NOTE 10 – 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 31,112 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 March 31, 2024, were 13,519 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 during the three months ended March 31, 2024 and no expense was recognized in the period. In February 2023, 112 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 three months ended March 31, 2023 related to this modification.

For the three months ended March 31, 2023, total expense for RSUs was $53,773.

Performance Shares

In 2022 the compensation committee approved reserving 1,112 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 are 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 689 shares (618 were issued due a forfeiture of 3 shares and 68 shares 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 quarter ended March 31, 2023.

In addition, the compensation committee also approved reserving 1,112 shares from the 2021 Plan to issue to employees based on achievement of the Company’s 2023 performance milestones to employees who are 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 three months ended March 31, 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 months ended March 31, 2024 and 2023, the Company recognized share-based compensation (benefit) expense of $(1,922) and $745,943, respectively, related to common stock options. The share-based compensation benefit for the three months ended March 31, 2024 is primarily due to forfeiture of unvested stock options from employees who terminated during the period which offset the expense from stock options outstanding with current employees. The Company expects to recognize additional compensation expense of $421,863 related to these common stock options assuming all awards will vest.

Total stock-based compensation recorded for the three ended March 31, 2024 and 2023 for all stock based compensation awards, including warrants, has been recorded as follows: