DEF 14A: Volcon Seeks Stockholder Approval for Reverse Stock Split and Nasdaq Compliance

Volcon, Inc. is asking stockholders to approve a reverse stock split, elect directors, ratify the appointment of auditors and approve other corporate governance matters at its upcoming annual meeting.

Summary

• Volcon, Inc. is holding its 2024 Annual Meeting of Stockholders online on May 28, 2024.
• Stockholders will vote on several proposals, including the election of four directors, an amendment to the company's certificate of incorporation to allow for a reverse stock split, a Nasdaq proposal related to convertible preferred stock, ratification of the appointment of MaloneBailey, LLP as the independent auditor, and a proposal to adjourn the meeting if necessary.
• The proposed reverse stock split would allow the Board of Directors to effect a split at a ratio between 1-for-10 and 1-for-100.
• The Nasdaq proposal relates to complying with Nasdaq Listing Rule 5635(d) regarding the issuance of common stock upon conversion of Series A Convertible Preferred Stock and the elimination of a floor price.
• The Board of Directors recommends voting FOR all director nominees, the reverse stock split proposal, the Nasdaq proposal, ratification of the auditor appointment, and the adjournment proposal.
• As of April 2, 2024, Volcon had 20,648,955 shares of common stock and 19,880 shares of Series A Convertible Preferred Stock outstanding.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company is taking steps to address its low stock price and improve its balance sheet, there are significant risks and uncertainties associated with these actions. The company's past performance and current financial situation warrant caution.

Positives

• The reverse stock split could make the company's stock more attractive to institutional investors.
• The exchange of senior convertible notes for Series A Convertible Preferred Stock removed substantially all of the debt from its balance sheet.
• The Board is actively searching for a third independent board member to comply with Nasdaq listing rules.

Negatives

• The company's common stock price has been below the minimum required by Nasdaq, leading to a delisting warning.
• Prior reverse stock splits in October 2023 and February 2024 were followed by a significant drop in the trading price of the company's common stock.
• The company suspended payment of quarterly compensation to non-employee directors to preserve cash, accruing $83,500 as of March 31, 2024.

Risks

• There is no guarantee that a reverse stock split will increase the stock price or attract institutional investors.
• The market price of the common stock after a reverse stock split may not remain unchanged or increase in proportion to the reduction in the number of shares.
• The reverse stock split may result in some stockholders owning odd lots of less than 100 shares, which may be more difficult to sell.
• If the Nasdaq Proposal is not approved, the company may incur substantial costs and expenses in the future in connection with calling additional meetings every 90 days for the life of the Preferred Stock.

Future Outlook

The company is focused on regaining compliance with Nasdaq listing requirements and improving its financial position.

Management Comments

• The Company's Board has determined that each of the proposals that will be presented to the stockholders for their consideration at the Annual Meeting are in the best interests of the Company and its stockholders, and unanimously recommends and urges you to vote FOR each director nominee; FOR the approval of an amendment to the Company's amended and restated certificate of incorporation to grant our Board of Directors authority to effect a reverse stock split of the outstanding shares of the Company's common stock, at a reverse stock split ratio of between 1-for-10 to 1-for-100 (or any whole number in between), as determined by the Board in its sole discretion; FOR the Nasdaq Proposal (as described in this Proxy Statement); FOR ratification of MaloneBailey, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2024; and FOR approval of a proposal to permit the adjournment of the meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the foregoing proposals.

Industry Context

Many companies facing low stock prices consider reverse stock splits to improve their marketability and appeal to institutional investors. Volcon's situation is not unique, and the success of a reverse stock split depends on various factors, including the company's underlying performance and market conditions.

Comparison to Industry Standards

• Reverse stock splits are a common strategy for companies facing delisting from exchanges like Nasdaq, similar to what happened with electric vehicle company AYRO, Inc. when Christian Okonsky was Chairman of the Board.
• The compensation structure for non-employee directors, including cash retainers and equity-based compensation, is generally in line with industry standards for companies of similar size and stage.
• The use of MaloneBailey, LLP as an auditor is common among smaller public companies, although larger companies typically engage Big Four accounting firms.

Management Changes

Stakeholder Impact

• Stockholders may experience dilution if the Nasdaq Proposal is approved and the Preferred Stock is converted at a lower price.
• The reverse stock split could affect the liquidity and trading costs of stockholders' shares.
• Employees may be affected by the company's cost-saving measures, such as the suspension of director compensation.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on May 28, 2024.
• The Board of Directors will determine whether to implement the reverse stock split and at what ratio, if approved by stockholders.
• The company will continue to seek compliance with Nasdaq listing requirements.
• The company will hold a new meeting every 90 days to seek approval of the Nasdaq Proposal until it receives approval.

Key Dates

Keywords

reverse stock split, annual meeting, proxy statement, Nasdaq, directors, auditor, Volcon, stockholders, preferred stock, common stock