Volcon reports Q1 net loss of $26M, revenue consistent with Q4
Volcon shares its operational highlights and financial results for the quarter ended March 31, 2024. Company highlights include a Nasdaq extension for compliance to June, the first Stag delivery to a U.S. dealer and the Army, the continued delivery of the Grunt EVO and a total of 105 U.S. dealers and nine international distributors across 14 countries.
As previously noted in Volcon’s 2023 annual operational updates, the company presented its plan of compliance to the Nasdaq Hearing Panel on March 26, 2024, regarding ongoing compliance with the bid price and equity compliance. On April 2, Nasdaq gave the company an extension to execute its plan of compliance until June 24, 2024.
On May 6, 2024, Volcon shipped its first Stag to a U.S. dealer to fulfill its first consumer pre-order. The company expects to ship additional Stags to U.S. dealers to fulfill previously received pre-orders from consumers who have paid a deposit. Although pre-orders are cancelable until the customer takes delivery of the Stag, Volcon expects that it will convert some of the pre-orders into sales in 2024. As previously announced, the company delivered its first Stag to the Army Corp of Engineers on February 27, 2024, at its Fort Leonard Wood, Missouri, facility. Volcon expects to ship the Army Corp three more Stags on May 10 and anticipates additional deliveries to complete the Army Corp’s orders by July 2024.
Since the company began taking online pre-orders for continental U.S. customers, it has seen an increase in Grunt EVO sales. Customers can pay a $100 deposit and order an EVO which will be delivered to a dealer closest to the customer. Volcon expects that the Spring/Summer sales seasons will increase demand due to warmer weather in the U.S., and the previously discussed ramp-up in manufacturing will allow it to fulfill the expected higher demand. As noted in Volcon’s third-quarter earnings release, it deferred the launch of the Runt LT, its smaller off-road motorcycle, to focus on the distribution of the Grunt EVO and Stag shipments. Volcon has concluded that it will no longer launch the Runt LT and is evaluating options for new two-wheel products that it could develop and sell over the next 9 -12 months. The company states that Brat sales continue to do well.
Volcon’s U.S. dealer count is 105. The company signed two new dealers in California, where there is a large population of off-road enthusiasts and regulations on off-road vehicles to limit carbon emissions are being implemented. This will help the adoption of EV in the off-road industry.
Financial highlights:
| 3 Months Ended | ||||||||||||
| GAAP | March 31, 2024 | December 31, 2023 | September 30, 2023 | |||||||||
| Revenue | $ | 1,033,548 | $ | 1,083,800 | $ | 487,430 | ||||||
| Cost of goods sold | (1,621,580 | ) | (6,283,944 | ) | (3,542,468 | ) | ||||||
| Gross Margin | (588,032 | ) | (5,200,144 | ) | (3,055,038 | |||||||
| Sales & Marketing | 760,564 | 1,365,186 | 1,870,532 | |||||||||
| Product Development | 814,945 | 1,932,705 | 2,983,197 | |||||||||
| General & Administrative | 2,080,794 | 1,384,872 | 1,544,344 | |||||||||
| Total Operating Expenses | 3,656,303 | 4,682,763 | 6,398,073 | |||||||||
| Loss from Operations | (4,244,335 | ) | (9,882,907 | ) | (9,453,111 | ) | ||||||
| Other Income (Expense) | (21,803,709 | ) | (6,467,255 | ) | (1,874,785 | ) | ||||||
| Net loss | $ | (26,048,044 | ) | $ | (3,415,652 | ) | $ | (11,327,896 | ) | |||
Revenue
The company’s revenue for the first quarter of 2024 was $1.0 million, consistent with revenue for the fourth quarter of 2023, and an increase of $0.5 million over the third quarter of 2023. Revenue for the first quarter of 2024 includes Grunt EVO sales of $0.3 million compared to approximately $0.4 million and $37,000 of sales of Grunt EVOs in the fourth and third quarters of 2023. Brat revenue in the first quarter of 2024 was $0.5 million compared to Brat revenue of $0.6 million and $0.5 million in the fourth and third quarters of 2023.
Operating expenses
The company’s operating expenses for the first quarter of 2024 were $3.7 million compared to $4.6 million and $6.4 million in the fourth and third quarters of 2023. Volcon’s sales and marketing costs have decreased as it has realigned its sales marketing efforts and reduced its headcount. Its product development costs have declined each quarter due to lower prototype costs due to the completion of Stag development and the beginning of production. Volcon’s general and administrative costs in the fourth quarter of 2024 were $0.3 million lower than the first quarter of 2024 due to lower payroll-related costs, including stock-based compensation, due to the reversal of 2023 executive bonuses that were not awarded by the board of directors. They were also $0.1 million lower due to a refund of product liability premiums on the renewal of its product liability policies. Volcon continues to focus on reducing operating costs while continuing to make investments in product development to continue to build its product offerings.
Net loss
The company’s net loss was $26.0 million for the first quarter of 2024 compared to a net loss of $3.4 million for the fourth quarter of 2023 and $11.3 million for the second quarter of 2023. Net loss in the first quarter of 2024 includes the recognition of a loss of $19.8 million for warrants issued in its November 2023 public offering as these warrants were deemed to be liabilities and are recorded at fair value with changes being recorded in income. The first quarter 2024 net loss also includes a loss of $0.3 million from the conversion of some of the convertible notes to common stock and a loss of $1.3 million for the exchange of the remaining convertible notes for convertible preferred stock. Interest expense for the first quarter of 2024 decreased by $0.1 million due to the conversion and exchange of all convertible notes by early March 2024.
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 it 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. In addition, a gain of $8.4 million was recognized for warrants issued in its 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.
Adjusted EBITDA
Adjusted EBITDA for each quarter 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 add back of issuance costs in the fourth quarter of 2024. Volcon’s adjusted EBITDA for the first quarter of 2024 was a loss of $4.1 million, compared to the fourth quarter of 2023 loss of $9.4 million and compared to the third quarter of 2023 loss of $8.9 million.
