The following discussion and analysis is intended as a review of significant
factors affecting the Company’s financial condition and results of operations
for the periods indicated. This discussion and analysis should be read in
conjunction with the financial statements and related notes appearing elsewhere
in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form
10-K, which contains audited financial statements of the Company as of and for
the year ended
Exchange Commission
necessarily indicative of results for the year ending
future period.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on form 10-Q, together with other statements and
information publicly disseminated by the Company, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and include this statement for purposes of complying with these safe
harbor provisions.
In addition, from time to time, we or our representatives may make
forward-looking statements orally or in writing. We base these forward-looking
statements on our expectations and projections about future events, which we
derive from the information currently available to us. Such forward-looking
statements relate to future events or our future performance, including: our
financial performance and projections; our growth in revenue and earnings; and
our business prospects and opportunities. You can identify forward-looking
statements by those that are not historical in nature, particularly those that
use terminology such as “may,” “should,” “expects,” “anticipates,”
“contemplates,” “estimates,” “believes,” “plans,” “projected,” “predicts,”
“potential,” or “hopes” or the negative of these or similar terms. In evaluating
these forward-looking statements, you should consider various factors,
including: our ability to change the direction of the Company; our ability to
keep pace with new technology and changing market needs; our capital needs, and
the competitive environment of our business. These and other factors may cause
our actual results to differ materially from any forward-looking statement.
Forward-looking statements are only predictions. The forward-looking events
discussed in this document and other statements made from time to time by us or
our representatives, may not occur, and actual events and results may differ
materially and are subject to risks, uncertainties and assumptions about us. We
are not obligated to publicly update or revise any forward-looking statement,
whether as a result of uncertainties and assumptions, the forward-looking events
discussed in this document and other statements made from time to time by us or
our representatives might not occur.
While we believe we have identified material risks, these risks and
uncertainties are not exhaustive. Other sections of this Form 10-Q describe
additional factors that could adversely impact our business and financial
performance. Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time, and it is not
possible to predict all risks and uncertainties, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements
are reasonable, we cannot guarantee future results, level of activity,
performance or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy or completeness of any of these forward-looking
statements. You should not rely upon forward-looking statements as predictions
of future events. We are under no duty to update any of these forward-looking
statements after the date of this Form 10-Q to conform our prior statements to
actual results or revised expectations, and we do not intend to do so.
24
Forward-looking statements include, but are not limited to, statements about:
· our ability to obtain additional funding to produce, market and sell our
vehicles and develop new products;
· our ability to produce our vehicles with sufficient scale and quality to
satisfy customers;
· whether we experience delays in the design, production and launch of our
vehicles;
· the inability of our suppliers to deliver the necessary components for
our vehicles at prices and volumes acceptable to us;
· our ability to establish a network of dealers to sell and service our
vehicles.
· our vehicles failing to perform as expected;
· our facing product warranty claims or product recalls;
· our facing adverse determinations in significant product liability
claims;
· customers not adopting electric vehicles;
· the development of alternative technology that adversely affects our
business;
· the impact of COVID-19 on our business;
· increased government regulation of our industry;
· tariffs and currency exchange rates; and
· the conflict with Russia and the Ukraine and the potential adverse
effect it may have on the availability of batteries for our vehicles.
Overview
We are an all-electric, off-road powersports vehicle company developing and
manufacturing electric two and four-wheel motorcycles and utility terrain
vehicles (UTVs), also known as side-by-sides. In
offerings with two off-road motorcycles – the Grunt and the Runt. We initially
began taking orders on our website for these initial offerings and began
delivering the Grunts in the third quarter of 2021. We terminated our
direct-to-consumer sales platform as of
accessories and a delivery fee representing total deposits of
These orders are cancelable by the customer until the vehicle is delivered and
after a 14-day acceptance period, therefore the deposits have been recorded as
deferred revenue. We are assembling the Grunt in a leased production facility in
ended
Beginning in
retail partners to display and sell our vehicles and accessories. Customers will
be able to buy our vehicles and accessories directly from a local dealership.
Some of these retail partners will also provide warranty and repair services to
our customers. Through
agreements. We anticipate that we will begin shipping Grunts to dealers in
2022
We have selected a supplier to manufacture the 2023 Runt, a smaller version of
the Grunt, and are completing the final design and manufacturing specifications
with the supplier. We expect to begin selling the Runt in the fourth quarter of
2022.
We are designing an upgraded Grunt, the 2023 Grunt EVO, that will have a belt
drive rather than a chain drive, an upgraded rear suspension, including a new
shock, a new seat and will be available in additional colors and have
aftermarket accessory upgrades such as handlebars, grips, foot pegs and seats.
The pricing for the 2023 Grunt EVO and accessories has not yet been determined.
We expect the Grunt EVO to be available beginning in the fourth quarter of 2022.
Also in the fourth quarter of 2022, we expect to begin selling the 2023 Volcon
Brat E-Bike which will be manufactured by a third party. Pricing for the Brat
has not yet been determined.
25
In
expect to publicly introduce a prototype of the Stag in the second half of 2022,
with delivery of the first Stag model to customers beginning in the second half
of 2023. We expect the Stag to be followed by the introduction of a higher
performance, longer range UTV (to be named) which we expect to be available for
sale in 2024.
We signed a lease for a dedicated, built-to-suit manufacturing facility on 53
acres in
entity controlled by our founders. An amendment to the lease that will provide
additional tenant improvements and access to an additional 17 acres of land was
provided in
The Company evaluated the cost of this facility in relation to other lower cost
options and determined that it would be in the best interest of the Company to
terminate this agreement. The Company notified the landlord on
that it would not be leasing this facility. The Company is currently in
negotiations to determine the amount of the security deposit and prepaid rent
that will be returned to the Company as certain survey, architecture and
construction design costs were incurred that will be paid by the Company.
