NOTE 11 – STOCK-BASED COMPENSATION

In January 2021, the Company’s board of directors adopted the Volcon, Inc. 2021 Stock Plan, (the “2021 Plan”). The 2021 Plan is a stock-based compensation plan that provides for discretionary grants of stock options, stock awards, and restricted stock unit awards to employees, members of the board of directors and consultants (including restricted stock units issued prior to the adoption of the plan as further discussed below). The Company has reserved 312 shares of the Company’s common stock for issuance under the 2021 Plan. To the extent that an award, if forfeitable, expires, terminates or lapses, or an award is otherwise settled in cash without the delivery of shares of common stock to the participant, then any unpaid shares subject to the award will be available for future grant or issuance under the 2021 Plan. Shares available for issuance under the 2021 Plan as of June 30, 2024, were 122 shares. Awards vest according to each agreement and as long as the employee remains employed with the Company or the consultant continues to provide services in accordance with the terms of the agreement.

Restricted Stock Units

There were no restricted stock units outstanding in 2024 and no expense was recognized for any period of 2024. In February 2023, 2 RSUs were subject to cancellation due to termination of employment. However, the Company entered into a modification to allow the employee to fully vest in these RSUs as part of a severance agreement. The Company recorded additional expense of $31,487 during the six months ended June 30, 2023 related to this modification.

For the three and six months ended June 30, 2023, the Company recognized expense for RSUs of $23,550 and $77,323, respectively.

Performance Shares

In 2022 the compensation committee approved reserving 12 shares from the 2021 Plan to issue based on achievement of the Company’s 2022 performance milestones to employees who are employed in 2022 and were active employees on the date of approval in 2023 by the compensation committee. On February 6, 2023 the compensation committee of the board of directors approved a grant of 7 shares (7 were issued due a forfeiture of 1 share and 1 share withheld for payment of employee withholding taxes) for the achievement of some of the Company’s 2022 performance milestones. The Company recognized share-based compensation expenses of $257,717 related to the grant of these shares in the six months ended June 30, 2023.

In addition, the compensation committee also approved reserving 12 shares from the 2021 Plan to issue to employees based on achievement of the Company’s 2023 performance milestones to employees who were employed in 2023 and are active employees on the date of approval in 2024 by the compensation committee. No shares were approved for grant by the compensation committee for 2023 performance milestones.

Stock Options

The following summarizes activity relating to common stock options to employees and consultants for services during the six months ended June 30, 2024:

The Company valued the options using the closing stock price of the Company’s common stock on the date of grant and the following assumptions:

During the three and six months ended June 30, 2024, the Company recognized share-based compensation (benefit) expense of $287,751 and $285,829, respectively, related to common stock options. The share-based compensation for the three and six months ended June 30, 2024 includes a net benefit of $1,922 for the three months ended March 31, 2024 primarily due to forfeiture of unvested stock options from employees who terminated during the period ended March 31, 2024, which offset the expense from stock options outstanding for current employees. During the three and six months ended June 30, 2023 the Company recognized share-based compensation expenses of $601,844, and $1,605,504, respectively, related to common stock options. The Company will not recognize any additional stock compensation expense for outstanding awards at June 30, 2024 as all remaining expense for unvested options was recognized as of June 30, 2024 as it was not significant.

Total stock-based compensation recorded for the three and six months ended June 30, 2024 and 2023 for all stock-based compensation awards, including warrants, has been recorded as follows: