EDGAR 10-K Filing

Company CIK: 1499961
Filing Year: 2024
Filename: 1499961_10-K_2024_0001558370-24-000312.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS.
References in this Annual Report to the “Company”, “we”, “us”, “our” or similar references, or “Mullen,” mean Mullen Automotive Inc., a Delaware corporation, and its subsidiaries Ottava Automotive, Inc., a California corporation, Mullen Real Estate, LLC., a Delaware corporation, Mullen Investment Properties LLC, a Mississippi corporation, and Bollinger Motors, Incorporated a consolidated subsidiary.
Background
We are a Southern California-based electric vehicle company that operates in various verticals of businesses focused within the automotive industry. The Company was originally formed on April 20, 2010, as a developer and manufacturer of electric vehicle technology. During 2021, the Company completed a merger with Net Element, Inc., a Delaware-incorporated company1. The Company changed its name from “Net Element, Inc.” to “Mullen Automotive Inc.” The Nasdaq Stock Market, LLC (Nasdaq Capital Market) ticker symbol for the Company’s common stock changed from “NETE” to “MULN” at the opening of trading on November 5, 2021. The CUSIP number of the common stock is 62526P 406.
The Company
Mullen Automotive is a Southern California-based automotive company that is building and delivering the newest generation of Commercial Trucks. We also have a portfolio of high-performance Passenger vehicles in various stages of Product Development for launch in subsequent years.
The company entered the Commercial Truck Business executing two opportunistic acquisitions in the fourth quarter of 2022. On September 7, 2022, the first acquisition was announced of Bollinger Motors. The purchase price was $148.6 million in cash and stock for a 60.0% controlling interest, which gives Mullen the majority ownership of Bollinger Motors, Inc. This provided Mullen entry into the medium duty truck classes 4-6, and the Sport Utility and Pick Up Truck EV segments.
The second acquisition was in October 2022, when the U.S. Bankruptcy Court approved the Company acquisition ELMS’ (Electric Last Mile Solutions) assets in an all-cash purchase. With this transaction, Mullen acquired ELMS’ manufacturing plant in Mishawaka Indiana and all the intellectual property needed to engineer and build Class 1 and Class 3 electric vehicles.
These two acquisitions give Mullen the most complete portfolio coverage in the Commercial EV truck market from Class 1 to 6 where there is very little current competition and, in some segments, no other announced entries.
Mullen’s Tunica Mississippi manufacturing plant was equipped during 2023 to become the Commercial Manufacturing Center. Tunica was commissioned with two lines to manufacture the Class 1 and 3 vehicles and began shipping Class 3 trucks in September 2023.
The Mullen FIVE, the Company’s first electric crossover, is slated to start European production in late 2025. Early drivable concept vehicles have been extensively previewed by Customers through 24 Marketing events at tracks nationwide during 2022 and 2023. The response to the styling, technology and performance has been very positive. The plan is for initial introduction to be in Europe for the low volume RS Super high-performance version, followed by the GT high volume entry in the US if the introduction in Europe is successful.
1 The Merger was accounted for as a reverse merger transaction, in which Mullen Automotive-California is treated as the acquirer for financial accounting purposes. For more information on the Merger, see “The Merger and Related Transactions.”
Company Overview
Our Strength and Strategy
● Experienced and proven team in the Electric Vehicle (“EV”) space. Our executive team has extensive experience in the automotive original equipment manufacturing ("OEM") space. They have a detailed understanding of the product development cycle from blank sheet to post launch activities in both the Commercial and Retail segments. The team brings expertise in all the critical areas required to be successful - studio design, engineering product development, energy storage systems, supply chain management, manufacturing, and sales & service.
● Manufacturing Plants. Mullen owns two manufacturing plants in ready condition; Tunica and Mishawaka. Unlike many other new EV companies who must still invest time and money to acquire manufacturing capacity, Mullen has this capability and capacity today.
● Unique plan. Our approach for Class 1 and 3 Commercial Markets is to prioritize speed-to-market by leveraging other OEMS engineering and tooling and spending Mullen’s capital on the required Customer and legal requirements for the vehicles to be sold in the North American market. This results in with lower capital investment requirements compared to other startup EV companies and an opportunity to gain market share before other entries arrive. This strategy has been executed with both launches (Class 1 and 3) in fourth calendar quarter of 2023.
Our Market Opportunity
There is a significant transformation going on in the motor vehicle landscape. Electric vehicles are quickly becoming mainstream as all major OEM’s have announced billions of dollars of investments to quickly transform their entire from gas powered to electric propulsion. Mullen is at the forefront of this transformation leading the way in Commercial Trucks
● Policy changes at the state and national level have put pressure on many commercial fleets to purchase a portion of their fleet in Electric starting in 2023 and rapidly increasing through the decade ahead. They also have put in place aggressive rebates and credits to support early adoption.
● Many companies are stating aggressive adoption targets to voluntarily reduce their overall carbon footprint and their vehicle fleet is a high leverage point to reach those targets.
● As more entries come to market and the overall volume of available EV’s increase, the supply industry is able to produce lower cost EV components improving the affordability of the vehicles.
● The truck market use cases are highly varied. In urban duty cycles, electric powered trucks have become an economic option where the overall Total Cost of Ownership (TCO) has equaled or in some case become lower than the gas alternatives.
● Many of the large OEM’s that have historically provided the vehicles to the Commercial market have aggressive investment plans that have started with their high-volume Retail/Passenger vehicles and therefore left the commercial trucks until later years.
The Importance of Commercial and Fleet Business Segments
Fleet and Commercial segments represent a large portion of the total U.S. commercial market and includes Government, Commercial and Rental segments. Mullen’s Fleet First strategy takes advantage of segments vacated by competitors and allows a first mover advantage for the company. Our goal is to build strong customer relationships with fleet operators to capture a significant market opportunity as the broad trend of vehicle electrification continues.
The decisions for Fleet Customer to purchase an EV versus a gas-powered vehicle is pragmatic, a business decision relying on cost variables and company strategies rather than the decision processes that a retail customer includes in their purchase decision. There are generally well-known routes and duty cycles that allow a good match between range capabilities of the vehicles and required range, making the early adoption of EV’s in the Commercial space.
Our Commercial Portfolio of Vehicles
● Mullen Class 1 Van: The Mullen ONE van features specifications offering a good fit for a variety of applications including package delivery. Riding on a 120-inch wheelbase and measuring in at 186 inches long, 65 inches wide, and 75 inches tall, it has 160 cubic-feet of cargo volume accessible via dual sliding side doors or a tall rear liftgate. It features a curb weight of 3,198 pounds and can carry a maximum payload of 1,683 pounds up to 110 miles with its 42kWh battery. Turning radius is approximately 20 feet, about the same as the smaller Ford Transit van. In this segment, all other EOMS’s have withdrawn their gas entry so the Mullen ONE will initially have no competition from the legacy manufacturers, in both gas and electric.
● Mullen ONE
● Mullen Class 3: The Mullen THREE is a Class 3 commercial electric vehicle targeting over 5,684 pounds of max payload, 11,000 pounds gross vehicle weight rating (GVWR) and approximately 120 miles of range with its 89 KwH battery. The tilt cab chassis design of the vehicle is configurable and can be outfitted with a dry box, flat bed, stake bed, and other customizable cargo options. The cab-over design not only provides great visibility for the driver, but also results in a tight turning circle of approximately 38 ft, which makes this truck extremely maneuverable on narrow city streets. We believe the introduction of the Mullen 3 will sell to several target use cases, including delivery, construction, landscaping, towing, and refrigerated groceries.
Mullen THREE
Bollinger B4 Chassis Cab: The all-new Bollinger B4 chassis is designed from the ground up with fleet efficiency as its first priority. With a GVWR of 15,500 pounds, the Bollinger B4 can carry over 7,325 lbs. of payload when equipped with dual battery packs. With a 158 in. wheelbase, this chassis can be upfitted with a body length up to 18 ft., yet still be capable of an impressive turning circle, making this truck an excellent choice for urban and semi-urban driving. Every aspect of these trucks has been streamlined to be as versatile as possible. The cab forward design provides better visibility and frees up space behind the driver for more cargo area. Bollinger Class 4 production launch begins in the second half of calendar 2024. Bollinger is also planning to launch Class 5 and Class 6 vehicles in the coming years.
● Mullen I-GO: Perfect for international urban markets, the Mullen I-GO bridges the gap between the growing demand for quick deliveries and space constraints in dense cities. The I-GO commercial EV is certified, and ready for sale in initial markets of UK, Germany, Spain, France, and Ireland. The I-GO is a small L7E class vehicle with dimensions that include a 96 inch wheelbase and gross vehicle weight of 1,753 lbs.
Mullen Passenger Vehicle Portfolio
● Mullen FIVE and Mullen FIVE RS: The Mullen FIVE represents Mullen Automotive’s entry into the full-electric, mid-size luxury SUV market. The Mullen FIVE will be competitively priced starting from a base price of $55,000 to $76,000 offering at least two optional packages which will allow customers to purchase a vehicle with options that best fit their budgetary and performance needs. The Mullen FIVE RS is an ultra-high-performance EV that is planned to feature a top speed of 200 mph and acceleration from 0-60 mph in just 1.9 seconds. The vehicle will be equipped with 800-volt architecture, all-wheel drive, a two-speed gearbox, and over 1,000 horsepower. The RS is planned to be launched in the European market in the fourth calendar quarter of 2025 as a low volume prestige entry.
● Design. Our Mullen platform architecture for the Mullen FIVE, creates the opportunity for vehicles with unique aspect ratios - low roof line, wide track width, svelte body, and a long wheelbase. The vehicle is being engineered to be a top safety plus pick and is planned to have a five-star crash rating.
Mullen FIVE and Mullen FIVE RS
Bollinger B1 and B2
BOLLINGER B1 SUV
By designing an electric all wheel-drive SUV from the ground up, the Bollinger Motors team created a new platform of electric trucks capable of exceptional off road performance, combined with never-before-seen cargo and utility features. The Bollinger electric truck dual-motor drivetrain offers outstanding horsepower and torque, 50/50 weight distribution, unbeatable traction and best-in-class ground clearance boasting a 10" to 20" adjustable ride height.
BOLLINGER B2 PICKUP
The Bollinger B2 electric pickup truck is the big brother of the B1 with identical DNA. It offers the same functionality inside and out, except in a long-bed pickup truck version. This electric truck features a six-foot bed that is capable of carrying 16-foot long cargo through a patented full-vehicle-length pass-through with gates closed.
Battery Technology
The Company plans to use is using Li-Ion technology for its first vehicles supplied from world leader CATL. Lithium Iron Phosphate chemistry has proven to be the best combination for Commercial vehicles when balancing cost and performance.
As part of our strategy to increase our vertical integration of critical systems, Mullen purchased the assets of Romeo Power in September 2023 for $3.5 million. This included battery production lines as well as a significant amount of inventory for pack production and the IP to produce the Legions and Hermes battery systems. Mullen recently announced addition of a new facility in Fullerton California for the Romeo equipment to be installed. When in production, the in-house made Mullen battery packs will reduce reliance on third party suppliers and reduce supply chain risks in a very critical area of the vehicle.
Romeo Production Lines being installed in new Mullen Battery Facility
Solid State Development
The company is engaged in current product development and testing on solid state polymer technology with two suppliers. We are planning to first test the modules that have been engineered to be installed in the Class 1 Cargo Van, and subsequently perform drivable vehicle testing vehicle in the first calendar quarter of 2024. The Company plans to introduce this technology into the production Commercial vehicle lines after full vehicle testing and certification has been completed.
Our Vehicle Manufacturing Approach
We have a 124,700 sq ft facility located in Tunica, Mississippi that was purchased during 2021 and there is a 15,000 square-foot expansion for incoming inventory and finished product shipping commencing in the first calendar quarter of 2024. After equipment installation, debug trials and final quality control buy-off, the Class 3 line produced and shipped its first vehicles in September 2023. Following that, the Class 1 assembly line began production in November.
Passenger Division Manufacturing Operations
Through the ELMS asset acquisition, Mullen acquired a 675,000 sq ft manufacturing facility. This was the original manufacturing plant for General Motors Hummer H2 production, and later the Mercedes-Benz R-Class. There have been
many upgrades to the plant by the prior owners and most importantly the plant has been converted to manufacture Electric Vehicles. The plant is currently planned to produce the Mullen FIVE and Bollinger B1 and B2 vehicles.
Mullen Commercial Sales, Service and Distribution
The commercial sales and distribution plan is to form partnerships with strong existing top performing commercial dealerships that will cover the National fleet business requirements.
On December 13, 2022, the Company announced Randy Marion Isuzu LLC as its first dealer group partner for Mullen’s commercial EV lineup. The Marion group have signed two significant Purchase orders the first for 6,000 Class 1 vehicles in December 2022 valued at $200 million and the second for 1,000 Class 3 trucks valued at $63 million.
Additional large commercial dealers have been identified and will be added in 2024 to expand the national coverage, based on criteria driven by potential customers, size of fleets and state incentives.
Government Procurement Programs
The Company also plans to focus on U.S. Government vehicle procurement programs. The Biden administration issued an executive order in 2021 focused on revitalizing the electric-vehicle (EV) program of the U.S. government, requiring the replacement of the government’s entire fleet of about 650,000 vehicles with American-made EVs. The Company focus is establishing Mullen’s EV lineup within the overall federal fleet procurement process. with a partner organization RRDS that has extensive experience in Government sales. The application for approval for sales was submitted jointly with RRDS on November 24, 2023.
After Sales Strategy
To ensure all Customers nationwide have access to fast response for required servicing of their vehicles, Mullen has partnered with Amerit Fleet Solutions using both their facilities and mobile vehicles. Amerit technicians have been trained and are ready to service beginning with first Customer deliveries.
Vehicle Fleet Connectivity
To assist fleets to improve their operating costs, safety and productivity, Mullen offers their Advanced Telematics System Pulse which provides Driver and Fleet Manager connectivity to the vehicles with real time alerts for vehicle location, routing, maintenance alerts, and battery state of charge.
Marketing Strategy
Consumer Marketing of Passenger and Commercial Vehicles
Beginning in October 2022, the Company launched the “Strikingly Different” EV Tour of the Mullen FIVE EV Crossover where the public had the opportunity to interact with and ride in the vehicle in nine major cities across the United States. The Mullen FIVE EV Crossover vehicle on tour was equipped with a completely updated infotainment system featuring PERSONA, Mullen’s AI-powered proprietary advanced facial recognition technology, which bridges the gap between driver and vehicle by personalizing the overall vehicle experience. Participants had the opportunity to interact with and witness PERSONA in action. 
With the tremendous success of the Mullen FIVE tour in 2022, the 2023 Ride and Drive was significantly expanded to feature more vehicles from Mullen’s line of consumer and commercial EVs as well as more stops across the United States. The Mullen EVs featured on tour included:
● Mullen FIVE EV Crossover
● Mullen FIVE RS High-Performance Sport EV Crossover
● Mullen GT High-Performance Electric Sports Car
● Mullen ONE Class 1 Commercial EV Cargo Van
● Mullen THREE Class 3 Commercial Low Cab Forward
● Bollinger B2 Electric Pickup Truck
The 13 tour stops in 2023 were at speedways and other exciting venues with focus on the south, northeast, Midwest and western part of the U.S.
Tour participants had the chance to test drive the commercial vehicles and ride in the high-performance passenger EVs on racetracks with a professional driver. The reason speedways were selected as tour stops was to demonstrate the power of the Mullen FIVE RS, an ultra-high-performance EV that will feature a top speed of over 200 mph and acceleration from 0-60 mph in just 1.95 seconds. The vehicle is equipped with 800-volt architecture, all-wheel drive, a two-speed gearbox, and over 1,000 horsepower.
The tour was provided Mullen with the opportunity to increase brand awareness, allow potential customers to test drive the vehicles for themselves. experience the technology firsthand, and gather consumer feedback.
Commercial Vehicle Marketing 
In 2023, we began planning and executing a strategic marketing initiative surrounding Mullen’s new commercial products, the Mullen ONE and the Mullen THREE. These initiatives included Email Blasts, Social Media, Paid Advertising, Press Releases, Editorial Content, Sponsorships and sixteen regional and national tradeshows. Mullen is working with key partner-agencies on advertising, tradeshows and events, social media and videography. In the upcoming year, we will execute commercial marketing initiatives through regional and national tradeshows, extended online presence, event partnership initiatives and broadened sales outreach. 
