Volcon(VLCN) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Volcon, Inc.'s unaudited consolidated financial statements for Q1 2022 detail initial revenue, significant operating losses, and equity financing Consolidated Balance Sheets Total assets increased to $25,046,898 by March 31, 2022, driven by cash from a public offering, significantly boosting stockholders' equity Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $13,999,965 | $5,572,199 | | Total current assets | $21,173,619 | $10,881,057 | | Total assets | $25,046,898 | $14,624,265 | | Liabilities & Equity | | | | Total current liabilities | $5,913,402 | $6,483,725 | | Total liabilities | $7,675,645 | $8,320,017 | | Total stockholders' equity | $17,371,253 | $6,304,249 | | Total Liabilities & Equity | $25,046,898 | $14,624,265 | Consolidated Statements of Operations Volcon reported first revenues of $1,184,502 in Q1 2022, incurring a ($2,343,213) gross margin loss and an ($8,612,345) net loss Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Revenue | $1,184,502 | $– | | Cost of goods sold | ($3,527,715) | $– | | Gross margin | ($2,343,213) | $– | | Total operating expenses | $6,305,558 | $15,301,765 | | Loss from operations | ($8,648,771) | ($15,301,765) | | Net loss | ($8,612,345) | ($15,319,687) | | Net loss per common share – basic & diluted | ($0.40) | ($7.69) | Consolidated Statements of Stockholders' Equity Stockholders' equity increased from $6,304,249 to $17,371,253 by March 31, 2022, primarily due to $18,099,420 net proceeds from a public offering - In Q1 2022, the company raised $18,099,420 in net proceeds from a public offering of 6,666,667 shares of common stock[13] - Stock-based compensation for Q1 2022 was $1,575,165, a significant decrease from the $13,202,878 recorded in Q1 2021, mainly due to large warrant issuances to founders[12][13][96] Consolidated Statements of Cash Flows Net cash used in operating activities was ($9,448,022) in Q1 2022, offset by $18,099,420 from financing activities, resulting in a $8,427,766 net increase in cash Consolidated Cash Flow Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($9,448,022) | ($2,997,194) | | Net cash used by investing activities | ($223,632) | ($128,202) | | Net cash provided by financing activities | $18,099,420 | $8,944,846 | | Net change in cash | $8,427,766 | $5,819,449 | | Cash at end of period | $13,999,965 | $6,355,531 | Notes to the Financial Statements Notes detail accounting policies, a 'going concern' warning due to recurring losses, risks from the Russia-Ukraine conflict, and a terminated related-party lease - The company has recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern; management plans to seek additional funding through loans or equity sales in 2022[23] - The conflict between Russia and Ukraine could impact the availability and price of nickel, a key component in the batteries for the company's vehicles[25] - On April 27, 2022, the company terminated a lease agreement with an entity controlled by its founders for a future headquarters and production facility in Liberty Hill, Texas[67][121] - As of March 31, 2022, the company has a cumulative net operating loss carryforward of approximately $30.9 million, which can be carried forward indefinitely but may be subject to limitations[102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the shift to a dealership model, product pipeline, Q1 2022 first revenue of $1.2 million and $8.6 million net loss, and insufficient cash, raising going concern doubts - The company is shifting its sales strategy from direct-to-consumer to a dealership model, having signed 83 dealership agreements by the end of Q1 2022[114] - Product development pipeline includes the 2023 Runt, Grunt EVO, and Brat E-Bike expected in Q4 2022, and the Stag UTV prototype introduction in H2 2022 with customer deliveries in H2 2023[115][116][117][119] - The company terminated a lease for a planned manufacturing facility in Liberty Hill, Texas, and is now evaluating third-party manufacturing options for the Stag UTV[121][159] - Management states that cash on hand as of March 31, 2022, is insufficient to fund operations beyond one year, which raises substantial doubt about the company's ability to continue as a going concern[148] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Volcon is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Volcon is not required to provide quantitative and qualitative disclosures about market risk[153] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of March 31, 2022[154] - There were no changes to internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[155] PART II — OTHER INFORMATION Legal Proceedings The company reports no specific material legal proceedings at this time, though it may be involved in ordinary course business matters - The company is not currently involved in any material legal proceedings[157] Risk Factors No material changes to risk factors except for a new risk concerning the termination of a manufacturing facility lease, which could impact future production - A new risk factor has been added regarding the termination of the lease for a built-to-suit manufacturing facility from an entity controlled by the company's founders[158] - The company is now evaluating third-party manufacturing for the Stag UTV or finding another facility; failure to do so on reasonable terms could impair manufacturing capabilities and adversely affect the business[159] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[160] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[160] Mine Safety Disclosures This item is not applicable to the company - Not applicable[160] Other Information The company reported no other information for this item - None[161] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, stock forms, agreements, and officer certifications - Exhibits filed include officer certifications (31.1, 31.2, 32.1, 32.2), an underwriting agreement (10.3), and an employment agreement (10.2)[163]