NOTE 8 – 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 a total of 3,000,000 shares of the Company’s common stock for issuance under the 2021 Plan, which may be adjusted for changes in capitalization and certain corporate transactions. 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 December 31, 2021, were 522,823. 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. The Company has granted awards with time-based vesting and performance-based vesting features.

Restricted Stock Units

Beginning in October 2020, the Company entered into various agreements with employees and a consultant (who became an employee in May 2021 and continued to vest under the same terms as the consulting agreement) where the Company agreed to award a total of 637,500 shares of restricted stock units (RSUs) which vest equally over a period of three years. The Company estimated the fair value of the shares of common stock using the estimated fair value of its common stock based on the most recent fundraising at $1.88 per share. For the period from February 21, 2020 (inception) to December 31, 2020, the Company recognized expense of $58,875 related to these RSUs.

In July 2021, the Company’s CEO resigned effective July 30, 2021. The share-based awards of 187,500 RSUs and 187,500 stock options awarded to the former CEO were forfeited and were returned to the shares available for issuance under the 2021 Plan and all previously recognized compensation expense for his RSUs and stock options was reversed. During the year ended December 31, 2021, the Company recognized expense of $237,764 for RSUs. The Company expects to recognize additional compensation expense of $1,483,425 related to RSUs (including 1,126,250 related to the modification in January 2022 noted below) assuming all awards outstanding at December 31, 2021 will vest.

The following is the restricted stock unit activity for the year ended December 31, 2021:

_____________________ 

Performance shares

In January 2021, the Board of Directors authorized 250,000 common shares to be reserved under the 2021 Plan for issuance to employees upon achieving multiple Company performance milestones. The allocation of the number of shares to be awarded was to be determined upon achievement of all the milestones. In July 2021, the Compensation Committee of the Board of Directors approved a grant of 162,507 shares since some of the performance milestones were met. The Company recognized share-based compensation expense of $594,775 related to the grant of these shares.

The remaining 87,493 shares not awarded in July 2021 were available for issuance to employees based upon achieving multiple Company performance milestones for the second half of 2021. On February 28, 2022, the Compensation Committee of the Board of Directors approved a grant of 44,623 shares for the achievement of some of the performance milestones. In February 2022, the Company will recognize share-based compensation expense of $83,445 based on the Company’s stock price on February 28, 2022 related to the grant of these shares.

Stock Options

The following is the common stock options to employees and consultants for services during the year ended December 31, 2021:

The Company valued the options using an estimated fair value of the shares of common stock between $0.98 – $5.00, volatility between 71% - 105% based on peer companies, risk free interest rate between 0.77% - 0.85%, no dividends and an estimated life of 6 years. During the year ended December 31, 2021, the Company recognized expense of $544,069 related to these common stock options. The Company expects to recognize additional compensation expense of $3,234,816 related to these common stock options assuming all awards vest.

Total stock-based compensation recorded for the year ended December 31, 2021 and for the period from February 21, 2020 (inception) to December 31, 2020 for all stock based compensation awards, including warrants, has been recorded as follows: