors) entered by the Company for a period of up to 6 months after termination of employment; provided that they are not terminated for Cause (as defined in the employment agreement).
Endo, they are each entitled to a payment of 5% of the gross proceeds from any merger, sale or change of control transaction (as determined by the board of directors) entered into by the Company for a period of up to 6 months after termination of employment; provided that they are not terminated for cause (as defined in the employment agreement).
Although we take precautions to protect our intellectual property, using our third party manufacturers in Mexico and China could subject us to an increased risk that unauthorized parties will be able to copy or otherwise obtain or use our intellectual property, and we may be unsuccessful in monitoring and enforcing our intellectual property rights against them, which could harm our business.
Although we take precautions to protect our intellectual property, using our third party manufacturers in China could subject us to an increased risk that unauthorized parties will be able to copy or otherwise obtain or use our intellectual property, and we may be unsuccessful in monitoring and enforcing our intellectual property rights against them, which could harm our business.
Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer. We primarily sell our vehicles and accessories through a network of third parties, and there is no assurance that we will be able to successfully build out this network.
Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer. 13 We primarily sell our vehicles and accessories through a network of third parties, and there is no assurance that we will be able to successfully build out this network.
Any remedial costs or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means. Moreover, we or our third party vendors or business partners may be more vulnerable to such attacks in remote work environments, which have increased in response to the COVID-19 pandemic.
Any remedial costs or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means. Moreover, we or our third party vendors or business partners may be more vulnerable to such attacks in remote work environments, which increased in response to the COVID-19 pandemic.
In addition, global financial markets overall have seen significant volatility in 2023 and could continue to experience volatility in the future and could decline. A number of large companies have announced layoffs. Public companies in the EV sector have seen significant declines and volatility in 2023. Consumer confidence in the U.S. has declined.
In addition, global financial markets overall have seen significant volatility since 2023 and could continue to experience volatility in the future and could decline. A number of large companies have announced layoffs. Public companies in the EV sector have seen significant declines and volatility. Consumer confidence in the U.S. has declined.
If we are unable to realize our sales and delivery plan, our brand, business, prospects, financial condition, and operating results could be materially damaged. We are dependent on our third party manufacturers, who are dependent on their suppliers, some of which could be single-source suppliers.
If we are unable to realize our sales and delivery plan, our brand, business, prospects, financial condition, and operating results could be materially damaged. 8 We are dependent on our third party manufacturers, who are dependent on their suppliers, some of which could be single-source suppliers.
Even if granted, there can be no assurance that our issued patents or new patent applications will provide us with protection. We have registrations for the trademarks VOLCON and GRUNT in the U.S.
Even if granted, there can be no assurance that our issued patents or new patent applications will provide us with protection. We have registrations for the trademarks VOLCON, GRUNT, and GRUNT EVO in the U.S.
Our efforts to secure trademark registrations for VOLCON and other trademarks referenced above are ongoing and we may encounter resistance from other companies, particularly as we expand into additional territories.
Our efforts to secure trademark registrations for VOLCON and VLCN and other trademarks referenced above are ongoing and we may encounter resistance from other companies, particularly as we expand into additional territories.
Our efforts to secure trademark registrations for VOLCON and other trademarks referenced above are ongoing and we may encounter resistance from other companies, particularly as we expand into additional territories.
Our efforts to secure trademark registrations for VOLCON and VLCN and other trademarks referenced above are ongoing and we may encounter resistance from other companies, particularly as we expand into additional territories.
Product recalls could also harm our reputation and cause us to lose customers, particularly if recalls cause consumers to question the safety or reliability of our products, which could have a material adverse effect on our business, results of operations or financial condition. 16 Our success is dependent upon the success of the off-road vehicle industry and upon consumers’ willingness to adopt electric vehicles.
Product recalls could also harm our reputation and cause us to lose customers, particularly if recalls cause consumers to question the safety or reliability of our products, which could have a material adverse effect on our business, results of operations or financial condition. 15 Our success is dependent upon the success of the off-road vehicle industry and upon consumers’ willingness to adopt electric vehicles.
These material weaknesses are as follows: · Inadequate segregation of duties within account processes due to limited personnel · Insufficient formal written policies and procedures for accounting, IT, financial reporting and record keeping In addition to hiring more finance and accounting personnel in 2021 to improve our segregation of duties, through 2023, we have made further progress towards remediating these material weaknesses.
These material weaknesses are as follows: · Inadequate segregation of duties within account processes due to limited personnel · Insufficient formal written policies and procedures for accounting, IT, financial reporting and record keeping In addition to hiring more finance and accounting personnel in 2021 to improve our segregation of duties, through 2024, we have made further progress towards remediating these material weaknesses.
This increase in regulations may result in increased costs and expenses, which may materially and adversely affect our business, results of operations or financial condition. 17 We could be negatively impacted by cybersecurity attacks and are subject to evolving privacy laws in the U.S. and other jurisdictions that could adversely impact our business and require that we incur substantial costs.
This increase in regulations may result in increased costs and expenses, which may materially and adversely affect our business, results of operations or financial condition. 16 We could be negatively impacted by cybersecurity attacks and are subject to evolving privacy laws in the U.S. and other jurisdictions that could adversely impact our business and require that we incur substantial costs.
Many companies, which have greater financial and marketing resources than Volcon, make electric street motorcycles, including Zero Motorcycles. Some companies make electric UTVs as part of their product line. For example, Polaris has a joint venture with Zero Motorcycles to help them design dedicated electric UTVs, the first product of which began selling in 2023.
Many companies, which have greater financial and marketing resources than us, make electric street motorcycles , including Zero Motorcycles. Some companies make electric UTVs as part of their product line. For example, Polaris has a joint venture with Zero Motorcycles to help them design dedicated electric UTVs, the first product of which began selling in 2023.
Our business model is dependent not only on our ability to create the foregoing network, but also on the commitment and motivation of these third parties to promote our brand and products. Orders for vehicles are cancelable and there can be no assurance that all orders will result in revenue being recognized.
Our business model is dependent not only on our ability to create the foregoing network, but also on the commitment and motivation of these third parties to promote our brand and products. Orders for vehicles are cancellable and there can be no assurance that all orders will result in revenue being recognized.
We do not intend to compete with dealers who sell these products and we provide for price protection to them in the event we are selling these products below the retail price they are selling them for in order for them to maintain their margin. We also sell our vehicles and accessories internationally through international distributors.
We do not intend to compete with our dealers who sell these products and we provide price protection to them in the event we are selling these products below the retail price they are selling them for in order for them to maintain their margin. We also sell our two-wheeled vehicles and accessories internationally through international distributors.
The recent conflict between Russia and the Ukraine could impact the availability of nickel, an element used in the production of lithium ion cells used in batteries that power our vehicles. According to the Wall Street Journal, Russia produces 5%-6% of the world’s nickel supply and 17% of the high purity nickel production.
The ongoing conflict between Russia and the Ukraine could impact the availability of nickel, an element used in the production of lithium ion cells used in batteries that power our vehicles. According to the Wall Street Journal, Russia produces 5%-6% of the world’s nickel supply and 17% of the high purity nickel production.
While we believe these efforts have improved the internal control over financial reporting during 2023, they did not fully remediate the material weaknesses as we have not fully documented all of our policies or procedures and we have not performed any testing of our internal controls.
While we believe these efforts have improved the internal control over financial reporting during 2024, they did not fully remediate the material weaknesses as we have not fully documented all of our policies or procedures and we have not performed any testing of our internal controls.
Our mission is to build industry leading products that connect people to outdoor experiences through the intentional blending of leading technology and design. Our vision is to amplify the powersports experience for all. Our values are building the future of powersports.
Our mission is to source industry leading products that connect people to outdoor experiences through the intentional blending of leading technology and design. Our vision is to amplify the powersports experience for all. Our values are building the future of powersports.
Any cancellations could harm our financial condition, business, prospects and operating results. 15 We may be unable to improve our existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance.
Any cancellations could harm our financial condition, business, prospects and operating results. 14 We may be unable to improve our existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance.
We will need to raise additional funds to finance our operations, to complete acquisitions or to develop strategic relationships by issuing equity or convertible debt securities, which would reduce the percentage ownership of our existing stockholders.
If we need to raise additional funds to finance our operations, to complete acquisitions or to develop strategic relationships by issuing equity or convertible debt securities, which would reduce the percentage ownership of our existing stockholders.
For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.
For instance, smaller reporting companies are not required to obtain an auditor attestation and report regarding management’s assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure. 20 ITEM 1B.
The markets for powersport vehicles and eBikes are highly competitive based on a number of factors, including innovation, performance, price, technology, product features, styling, fit and finish, brand recognition, quality and distribution. We believe our ability to compete successfully in these markets depends on our ability to capitalize on our competitive strengths and build brand recognition.
The markets for powersport vehicles and E-Bikes are highly competitive based on a number of factors, including innovation, performance, price, technology, product features, styling, fit and finish, brand recognition, quality and distribution. We believe our ability to compete successfully in these markets depends on our ability to capitalize on our competitive strengths and build brand recognition.
The material weaknesses identified by our independent registered public accounting firm in our internal control over financial reporting in our 2020 audit have not been remediated as of December 31, 2023.
The material weaknesses identified by our independent registered public accounting firm in our internal control over financial reporting in our 2020 audit have not been remediated as of December 31, 2024.
If we elect to make any payments to the entities in the form of stock, it would reduce the ownership percentage of our other stockholders. 20 In January 2024, the Company entered into an employment agreement with John Kim, a member of the board of directors of the Company, to become the Company’s CEO and President.
If we elect to make any payments to the entity in the form of stock, it would reduce the ownership percentage of our other stockholders. In January 2024, the Company entered into an employment agreement with John Kim, a member of the board of directors of the Company, to become the Company’s CEO and President.
Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our business, results of operations or financial condition. We provide a one-year warranty against defects for the Grunt EVO, Brat and Volcon youth motorcycles and a two-year warranty on the battery.
Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our business, results of operations or financial condition. We provide a one-year warranty against defects for the Grunt EVO and Brat and a two-year warranty on the battery.
S., which could cause the cost of our products manufactured there to rise, or result in our inability to continue to use third party manufacturers in such country, resulting in a need to find alternative sources of manufacture, which could result in the delay of manufacture and supply of our products, increase our cost of manufacture, and cause a delay in our shipments to customers and a delay or cancellation of orders.
S., which could cause the cost of our products manufactured there to rise, or result in our inability to continue to use third party manufacturers in China, resulting in a need to find alternative sources of manufacture, which could result in the delay of manufacture and supply of our products, increase our cost of manufacture, and cause a delay in our shipments to customers and a delay or cancellation of orders.
In addition, as we do not have a long-term history of sales, our forecasted demand may be materially incorrect, which could cause us to fail to meet unforeseen demand and incur higher costs for excess inventory purchased to meet our forecast.
In addition, as we do not have a long-term history of sales, our forecasted demand may be materially incorrect, which could cause us to either fail to meet unforeseen demand or incur higher costs for excess inventory purchased to meet our forecast.
We have registrations for the trademarks VOLCON and GRUNT in the U.S.
We have registrations for the trademarks VOLCON, GRUNT, and GRUNT EVO in the U.S.
If we receive objections from other entities and are unsuccessful in obtaining agreements or otherwise resolving the matters with these entities, we will need to consider the use of different trademarks for our Company and our products. Competition There are dozens of manufacturers that sell off-road motorcycles, UTVs and eBikes in the U.S. and even more globally.
If we receive objections from other entities and are unsuccessful in obtaining agreements or otherwise resolving the matters with these entities, we will need to consider the use of different trademarks for our Company and our products. 4 Competition There are dozens of manufacturers that sell off-road motorcycles, UTVs and E-Bikes in the U.S. and even more globally.
The market price of our common stock is subject to wide fluctuations in response to, among other things, the risk factors described in this filing and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us.
The m arket price of our common stock is subject to wide fluctuations in response to, among other things, the risk factors described in this filing and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us.
For instance, we are exposed to multiple risks relating to battery packs. 11 These risks include: · an increase in the cost, or decrease in the available supply, of materials used in the battery packs; · disruption in the supply of battery packs due to quality issues or recalls by battery cell manufacturers; · sanctions imposed by the U.S. on countries in which our products are manufactured or where parts are manufactured for our third party manufacturers; and · tariffs on the products we source in China.
These risks include: · an increase in the cost, or decrease in the available supply, of materials used in the battery packs; · disruption in the supply of battery packs due to quality issues or recalls by battery cell manufacturers; · sanctions imposed by the U.S. on countries in which our products are manufactured or where parts are manufactured for our third party manufacturers; and · tariffs on the products we source in China.
Our reliance on third parties for the manufacture, design and development of our vehicles exposes us to a number of risks which are outside our control, including: · delays due to design and development of our products to meet our product specifications · delays due to defective parts or components · unexpected increases in manufacturing costs; · interruptions in vehicle deliveries if a third party vendor is unable to complete production or design in a timely manner; · shipping delays due to availability of ships, trains, trucks or containers to ship products or delays at ports to ship products to us or to our customers; and · inability to control the quality of finished products. 9 Our reliance on third parties reduces our control over the manufacturing, design and development processes, including reduced control over timing to release products, quality, product costs and product supply.
Our reliance on third parties for the manufacture, design and development of our vehicles exposes us to a number of risks which are outside our control, including: · delays due to design and development of our products to meet our product specifications; · delays due to defective parts or components; · unexpected increases in manufacturing costs; · interruptions in vehicle deliveries if a third party vendor is unable to complete production or design in a timely manner; · shipping delays due to availability of ships, trains, trucks or containers to ship products or delays at ports to ship products to us or to our customers; and · inability to control the quality of finished products.
Products that we have manufactured for us in Mexico and China may also be subject to any uncertainty of trade relations between such countries and the U.
Products that we have manufactured for us in China may also be subject to any uncertainty of trade relations between China and the U.
These vendors may experience delays in fulfilling their obligations under these contracts due to the inability to source parts from other vendors, lack of employees available to work on our projects due to labor shortages or other competing projects from other customers or COVID-19-related issues impacting employees.
These vendors may experience delays in fulfilling their obligations under these contracts due to the inability to source parts from other vendors, lack of employees available to work on our projects due to labor shortages or other competing projects from other customers.
Many companies, like Super 73, make and sell eBikes and have a stronger established brand name and product line. Government regulations We have focused on the off-road-only portion of the market because it is free of many of the homologation issues and highway certifications required to produce and sell an on-road vehicle.
Many companies, like Super 73, make and sell E-Bikes and have a stronger established brand name and product line. Government regulations We initially focused on the off-road-only portion of the market for our motorcycle and UTV because it is free of many of the homologation issues and highway certifications required to produce and sell an on-road vehicle.
As of March 15, 2024, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, one importer in New Zealand, and one importer in Australia to sell our vehicles and accessories in their assigned countries/markets.
As of March 21, 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.
As an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
Management anticipates that our cash on hand as of December 31, 2023 plus the cash expected to be generated from operations will not be sufficient to fund planned operations and maintain required cash balances for the Convertible Notes beyond one year from the date of the issuance of the financial statements as of and for the year ended December 31, 2023.
Management anticipates that our cash on hand as of December 31, 2024 plus the cash expected to be generated from operations, and the cash received from the ATM and February 6, 2025 equity offering will not be sufficient to fund planned operations and maintain required cash balances for the Convertible Notes beyond one year from the date of the issuance of the financial statements as of and for the year ended December 31, 2024.
Additionally, for so long as we remain an emerging growth company, we: · may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and · are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. 23 We intend to take advantage of all of these reduced reporting requirements and exemptions, other than the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.
Additionally, for so long as we remain an emerging growth company, we: · may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and · are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act.
The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased production of electric vehicle (EV) products by our competitors, and could adversely affect our business and operating results.
The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased production of electric vehicle (EV) products by our competitors, and could adversely affect our business and operating results. For instance, we are exposed to multiple risks relating to battery packs.
Bureau of Economic Analysis, or the BEA, found that outdoor recreation drives $563 billion of the current-dollar gross domestic product for the U.S. The BEA noted that motorcycles and ATVs make up $11.5 billion of that total.
Bureau of Economic Analysis, or the BEA, found that outdoor recreation drives $640 billion of the current-dollar gross domestic product for the U.S, compared to $563 billion in 2022. The BEA noted that motorcycles and ATVs make up $11.7 billion of the 2023 total.
The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to design changes and delays in product deliveries to our customers, which could hurt our relationships with our customers and result in negative publicity, damage to our brand and reputation, and a material and adverse effect on our business, prospects, financial condition and operating results . 10 Our third party manufacturers operate outside of the U.S., subjecting us to risks of international operations.
The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to design changes and delays in product deliveries to our customers, which could hurt our relationships with our customers and result in negative publicity, damage to our brand and reputation, and a material and adverse effect on our business, prospects, financial condition and operating results .
Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange. In an effort to regain compliance with Nasdaq listing rules, we completed a reverse stock split on October 13, 2023 and a reverse stock split on February 5, 2024.
Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange. In an effort to regain compliance with Nasdaq listing rules, we completed reverse stock splits during 2024.
Failure to develop and maintain a strong brand would materially and adversely affect customer acceptance of our vehicles, could result in suppliers and other third parties being less likely to invest time and resources in developing business relationships with us, and could materially adversely affect our business, results of operations or financial condition.
Failure to develop and maintain a strong brand could materially and adversely affect customer acceptance of our vehicles, could result in suppliers and other third parties being less likely to invest time and resources in developing business relationships with us, and could materially adversely affect our business, results of operations or financial condition. 11 An adverse determination in any significant product liability claim against us could materially adversely affect our business, results of operations or financial condition.
We have also applied to register additional trademarks – including VOLCON, VOLCON BRAT, VOLCON STAG, GRUNT EVO, EMPOWERING ADVENTURE, RUNT, VOLCON RUNT, STAG, and VOLCON STAG - in the U.S., Canada, New Zealand, Australia and certain additional countries in Latin America, and many of these trademarks are now allowed or registered in these countries.
We have also applied to register additional trademarks – including VOLCON, VOLCON BRAT, EMPOWERING ADVENTURE, STAG, VOLCON STAG, VLCN, VLCN BRAT, VLCN HF1, VLCN MN1, VLCN FT1, VLCN HT1, VLCN SK1, and VLCN RV1 - in the U.S., Canada, New Zealand, Australia and certain additional countries in Latin America, and many of these trademarks are now allowed or registered in these countries.
We have also applied to register additional trademarks – including VOLCON, VOLCON BRAT, VOLCON STAG, GRUNT EVO, EMPOWERING ADVENTURE, RUNT, VOLCON RUNT, STAG, and VOLCON STAG - in the U.S., Canada, New Zealand, Australia and certain additional countries in Latin America, and many of these trademarks are now allowed or registered in these countries.
We have also applied to register additional trademarks – including VOLCON, VOLCON BRAT, EMPOWERING ADVENTURE, STAG, VOLCON STAG, VLCN, VLCN BRAT, VLCN HF1, VLCN MN1, VLCN FT1, VLCN HT1, VLCN SK1, and VLCN RV1 - in the U.S., Canada, New Zealand, Australia and certain additional countries in Latin America, and many of these trademarks are now allowed or registered in these countries.
These sanctions have also impacted the U.S. and global economy and could result in an economic recession which could cause a broader disruption to the Company’s supply chain and distribution network and customer demand for our products.
These sanctions have also impacted the U.S. and global economy and could result in an economic recession which could cause a broader disruption to the Company’s supply chain and distribution network and customer demand for our products. These factors would have a negative impact on our results of operations and cash flows.
Globally inflation and interest rates rose in 2023 compared to 2022 and could continue to rise or remain at current levels in the future. Our vehicles represent a discretionary purchase.
Globally inflation and interest rates rose in 2023 and remained at such levels in 2024 and could rise or remain at current levels in the future. Our vehicles represent a discretionary purchase.
We have received notice from an entity in Brazil who has opposed our applications for trademarks including the word VOLCON, but we believe the trademarks and the goods being sold under them are not similar and there is no potential for confusion. 5 We have also identified that in Australia, VOLCON is similar to another trademark that does not appear to be in use.
We have received notice from an entity in Brazil who has opposed our applications for trademarks including the word VOLCON, but we believe the trademarks and the goods being sold under them are not similar and there is no potential for confusion.
On December 19, 2023, the Company received a notice from the Nasdaq that we were not in compliance with Nasdaq’s Listing Rule 5550(a)(2), (the “Bid Price Rule”) as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days.
On December 19, 2023, we were notified by the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) that we were not in compliance with Nasdaq’s Listing Rule 5550(a)(2), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days.
We may enter into agreements with third parties to manage such recycling and disposal; however, we may be found liable for any failures in compliance by these third parties and subject to fines or remediation liabilities, which costs may be substantial. We intend to sell and distribute our vehicles internationally through international distributors.
We may enter into agreements with third parties to manage such recycling and disposal; however, we may be found liable for any failures in compliance by these third parties and subject to fines or remediation liabilities, which costs may be substantial. Vehicles sold internationally are subject to the local laws of each jurisdiction in which we sell our vehicles.
We can provide no assurance that we will not realize future delays in production, and until we have multiple manufacturers or manufacture our products internally, our ability to release products on the timeline we expect will be dependent on our current outside manufacturers.
We can provide no assurance that we will not realize future delays in production or our costs will stay at levels that allow us to sell our products profitably. Since we do not have multiple manufacturers or manufacture our products internally, our ability to release products on the timeline we expect will be dependent on our current outside manufacturers.
Because we are a young company with limited sales history and recurring losses, we may not be able to obtain these inventory financing sources which may result in dealers not wanting to sell our vehicles.
Because we are a young company with limited sales history and recurring losses, we may not be able to obtain these inventory financing sources which may result in dealers not wanting to sell our vehicles. In the U.S., we began to sell the Brat on our website in 2023, in addition to our dealer network and bicycle dealers.
In the U.S., the Consumer Product Safety Commission (CPSC) has federal oversight over product safety issues related to off-road vehicles and eBikes. We believe that our products comply with all applicable CPSC safety standards as well as all other applicable safety standards in the U.S. The assembly, use, storage, transport and disposal of battery packs is subject to extensive regulation.