We plan to sell our vehicles and accessories globally in a three-phase rollout
of export sales-
expected in 2022 and
requirements of each country, if any. Export sales are executed through
individual importers in each country that buy vehicles by the container. Each
importer will sell vehicles to local dealers or directly to customers. Local
dealers will provide warranty and repair services for vehicles purchased in
their country. For the three months ended
on 63 Grunts shipped to
Results of Operations The following financial information is for the three months endedMarch 31, 2022 and 2021. 2022 2021 Revenue$ 1,184,502 $ - Cost of goods sold 3,527,715 - Gross margin (2,343,213 ) - Operating expenses: Sales and marketing 1,014,906 343,279 Product development 2,495,712 1,560,115 General and administrative 2,794,940 13,398,371 Total operating expenses 6,305,558 15,301,765 Loss from operations (8,648,771 ) (15,301,765 ) Interest and other expense 36,426 (17,922 ) Net loss$ (8,612,345 ) $ (15,319,687 )
Due to recurring losses, there is no provision for income taxes for any period
presented.
26 Revenue
Revenue for the three months ended
represents sales of Grunts of
compared to no revenue for the three months ended
Cost of goods sold
Cost of goods sold for the three months ended
compared to cost of goods sold of
Costs include labor costs of
assembly and quality control testing of Grunts and stock-based compensation of
the period was
facility and inventory warehousing costs. Shipping costs and duties/tariffs for
inventory purchases were
In the next 6-9 months we could experience manufacturing delays due to shipping
constraints in our supply chain. We expect cost of goods sold to increase as we
sell higher quantities of Grunts, but we expect the cost per Grunt to decrease
as we gain efficiencies in the manufacturing process and the cost of parts is
reduced as we purchase in higher volumes and source additional suppliers.
Sales and marketing
Sales and marketing expenses relate to costs to increase exposure and awareness
for our products and developing our network of
distributors.
Sales and marketing expenses were
31, 2022
products and brand of
compensation of
consultants,
for travel build our dealer network.
Sales and marketing expenses were
2021
products and brand of
costs of
granted to employees and consultants.
We expect sales and marketing expenses to increase as we expand our
and international distributor networks and promote our products.
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.
For the three months ended
were
payroll costs of
fees of
fees of
For the three months ended
were
payroll costs of
to share-based awards granted to employees and consultants), professional fees
of
fees of
We expect general and administrative expenses to increase as we increase
staffing to support sales, manufacturing, product development and to comply with
public company reporting and compliance requirements.
27 Product Development Expense
Product development expenses relate to development of our products and process
to manufacture these products.
Product development expenses were
31, 2022
costs of
granted to employees and consultants, professional fees of
design and
of
tools and shop supplies of
Product development expenses were
31, 2021
costs of
granted to employees and consultants, professional fees of
design, prototype parts and tooling costs of
We expect product development costs to increase in the future as our product
development activities expand for new vehicle models.
Interest and Other Expenses
Interest and other expenses for the three months ended
were not significant for either period.
Net Loss
Net loss for the three months ended
Liquidity and Capital Resources
On
debt and equity sales.
Cash used in operating activities
Net cash used in operating activities was
ended
compensation, write down of inventory and prepaid inventory and depreciation and
amortization. Cash used in operating activities includes increases in inventory
of
we purchased more inventory in the three months ended
fewer deposits based on the timing of inventory purchases domestically versus
internationally to build Grunts for delivery to customers, a decrease of
million
in the three months ended
higher accrued liabilities due to the timing of invoices received from vendors
and an increase in prepaid expenses of
legal counsel retainers of
increase director and officer liability insurance due to the public stock
offering that occurred in
Net cash used in operating activities was
compensation, and depreciation and amortization. Cash used in operating
activities includes increases in inventory and prepaid inventory totaling
million
production of the Grunt and
deposits for our
amendment to our related party lease for a facility in
28
Cash used in investing activities
Net cash used in investing activities was
ended
to our Grunt manufacturing and product development. Cash used from investing
activities for the period ended
Cash provided by financing activities
Cash provided from financing activities for the period ended
our common stock in
share.
Net cash provided by financing activities was
ended
which was convertible into preferred stock upon future financing events. We
received gross proceeds of
received gross proceeds of
preferred stock. We paid commissions and expenses of
79,750 shares of common stock and warrants to purchase 79,750 shares of common
stock with an exercise price of
offering. This equity financing resulted in the SAFE investments of
as of
stock and the WeFunder SAFE investments converting into 351,832 shares of Series
A preferred stock. In
stock at
commissions and expenses of
Our continuation as a going concern is dependent upon our ability to obtain
continued financial support from our stockholders, necessary equity financing to
continue operations and the attainment of profitable operations. As of
2022
Additionally, management anticipates that our cash on hand as of
is insufficient to fund planned operations, including the development of our
vehicles, beyond one year from the date of the issuance of the financial
statements as of and for the three months ended
raise substantial doubt regarding our ability to continue as a going concern. We
may be required to raise additional proceeds to fund our operations and there is
no guarantee that we will be able to raise funding with favorable terms, if at
all. Additionally, any equity issuance to raise additional proceeds during the
12 months following our
of our underwriter from our
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. In other words, an “emerging growth company” can delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. 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.
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.
Critical Accounting Policies
No critical accounting policies or estimates existed as of
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