Volcon shares 2023 operational and financial results

Volcon Inc. has reported its operational highlights and financial results for the year ended December 31, 2023.

Highlights

• Completes hearing with Nasdaq
• John Kim is appointed as chief executive officer and president
• The first Stag was delivered to the Army Corp. of Engineers on Feb. 27, 2024
• The Grunt EVO continued to be delivered (1,189 pre-orders, 180 units shipped)
• Sales of the Volcon Youth motorcycles were discontinued
• The company partnered with 103 U.S. dealers and nine international distributors covering 14 countries

Volcon presented its plan of compliance to the Nasdaq Hearing Panel on March 26, 2024, regarding ongoing compliance with the bid price and equity compliance. Nasdaq is currently evaluating the company’s plan and the decision’s timing is at the Hearing Department’s discretion. If the Hearing Department does not agree with the company’s plan or if the Hearing Committee provides the company a stay from suspension and the company is unsuccessful in carrying out its plan, Volcon’s common stock would be delisted from Nasdaq and trading of the 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.

John Kim, an independent board member of the company since July 2021, agreed to assume the role of chief executive officer and president effective February 4, 2024. “I have a personal interest in off-road vehicles and personally own dune buggies and motorcycles,” he says. “The opportunity to take the CEO role here at Volcon aligns my personal interest with the great products the company has developed. I have taken the first couple of months to gain an understanding of where we are in product development and manufacturing of our products and have revamped the company’s marketing strategy to align with industry and consumer interest in off-road electric vehicles. I look forward to the challenge of building Volcon to be a leader in off-road EV.”

Volcon delivered its first Stag to the Army Corp of Engineers on February 27, 2024, at its Fort Leonard Wood, Missouri facility. The Army Corp is testing the use of the Stag in humanitarian and military applications. Initial feedback from the Army Corp has indicated that, so far, they are pleased with how the Stag performs concerning the company’s specifications. Volcon expects to deliver eight Army Corp units over the next three to six months. Volcon also expects to deliver Stags to its U.S. dealers who are facilitating the delivery of units to consumers who placed a reservation. Volcon has over 900 reservations for the Stag, which does not require a cash deposit and over 500 pre-orders from consumers who have paid a deposit. Although reservations and pre-orders are cancelable until the customer takes delivery of the Stag, the company expects that it will be able to convert some of these pre-orders to sales in 2024.

Delivery of the Grunt EVO started in late September 2023 and production of the Grunt EVO has increased in the first quarter of 2024 so Volcon can meet product demand in the Spring and Summer sales seasons. As noted in its third quarter earnings release, Volcon deferred the launch of the Runt LT, its smaller off-road motorcycle, to focus on distributing the Grunt EVO and Stag shipments. The company is evaluating manufacturers to source components for the Runt LT and options for new two-wheel products that it could develop and sell over the next nine to 12 months.

Volcon’s U.S. dealer count is 103 dealers and the company shares it will continue to work to expand in states like California, where there is a large population of off-road enthusiasts and regulations are being implemented on off-road vehicles to limit carbon emissions.

Financial highlights

Revenue: The company’s revenue for the fourth quarter of 2023 was $1.1 million, an increase of $0.6 million over the third and second quarters of 2023. Revenue for the fourth quarter includes Grunt EVO sales of $0.4 million compared to approximately $37,000 of sales of Grunt EVOs in the third quarter of 2023 and zero in the second quarter of 2023. Brat revenue in the fourth quarter was $0.6 compared to Brat revenue of $0.5 million and $0.5 million in the third and second quarters of 2023.

Net loss: The company’s net loss was $3.4 million for the fourth quarter of 2023 compared to a net loss of $11.3 million for the third quarter of 2023 and $23.0 million for the second quarter of 2023. Net loss in the fourth quarter of 2023 includes the recognition of $2.1 million in cost of goods sold to terminate the agreement with Torrot to produce the Volcon Youth motorcycles as the company is discontinuing this product line and a write-down of $1.2 million to reduce the inventory at December 31, 2023 to its estimated net realizable value.

Sales and marketing expenses decreased as Volcon reduced marketing costs and eliminated certain sales positions in the third quarter of 2023. Product development costs were lower in the fourth quarter compared to the third quarter of 2023 as the third quarter had higher prototype vehicle and parts costs.

In addition, a gain of $8.4 million was recognized for warrants issued in Volcon’s November 2023 public offering as these warrants were deemed to be liabilities and are recorded at fair value with changes being recorded in income. Finally, issuance costs of $1.4 million were recognized for the warrant liabilities for the allocation of issuance costs from the public offering to these financial instruments.

Interest expense decreased by $0.7 million due to the extension in September 2023 of the due date of the outstanding convertible notes to January 2025. Net loss in the third quarter of 2023 includes a write-down of $1.6 million related to Volcon Youth motorcycles to reduce the inventory to its estimated net realizable value, a $0.7 million loss on the change in derivative liabilities related to the adjustable conversion features of convertible notes issued in May 2023 and the exchange of August 2022 convertible notes for convertible notes, and the adjustable exercise price of warrants issued with the new notes issued in May 2023 and exchange of the warrants issued with the August 2022 convertible notes as more fully described in the company’s interim financial statements as of and for the three and nine month periods ended September 30, 2023. The conversion feature and warrants are no longer derivative liabilities as of August 3, 2023, and have been reclassified to equity as of September 30, 2023.

In addition, in the third quarter of 2023, the company incurred higher prototype vehicle and part costs of $1.6 million over the second quarter of 2023 as the company received additional validation units in anticipation of a fourth quarter 2023 product launch. Net loss in the second quarter of 2023 includes a loss on extinguishment convertible notes of $22.3 million for the convertible notes issued in August 2022 for notes issued in May 2023 and an exchange of convertible notes for the August 2022 notes, partially offset by a gain on derivative liabilities of $5.8 million for the derivative liabilities noted above. The net loss for the second quarter of 2022 also includes the reversal of warranty expense of approximately $0.5 million due to the expiration of the one-year warranty on the Grunt as warranty claims were substantially lower than the estimated warranty cost initially recorded when Grunts sold.

Adjusted EBITDA: Adjusted EBITDA for each quarter of 2023 represents net loss adjusted to add back stock-based compensation, depreciation and amortization expense, interest expense, the loss/gain on derivative liabilities and warrant liabilities and the second quarter of 2023, an adjustment for the loss on extinguishment of convertible notes and the add back of issuance costs in the fourth quarter. The company’s adjusted EBITDA for the fourth quarter was a loss of 9.4 million, compared to the third quarter of 2023 loss of $8.9 million and compared to the second quarter of 2023 loss of $4.2 million.