We believe that our products comply with all applicable CPSC safety standards as well as all other applicable safety standards in the U.S. The assembly, use, storage, transport and disposal of battery packs is subject to extensive regulation.
We are utilizing a small number of vendors to assist us with the manufacturing, development and design of our vehicles, including the chassis, electrical systems, safety requirements, body components and accessories, and the inability of these vendors to complete our respective design requirements may delay our ability to release these vehicles for production, which could have a material adverse effect on our financial condition and operating results.
While we take measures to protect our trade secrets, the use of third party manufacturers may also risk disclosure of our innovative and proprietary manufacturing methodologies, which could adversely affect our business. 9 We are utilizing a small number of vendors to assist us with the manufacturing, development and design of our vehicles, including the chassis, electrical systems, safety requirements, body components and accessories, and the inability of these vendors to complete our respective design requirements may delay our ability to release these vehicles for production, which could have a material adverse effect on our financial condition and operating results.
Any significant delay or other complications in the production of our vehicles or the development, manufacture, and production ramp of our future vehicles, including complications associated with our third party manufacturers’ supply chains or obtaining or maintaining regulatory approvals, and/or coronavirus impacts, could materially damage our brand, business, prospects, financial condition and operating results.
Any significant delay or other complications in the production of our vehicles or the development, manufacture, and production ramp of our future vehicles, including complications associated with our third party manufacturers’ supply chains or obtaining or maintaining regulatory approvals, could materially damage our brand, business, prospects, financial condition and operating results. 10 We are an early-stage company and we have delivered a limited number of vehicles to customers.
We do not intend to pay dividends in the foreseeable future. We have never declared or paid any cash dividends on our capital stock. We do not expect to pay any cash dividends on our common stock in the foreseeable future.
We do not expect to pay any cash dividends on our common stock in the foreseeable future.
There can be no assurance that we will not require additional funding to support our operations. There can be no assurance that such additional funding, if needed, would be available to the Company on acceptable terms, or at all. These factors raise substantial doubt regarding our ability to continue as a going concern.
There can be no assurance that we will not require additional funding to support our operations. There can be no assurance that such additional funding, if needed, would be available to the Company on acceptable terms, or at all.
Our warranty for the Stag is also one-year against defects and two years for the batteries. Our warranty will generally require us to repair or replace defective products during such warranty periods at no cost to the consumer. Some of the parts are warrantied by the part manufacturer where others are no.
Our warranty will generally require us to repair or replace defective products during such warranty periods at no cost to the consumer. Some of the parts are warrantied by the part manufacturer where others are not.
In the event that our common stock is delisted from Nasdaq and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board.
In the event that the Nasdaq Hearings Department does not grant us an extension to demonstrate compliance our common stock would be delisted from Nasdaq and trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board.
We believe that our employees are our greatest asset and are striving to consistently evaluate our progress in developing and maintaining engagement. Available Information Our website is at www.volcon.com.
Management is also committed to being available to discuss any employee concerns on a one-on-one basis. We believe that our employees are our greatest asset and are striving to consistently evaluate our progress in developing and maintaining engagement. Available Information Our website is at www.volcon.com.
The conflict with Russia and the Ukraine could have an impact on the availability of components used in the manufacturing of lithium ion batteries that we use to power our vehicles.
There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability. The conflict with Russia and the Ukraine could have an impact on the availability of components used in the manufacturing of lithium ion batteries that we use to power our vehicles.
In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business. 8 Our transition to an outsourced manufacturing, design and development business model may not be successful, which could harm our ability to deliver products and recognize revenue.
In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.
We are relying on these distributors to market, promote, sell and service our vehicles and sell accessories in their designated countries/territories. We believe our success will be highly dependent on our ability to build out this network in the major markets in which we intend to compete for customers, and to maintain this network in the future.
We believe our success will be highly dependent on our ability to build out this network in the major markets in which we intend to compete for customers, and to maintain this network in the future.
A significant and growing number of established and new companies have entered or are reported to have plans to enter the EV market, including the off-road market that we intend to pursue.
There is no assurance that our vehicles will be successful in the respective markets in which they compete. A significant and growing number of established and new companies have entered or are reported to have plans to enter the EV market, including the off-road market that we intend to pursue.
According to the PowerSports Business 2023 Market Data Book: · In the U.S., UTV sales were just under 550,000 units in 2022, according to leading industry research firm Power Products Marketing. New motorcycle sales in 2022, meanwhile, were 733,537 units, according to the Motorcycle Industry Council.
According to the PowerSports Business 2024 Market Data Book: · In the U.S., UTV sales were just under 569,000 units in 2023, an increase of approximately 3.5% from 2022, according to Power Products Marketing (“PPM”). · New motorcycle sales in 2023, meanwhile, were approximately 520,000 units, according to the Motorcycle Industry Council (“MIC”), compared to 733,537 in 2022.
Resales of our common stock may cause the market price of our securities to drop significantly, regardless of the performance of our business. 19 Your ownership may be diluted if additional capital stock is issued to raise capital, to finance our operations, to complete acquisitions or in connection with strategic transactions.
Risks Related to our Common Stock Your ownership may be diluted if additional capital stock is issued to raise capital, to finance our operations, to complete acquisitions or in connection with strategic transactions.
As such, we will be subject to the local laws of each jurisdiction in which we sell our vehicles. These regulations may result in increased costs and expenses, which may materially and adversely affect our business, results of operations or financial condition. 6 Human Capital Volcon Mission People are at the core of our DNA.
These regulations may result in increased costs and expenses, which may materially and adversely affect the distributors business where it may not be economically feasible to sell our products locally, which in turn will adversely impact our results of operations or financial condition. Human Capital Mission People are at the core of our DNA.
The estimated fulfillment of all orders we have received assumes that our third party manufacturers can successfully meet our order quantities and deadlines. If they are unable to satisfy orders on a timely basis, our customers may cancel their orders.
The estimated fulfillment of all orders we have received assumes our third party manufacturers can successfully increase their production capacity in the future, of which there is no assurance. If we are unable to satisfy pending orders on a timely basis, customers may cancel their orders.
We may also have limited legal recourse in the event we encounter patent or trademark infringers, which could adversely affect our business, results of operations, and financial condition. While we take measures to protect our trade secrets, the use of third party manufacturers may also risk disclosure of our innovative and proprietary manufacturing methodologies, which could adversely affect our business.
We may also have limited legal recourse in the event we encounter patent or trademark infringers, which could adversely affect our business, results of operations, and financial condition.
We cannot predict whether we will need to complete an additional reverse stock split and the effect that such reverse stock split will have on the market price for shares of our common stock. As noted in the risk factor above, we were out of compliance with the Bid Price Rule and the Low Priced Stocks Rule in December 2023.
We cannot predict whether we will need to complete an additional reverse stock split and the effect that such reverse stock split will have on the market price for shares of our common stock.
Employee Engagement We are committed to building a strong culture with high levels of employee engagement. We hold quarterly all-hands and ad hoc meetings where management discusses various topics with employees including operational updates, vehicle development, financing activities, company policies and safety. Management is also committed to being available to discuss any employee concerns on a one-on-one basis.
This work environment is guided by principles of fair and equal treatment and prioritizes effective communication and employee engagement. 5 We are committed to building a strong culture with high levels of employee engagement. We hold ad hoc meetings where management discusses various topics with employees including operational updates, vehicle development, financing activities, company policies and safety.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.
In March 2022, we signed an agreement with a manufacturer in China to develop and manufacture the Brat, our first eBike. We provided this vendor with our specifications and design drawings, and they developed prototypes and the manufacturing process to build the Brat at a cost that was acceptable to us.
We provided this vendor with our specifications and design drawings, and they developed prototypes and the manufacturing process to build the Brat at a cost that was acceptable to us. We launched the Brat in December 2022 and have sold the Brat throughout 2024 and expect to continue to sell the Brat in 2025.
We are an early-stage company and we have delivered a limited number of vehicles to customers. We have delivered a limited number of vehicles to customers and we have no meaningful historical financial data upon which we may base our projected revenue and operating expenses.
We have delivered a limited number of vehicles to customers and we have no meaningful historical financial data upon which we may base our projected revenue and operating expenses. Our limited operating history makes it difficult for potential investors to evaluate our products or prospective operations and business prospects.
Potential tariffs or a global trade war could increase our costs and could further increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.
Increased tariffs or a global trade war could increase our costs and could further increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results. The Brat, MN1s and HF1 depend on materials from China, namely batteries, which are among the main components of our vehicles.
An adverse determination in any significant product liability claim against us could materially adversely affect our business, results of operations or financial condition. The development, production, marketing, sale and usage of our vehicles will expose us to significant risks associated with product liability claims.
The development, production, marketing, sale and usage of our vehicles will expose us to significant risks associated with product liability claims.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changePersonnel at all levels and departments are made aware of our cybersecurity policies through communications. As of December 31, 2023, and through the date of the filing of this report, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Biggest changePersonnel at all levels and departments are made aware of our cybersecurity policies through communications. As of December 31, 2024, and through the date of the filing of this report, we are not aware of any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
We engage a managed service provider (“MSP”) and other third parties in connection with our cybersecurity and information technology risk assessment processes and our MSP also assists us with managing and monitoring our network and local compute systems. These service providers assist us in designing and implementing our cybersecurity policies and procedures, as well as monitoring and testing our safeguards.
We engage a managed service provider (“MSP”) and other third parties in connection with our cybersecurity and information technology risk assessment processes and our MSP also assists us with managing and monitoring our network and local computer systems. These service providers assist us in designing and implementing our cybersecurity policies and procedures, as well as monitoring and testing our safeguards.
We conducted a NIST risk assessment and perform as needed updates to our risks to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.
We conducted a NIST risk assessment and performed as needed updates to our risks to identify cybersecurity threats, as well as assessments in the event of a material change in our business practices that may affect information systems that are vulnerable to such cybersecurity threats.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located in Round Rock, Texas, where we currently lease approximately 23,300 square feet of space across three facilities. We believe that our existing space is adequate for our current operations. We believe that suitable replacement and additional space, if necessary, will be available in the future on commercially reasonable terms. 24
Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located in Round Rock, Texas, where we currently lease approximately 23,300 square feet of space across three facilities. We believe that our existing space is adequate for our current operations. We believe that suitable replacement and additional space, if necessary, will be available in the future on commercially reasonable terms. 21

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe have insurance policies covering potential losses where such coverage is cost effective. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 25 PART II
Biggest changeWe have insurance policies covering potential losses where such coverage is cost effective. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 22 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is listed on the NASDAQ Stock Market LLC under the symbol “VLCN”. Holders As of March 26, 2024, we had 1,159 stockholders of record and 18,748,955 outstanding shares.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock is listed on the NASDAQ Stock Market LLC under the symbol “VLCN”. Holders As of March 28, 2025, we had 1,148 stockholders of record and 3,850,824 outstanding shares.
We did not issue any equity securities during the fourth quarter of 2023 that were not registered under the Securities Act. ITEM 6. [RESERVED]
We did not issue any equity securities during the fourth quarter of 2024 that were not registered under the Securities Act. ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs of December 31, 2023, we have an increase of $0.4 million in customer deposits, primarily for orders to be fulfilled from two of our Latin American distributors for shipments of Brats and Grunt EVOs. 31 Net cash used in operating activities was $33.7 million for the year ended December 31, 2022 and includes all of our operating costs except non-cash expenses including stock-based compensation of $3.3 million, write-down of inventory and prepaid inventory of $1.7 million , depreciation and amortization of $0.8 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes of $2.2 million, amortization of right of use assets and lease costs of $0.4 million and losses on write-off of assets and leases of $0.6 million.
Biggest changeCash used in operating activities Net cash used in operating activities was $16.0 million for year ended December 31, 2024 and includes all of our operating costs except depreciation and amortization of $0.4 million, write down of Stag, Grunt EVO and Volcon Youth inventory and inventory deposits of $ 9.3 m illion, 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 extinguishment 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.
Cost of goods sold Cost of goods sold for the year ended December 31, 2023 were $11,391,040, including payroll costs of $1,200,098 and stock-based compensation of $211,981 for employees performing warehouse and logistics management and quality control testing. Product costs for Brats, Grunt EVOs, and Volcon Youth motorcycles sold during the period were $1,674,987, $711,807 and $3,236,773, respectively.
Cost of goods sold for the year ended December 31, 2023 were $11,391,040, including payroll costs of $1,200,098 and stock-based compensation of $211,981 for employees performing warehouse and logistics management and quality control testing. Product costs for Brats, Grunt EVOs, and Volcon Youth motorcycles sold during the period were $1,674,987, $711,807 and $3,236,773, respectively.
Cash used in investing activities Net cash used in investing activities was $0.9 million for the year ended December 31, 2023, consisting of $0.9 million of purchases of equipment and tooling offset by proceeds of $0.1 million received for the sale of two vehicles.
Net cash used in investing activities was $0.9 million for the year ended December 31, 2023, consisting of $0.9 million of purchases of equipment and tooling offset by proceeds of $0.1 million received for the sale of two vehicles.
We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. 32 We have implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. 28 We have implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
Cash provided by financing activities Cash provided by financing activities for the year ended December 31, 2023, was $27.1 million and was related primarily to proceeds from the public offerings of 32,889 shares of our common stock for net proceeds of $4.6 million, issuance of convertible notes in a private offering with a principal amount of $4.9 million and net proceeds of $3.9 million, and proceeds from the public offering of 73,913 common stock units and 878,469 pre-funded warrants units for net proceeds of $16.2 million.
Cash provided by financing activities for the year ended December 31, 2023, was $27.1 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, issuance of convertible notes in a private offering with a principal amount of $4.9 million and net proceeds of $3.9 million, and proceeds from the public offering of 93 common stock units and 1,099 pre-funded warrants units for net proceeds of $16.2 million.
JOBS Act Accounting Election The recently enacted JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards.
As of the date of this report, we estimate we have shareholders’ equity of over $17.0 million. JOBS Act Accounting Election The recently enacted JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards.
Interest and Other Expenses, net Interest and other income/expenses for the year ended December 31, 2023 was $15,278,462. A loss on extinguishment of the Convertible Notes of $22,296,988 was recognized in the year ended December 31, 2023 (see Note 6 to the consolidated financial statements).
A loss on extinguishment of the Convertible Notes of $22,296,988 was recognized in the year ended December 31, 2023 (see Note 6 to the consolidated financial statements).
As such, to continue our operations in the near term we will be required to raise additional financing in the third quarter of 2024. We do not have commitments for any such financing, and there can be no assurance that such additional funding would be available to the Company on acceptable terms, or at all.
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 financing, we will be required to modify or curtail our operations.
Cash used in operating activities Net cash used in operating activities was $29.6 million for the year ended December 31, 2023 and includes all of our operating costs except stock-based compensation of $2.6 million, write-down of inventory of $4.3 million, depreciation and amortization of $0.2 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes and May 2023 Notes of $5.0 million, gain on change in derivative financial liabilities of $13.5 million, loss on extinguishment of Convertible Notes of $22.3 million, bad debt expense of $0.1 million.
As of December 31, 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. 27 Net cash used in operating activities was $29.6 million for the year ended December 31, 2023 and includes all of our operating costs except stock-based compensation of $2.6 million, write-down of inventory of $4.3 million, depreciation and amortization of $0.2 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes and May 2023 Notes of $5.0 million, gain on change in derivative financial liabilities of $13.5 million, loss on extinguishment of Convertible Notes of $22.3 million, bad debt expense of $0.1 million.
Management anticipates that our cash on hand as of December 31, 2023 plus the cash expected to be generated from operations will not be sufficient to fund planned operations during the near term and not beyond one year from the date of the issuance of the financial statements as of and for the year ended December 31, 2023.
Management anticipates that our cash on hand as of December 31, 2024 plus the cash raised from the ATM subsequent to December 31, 2024, net proceeds from the February 6, 2025 equity offering discussed above, and cash expected to be generated from operations 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 year ended December 31, 2024.
General and Administrative Expense General and administrative expenses relate to costs for our finance, accounting and administrative functions to support the development, manufacturing and sales of our products. 30 For the year ended December 31, 2023, general and administrative expenses were $6,388,007 and were primarily related to expenses associated with employee payroll costs of $1,613,575, stock-based compensation of $885,113 for share-based awards granted to employees, professional fees of $1,024,774 (including legal fees of $522,334, tax and audit fees of $326,702 and recruiting fees of $50,297), software costs were $444,318, insurance costs of $1,465,092, facilities costs of $249,074, which includes $85,756 of lease termination costs, annual and special stockholder meeting costs of $227,439 and board compensation expense of $117,000.
For the year ended December 31, 2024, general and administrative expenses were $7,665,647 and were primarily related to expenses associated with employee payroll costs of $2,120,064, stock-based compensation of $159,388 for share-based awards granted to employees, professional fees of $1,130,595 (including legal fees of $574,952, tax and accounting fees of $82,116 and audit fees of $242,200), software costs of $549,238, insurance costs of $2,494,892, travel expenses of $161,078, facilities expense of $177,435, annual and special shareholder meeting costs of $201,268, board compensation expense of $125,000 and other public company expense costs of $327,774. 26 For the year ended December 31, 2023, general and administrative expenses were $6,388,007 and were primarily related to expenses associated with employee payroll costs of $1,613,575, stock-based compensation of $885,113 for share-based awards granted to employees, professional fees of $1,024,774 (including legal fees of $522,334, tax and audit fees of $326,702 and recruiting fees of $50,297), software costs were $444,318, insurance costs of $1,465,092, facilities costs of $249,074, which includes $85,756 of lease termination costs, annual and special stockholder meeting costs of $227,439 and board compensation expense of $117,000.
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 December 31, 2023, we had incurred an accumulated deficit of $120.8 million since inception.
We also received proceeds of $1.0 million from the exercise of 11 warrants and reduction of the exercise price for 12 warrants. 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 .
Overview We are an all-electric, off-road powersports vehicle company developing electric two and four-wheel motorcycles and utility terrain vehicles, or UTVs, also known as side-by-sides, along with a line of upgrades and accessories. In October 2020, we began building and testing prototypes for our future offerings with two off-road motorcycles – the Grunt and the Runt.
Overview We are an all-electric, off-road powersports vehicle company selling and developing Volcon electric two-wheeled E-Bikes and motorcycles, four-wheeled 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.
Non-cash interest expense of $2,231,403 was recognized for the amortization of debt issuance costs and accretion of principal on the Convertible Notes issued in August 2022. We expect interest expense to decrease in the future due to the exchange of the May 2023 Notes for Preferred Stock.
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.
Results of Operations The following financial information is for the years ended December 31, 2023 and 2022. 2023 2022 Revenue $ 3,260,988 $ 4,546,686 Cost of goods sold 11,391,040 13,412,820 Gross margin (8,130,052 ) (8,866,134 ) Operating expenses: Sales and marketing 7,405,705 5,694,556 Product development 7,868,985 8,456,157 General and administrative 6,388,007 9,046,778 Total operating expenses 21,662,697 23,197,491 Loss from operations (29,792,749 ) (32,063,625 ) Interest and other expense (15,278,462 ) (2,171,780 ) Net loss $ (45,071,211 ) $ (34,235,405 ) Due to recurring losses, there is no provision for income taxes for any period presented. 28 Revenue Revenue for the year ended December 31, 2023, was $3,260,988 which represents sales of Brats of $2,341,097, Grunt EVO motorcycles of $465,438, Grunt motorcycles of $129,117, Volcon Youth and Torrot motorcycles of $498,160 and accessories and parts of $261,663 offset by $436,333 for rebates and dealer discounts.
Results of Operations The following financial information is for the years ended December 31, 2024 and 2023. 2024 2023 Revenue $ 4,037,191 $ 3,260,988 Cost of goods sold 18,168,288 11,391,040 Gross margin (14,131,097 ) (8,130,052 ) Operating expenses: Sales and marketing 2,548,953 7,405,705 Product development 2,668,330 7,868,985 General and administrative 7,665,647 6,388,007 Total operating expenses 12,882,930 21,662,697 Loss from operations (27,014,027 ) (29,792,749 ) Interest and other expense (18,496,282 ) (15,278,462 ) Net loss $ (45,510,309 ) $ (45,071,211 ) Due to recurring losses, there is no provision for income taxes for any period presented. 24 Revenue Revenue for the year ended December 31, 2024, was $4,037,191 which represents sales of Brats of $1,561,555, Grunt EVOs of $1,280,739, Stags of $371,552, Volcon Youth of $286,680 (which we stopped selling as of June 30, 2024), MN1s of $31,225, HF1s of $22,500 and accessories and parts of $264,338.
Offering costs related to the November 2023 public offering for the amount allocated to the issuance of Series A and Series B Warrants in the amount of $1,444,547. Interest and other expenses, net for the year ended December 31, 2022 were $2,171,780.
Offering costs related to the November 2023 public offering for the amount allocated to the issuance of Series A and Series B Warrants in the amount of $1,444,547. 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.
Cash provided from financing activities for the year ended December 31, 2022, was $40.4 million and was related to proceeds received from both the public offering of our common stock in February 2022 where we sold 29,630 shares at $675.00 per share for net cash proceeds of $18.1 million and the issuance of senior Convertible Notes and Note Warrants in August 2022 for net cash proceeds of $22.3 million.
Cash provided by financing activities Cash provided by financing activities for the year ended December 31, 2024, was $10.4 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.
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. 29 Sales and marketing Sales and marketing expenses relate to costs to increase exposure and awareness for our products and developing our network of U.S. dealers and international distributors.
Additional cost savings may be realized if the third party manufacturer for these vehicles can source or manufacture parts at a lower cost. 25 Sales and marketing Sales and marketing expenses relate to costs to increase exposure and awareness for our products and developing our network of U.S. dealers and international distributors.
If we are unable to raise additional near-term 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.
These factors raise substantial doubt regarding our ability to continue as a going concern. As of December 31, 2024, we had shareholders’ equity of $40,761.
For the year ended December 31, 2022 sales and marketing expenses were $5,694,556 and include $1,636,619 for promoting our products, employee payroll costs of $1,949,064, stock-based compensation of $764,517 for share-based awards granted to employees and consultants, $66,625 for professional fees, $356,958 for facilities costs primarily to operate our now closed dealership in Denver, Colorado, including costs of $148,323 for closing this store, and travel costs of $294,878 primarily related to costs incurred for travel to build our dealer network.
Sales and marketing expenses were $2,548,953 for the year ended December 31, 2024 and were primarily related to expenses associated with promoting our products and brand of $788,443, employee payroll costs of $845,675, stock-based compensation of $37,062 for share-based awards granted to employees and consultants, and travel costs of $99,218 primarily related to costs incurred for travel to build our dealer and distributor network and to attend events to promote our products.
Net cash used in investing activities was $0.8 million for the year ended December 31, 2022, primarily consisting of $0.3 million of purchases of equipment and tooling related to our Brat, Grunt, and Runt manufacturing and product development, $0.2 million for the cost of Grunts capitalized as demonstration units, and $0.2 million related to computers and equipment due to headcount growth prior to headcount reductions that occurred in the third quarter of 2022.
Cash used in investing activities Net cash used in investing activities was $0.2 million for the year ended December 31, 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.
We also received proceeds of $1.0 million from the exercise of 9,156 warrants and reduction of the exercise price for 7,778 warrants.
We also received net proceeds of $0.2 million for the issuance of common stock from our At The Market equity offering (“ATM”) established in October 2024 and proceeds of $0.1 million for the exercise of Series B warrants.
We expect 2024 product development costs related to employee costs to remain consistent with 2023. We expect costs to decrease for design and development costs and costs related to prototype costs for the current version of the Stag since the Stag is essentially ready for production in early 2024.
We expect 2025 product development costs related to employee costs to remain consistent with the year ended December 31, 2024 and we expect an increase in prototype expenses as we develop the dual sport motorcycle.
Cash used in operating activities includes increases in accounts receivable of $0.8 million for sales made to dealers, an increase in inventory of $5.1 million offset by a reduction in inventory deposits of $1.6 million as we made fewer deposits based on outsourcing of the assembly of the G runt in August 2022 as the third party manufacturer will purchase raw materials prospectively, a decrease of $2.3 million of customer deposits as we fulfilled all direct to consumer orders, a decrease of $0.4 million due to timing of payments on accounts payable, a decrease of $0.2 million in accrued liabilities and an increase in prepaid expenses and other assets of $0.8 million.
Cash used in operating activities includes a decrease in accounts receivable of $0.1 million due to collections, a decrease of $ 0.8 million in prepaid inventory deposits due to inventory being received, a decrease of $ 0.9 million in inventory, a decrease of $0.9 million in prepaid assets primarily due to lower insurance costs, a decrease of $0.5 million in accounts payable, and an increase of $1.6 million in accrued liabilities primarily due to the vendor settlements noted above and $0.4 million used to pay our lease liabilities.
For the year ended December 31, 2022, product development expenses totaled $8,456,157 and primarily related to expenses associated with employee payroll costs of $3,646,927, stock-based compensation of $704,152 for share-based awards granted to employees and consultants, $1,010,895 for consulting fees for product design, other professional fees of $133,680, primarily for employee recruiting, prototype parts and tooling costs of $2,201,706, facilities cost of $262,762 and software fees, small equipment, tools and shop supplies of $183,761.
Product development expenses were $2,668,330 for year ended December 31, 2024 and were primarily related to expenses associated with employee payroll costs of $1,515,900, stock-based compensation of $126,337 for share-based awards granted to employees, facilities costs of $242,677, prototype costs of $252,147 and software fees related to product development in the amount of $77,837, travel expenses of $163,669 and depreciation expense of $100,782.
We also expect sales expenses to increase as we begin expanding our international distributors and selling commissions for increased sales of Grunt EVOs and the Stag offset by overall lower expenses as we seek to reduce costs. Product Development Expense Product development expenses relate to development of our products and process to manufacture these products.
We expect sales expenses to increase as we begin expanding our international distributors and selling commissions to increase sales of Brats, MN1s and HF1s. 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.
Net Loss Net loss for the year ended December 31, 2023 was $45,071,211, compared to $34,235,405 for the year ended December 31, 2022. Liquidity and Capital Resources On December 31, 2023, we had cash of $8.2 million, including $0.2 million of restricted cash and we had a negative working capital of $21.4 million.
Liquidity and Capital Resources On December 31, 2024, we had cash and restricted cash of $2.3 million, including $0.1 million of restricted cash, and we had a working capital of $0.4 million. Since inception we have funded our operations from proceeds from debt and equity sales.
Removed
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. 26 We initially began to sell and distribute the Grunt and related accessories in the United States (‘U.S.”) on a direct-to-consumer sales platform. We terminated our Grunt direct-to-consumer sales platform in November 2021.
Added
(“Super Sonic”) located in Vietnam, and a subsidiary of Odes Industry, to supply golf carts to other companies in the U.
Removed
Prior to the termination of our direct-to-consumer sales platform, U.S. consumers made deposits for 360 Grunts (net of cancellations) and five Runts, plus accessories and a delivery fee representing total deposits of $2.2 million. These orders were cancelable by the consumer until the vehicle was delivered and after a 14-day acceptance period, therefore the deposits were recorded as deferred revenue.
Added
S. who sell golf carts. 23 Distribution and Supplier Agreements Exclusive Distribution Agreement In January 2025, we signed an exclusive Distribution Agreement with Super Sonic to act as their exclusive distributor of certain of their golf cart products (the “Products”), in the U. S.. Super Sonic agreed to recommend to all customers the sole use of us for all Products.
Removed
As of June 30, 2022, we had completed shipping of all Grunts sold through our direct-to-consumer sales platform. Due to delays in developing the Runt, we refunded the deposits made for all Runts. Beginning in November 2021, we began negotiating dealership agreements with powersports dealers to display and sell our vehicles and accessories.
Added
Super Sonic has the right to sell non-Volcon branded Products to other customers and shall pay 5% of the order price to us.
Removed
Customers can now, or will soon be able to, buy our vehicles and accessories directly from a local dealership. Some of these dealers will also provide warranty and repair services to customers. As of March 15, 2024, we have 103 active dealers.
Added
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.
Removed
Dealers can order any of our available products provided they are current on their accounts receivable and are within their established credit limit. We are offering dealers payment terms 30 to 90 days to make larger purchases of our vehicles.
Added
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.
Removed
We have entered into an accounts receivable factoring arrangement to allow the Company the ability to generate cash for working capital. We have agreements with third party financing companies to provide financing to qualified customers of each dealer.
Added
As more fully discussed in Note 15 of the accompanying financial statements, 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.
Removed
There is no recourse to the Company or the dealer if the dealer’s customer defaults on the financing agreement with the third party. We sell our vehicles internationally through importers. Each importer buys vehicles by the container and sells vehicles and accessories to local dealers or directly to consumers.
Added
Supply Agreement On February 24, 2025, we entered into a Supply Agreement with Venom-EV LLC (“Venom”) to supply Venom with certain golf carts. The Supply Agreement allows Venom to purchase up to $3 million of golf carts with payment terms of 90 days from the date the golf carts are delivered to Venom’s facility.
Removed
Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country. In October 2023, the Company made a decision to postpone expanding our dealer network in Canada for the foreseeable future and we have terminated the employment of our Canadian regional sales managers.
Added
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 three percent margin. We received an initial order from Venom for $2.4 million of golf carts.
Removed
As of March 15, 2024, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, one importer in New Zealand, and one importer in Australia to sell our vehicles and accessories in their assigned countries/markets.
Added
At the end of each calendar quarter, we agreed to issue Venom shares of Company common stock based on the number of golf carts purchased by Venom during the quarter as follows: for each 1,000 Units sold in 2025 to Venom by us, we shall issue Venom a number of shares equal to 1% of our outstanding shares of common stock as of the last day of such quarter that the 1,000 Units were sold for no additional consideration.
Removed
In 2024, we expect to expand our global sales of our vehicles and accessories beyond our current distributor base. In June 2022, we signed an exclusive distribution agreement with Torrot Electric Europa S.A., referred to herein as Torrot, to distribute their electric motorcycles for youth riders in Latin America.
Added
Revenue also increased due to the reversal of unclaimed dealer rebates and price adjustment credits in the amount of $350,093 offset by discounts due to various promotions in the amount of $125,859.
Removed
In October 2022, we signed an expanded agreement with Torrot, which superseded the June 2022 agreement, to also be the exclusive distributor of Torrot and Volcon co-branded youth electric motorcycles in the U.S. as well as Latin America.
Added
Revenue for the year ended December 31, 2023, was $3,260,988 which represents sales of Brats of $2,341,097, Grunt EVO motorcycles of $465,438, Grunt motorcycles of $129,117, Volcon Youth and Torrot motorcycles of $498,160 and accessories and parts of $261,663 offset by $436,333 for rebates and dealer discounts.
Removed
Finally, in December 2022, we signed an expanded agreement with Torrot to be the exclusive distributor of Volcon co-branded youth electric motorcycles in Canada. In June 2023, we wrote down all remaining Torrot branded inventory in the amount of $84,000.
Added
Cost of goods sold Cost of goods sold for the year ended December 31, 2024 were $18,168,288 including payroll costs of $274,801 for employees performing product fulfillment, logistics management, and service and warranty, partially offset by a stock-based compensation benefit of ($11,827) for the reversal of previously recognized stock-based compensation on stock options that did not vest due to employee terminations.
Removed
In December 2023 we notified Torrot that we were terminating our agreements due to continued lower than expected sales at significantly discounted pricing. In 2023, we wrote down the Volcon co-branded Torrot youth motorcycles by $2,674,352 to reduce their cost to the estimated net realizable value due to lower than expected sales.
Added
Product costs for Brats and Grunt EVOs sold during the period were $1,523,053 and $1,427,562, (before the finished goods inventory write down discussed below), respectively.
Removed
We have agreed to give Torrot a total of 1,000 Volcon branded Torrot motorcycles originally purchased for $1.8 million, an upfront payment of $370,000 and an additional $1.7 million to be paid out at $100,000 over 17 months beginning in April 2024 in exchange for unfulfilled 2023 and 2024 unit purchases.
Added
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. MN1 and HF1 product costs were $34,491 and $125,550 respectively.
Removed
As of December 31, 2023, we have Volcon Youth inventory of approximately $239,935, after reducing these to the estimated net realizable value, of Volcon branded Torrot motorcycles and accessories which we intend to liquidate and we have agreed to give Torrot sales rights in the U.S., Canada and LATAM after June 30, 2024.
Added
Stag product costs were $950,424, which includes an expense of $112,168 for the loss the Company realized due to agreeing to provide additional units to a customer at a sales price less than the manufactured cost of the units.
Removed
In July 2022, we expanded our offerings with the introduction of the first of our Volcon UTV models, the Stag, which we initially anticipated would be available for delivery to customers in the fourth quarter of 2023, followed by additional models of the Stag expected in 2024 and 2025.
Added
As noted above, the Company also wrote off all Stag parts inventory and prepaid inventory deposits resulting in an expense of $8,712,644.
Removed
Due to a delay in certain parts from third party vendors, we expect delivery to customers to begin in the first quarter of 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.
Added
The Company also recognized an expense of $976,420 for a settlement agreement with a vendor who supplies certain suspension components for the Stag, an expense of $2,526,410 for a settlement agreement with the manufacturer of the Stag and $35,000 for a settlement to a vendor of Grunt parts.
Removed
Beginning in June 2022, we took non-binding pre-production orders which are cancelable prior to delivery. In the third quarter of 2023 we canceled all of the original pre-production orders due to the introduction of multiple models and new pricing. We began taking new pre-production orders for the newly introduced models in the third quarter of 2023.
Added
These expenses were offset by a credit of $700,000 for an amendment to the original settlement agreement with Torrot whereby the Company agreed to settle the future payment obligation by making a one-time lump sum payment and returning all unsold units and parts to Torrot.
Removed
We also expect to introduce a higher performance, longer range UTV (to be named) but development of this vehicle has not yet begun and no timeline for its development and release has been determined. 27 In August 2022 we ceased manufacturing of the Grunt and we outsourced the manufacturing of the remaining Grunts and the 2024 Grunt EVO to the same third party manufacturer as the Stag.
Added
The Company also wrote down the Grunt EVO finished goods inventory by $674,379 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 tooling related to Stag, Grunt EVO and Runt.
Removed
The 2024 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 began taking pre-orders for an E-Bike, the Brat, in September 2022 and shipments to customers began in the fourth quarter of 2022.
Added
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 for the year ended December 31, 2024 were $408,217 for our warehouse facility and third party warehousing costs .
Removed
The Brat is being manufactured by a third party. In January 2023, we began selling the Brat directly to consumers through our website. Consumers who order the Brat from our website can have the Brat shipped to their specified destination.
Added
In 2025 we expect revenue and cost of goods sold to increase due to the expected increase in sales of the Brat, MN1 and HF1 products.
Removed
In November 2022, we finalized an agreement with the same third party that manufactures the Stag and Grunt EVO to manufacture the Runt LT. We received prototypes of the Runt LT in the first quarter of 2023. We are evaluating the market for the Runt LT and will determine whether to proceed with production in the first half of 2024.
Added
Facilities costs were $117,359. Professional fees were $253,872, mainly related to legal fees of $19,506 related to entering into international distribution agreements and sales consultants in the amount of $189,673. Depreciation expense, primarily for demo vehicles, was $157,950.
Removed
The estimated fulfillment of all orders we have received assumes that our third party manufacturers can successfully meet our order quantities and deadlines. If they are unable to satisfy orders on a timely basis, our customers may cancel their orders.
Added
Product Development Expense Product development expenses relate to development of our products and process to manufacture these products.
Removed
In September and October 2023, we reduced our headcount in several departments to reduce costs and we continue to evaluate other cost reduction opportunities.
Added
General and Administrative Expense General and administrative expenses relate to costs for our finance, accounting and administrative functions to support the operations, development, marketing and sales of our products.
Removed
Revenue for the year ended December 31, 2022, was $4,546,686, which represents sales of Grunts of $3,576,796 and accessories and parts of $250,780. The sales of Grunts are offset by promotional rebates and discounts provided to dealers and distributors during 2022 resulting in $930,422 being recorded to reduce revenue.
Added
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 and increased sales. Interest and Other Expenses, net Interest and other income/expenses for the year ended December 31, 2024 was $18,496,282.
Removed
The rebate is provided as a year-end incentive to dealers and distributors to sell their remaining 2022 Model Year Grunt inventory. Revenue of $489,769 and $129,383 represents the sale of Brats and Torrot kids motorcycles, respectively.
Added
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.
Removed
Cost of goods sold for the year ended December 31, 2022 were $13,412,820 including labor costs of $1,740,645 for employees and contractors performing assembly, logistics, quality control testing, and service and warranty of Grunts through August 2022, when assembly of the Grunt was discontinued, and stock-based compensation of $344,374 f or share-based awards for these employees.

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