In addition to the tradeshow attendance, the commercial vehicle lineup was available for test drives on the Strikingly Different Tour. Various commercial customers discussed their particular use case for fleet vehicles with our knowledgeable sales team and experienced the commercial vehicles firsthand. 
On August 24th, 2023, Mullen held a Commercial Vehicle Launch event to provide attendees the opportunity to visit Mullen’s Tunica facility, learn about the manufacturing process, participate in product walk around and test drive the Mullen ONE and Mullen THREE. Attendees included local county and state leadership, media, investors and customers. 
Commercial and Advertising
During 2023, the commercial team’s marketing and advertising efforts focused on building brand awareness, generating and nurturing leads and educating customers about our products. We have partnered with multiple fleet publishers to create email, print, web, and social marketing campaigns. We have leveraged Mullen’s social media platforms and online presence to keep our brand top of mind. We have purchased segmented lists of customers & companies that are purchasing similar vehicles to the Mullen ONE and Mullen THREE, with geographic locations in green states.
The Commercial Marketing team is building on the successful marketing efforts of 2023 to enhance our strategic approach for 2024. We will continue to maintain our web presence, marketing outreach, and participation in national tradeshows. Our sales team is engaged in attending several regional tradeshows and increasing our pilot program availability. We are also launching an upfitter partnership program to include our vehicles in various upfitter booths at local, regional and national tradeshow events. Our marketing and advertising efforts are being expanded into industry segment publications and we are increasing our online visibility.
Commercial Sales Outreach 
We have leveraged our sales team's 100+ years of experience in the fleet sector to build relationships with potential customers, upfitters, fleet management companies and dealerships. Our team engaged contacts via cold calling/emailing, events, incoming website leads, third-party site leads, referrals and personal relationships. 
We successfully built a pilot program for large fleets and organizations to test our vehicles across their use case and environment. The pilot program is a critical piece to our overall go to market strategy and has provided resourceful feedback for product development, interest and sales volume. 
The sales team has actively participated in dealer training, test drive availability, networking with upfitters, and preparing and inspecting demonstration units. 
Commercial Dealer Engagement 
Working hand in hand with our initial dealer partner, we have armed their sales team with all of the pertinent information about our Commercial Product line enabling them to successfully sell our vehicles. Mullen’s team launched an initial sales kick off covering topics including commercial vehicle walkarounds, product overviews, marketing initiatives, advertising support, upfitter readiness, Mullen’s Commercial Dealer Portal, Commercial Pulse, aftersales support, sales strategies and sales initiatives. Mullen will continue training initiatives in the coming weeks ensuring synergies between the commercial brand and Randy Marion Automotive Group (RMA). 
Research and Development
As an emerging automaker, we will rely heavily on research and development to establish and strengthen our market position. We will primarily conduct our research and development activities in Irvine, California, for the Mullen FIVE and at our Troy, Michigan and Oak Park Michigan facilities for our Commercial Platforms. During the fiscal year ended September 30, 2023, we incurred research and development expense of approximately $77.4 million. Expenses consisted primarily of personnel costs for our teams in engineering as well as contract and professional services that included the production of several demonstrator vehicles.
Intellectual Property
We place a strong emphasis on our innovative approach and proprietary designs which bring intrinsic value and uniqueness to our product portfolio. As part of our business, we seek to protect the underlying intellectual property rights of these innovations and designs such as with respect to patents, trademarks, trade secrets and other measures, including through employee and third-party nondisclosure agreements and other contractual arrangements. Our success depends in part upon our ability to protect our core technology and intellectual property. We have nondisclosure and invention assignment agreements with our consultants and employees, and we seek to control access to and distribution of our proprietary information through non-disclosure agreements with our vendors and business partners.
Trademarks and Patents
We plan to file additional applications for the registration of our trademarks and issuances of patents in the United States and foreign jurisdictions as our business expands under current and planned distribution arrangements. Protection of registered trademarks and issued patents in some jurisdictions may not be as extensive as the protection provided by the United States. There are no assurances given that pending applications will be granted or that they will, if granted, contain all of the claims currently included in the applications. Refer to Intellectual Property Table.
Patents
Trademarks
Company
U.S.
Non U.S.
U.S.
Non U.S.
Status
Total
Comments
Mullen Automotive
Issued/Registered
Not included are 95 patents pending
Bollinger Motors
Issued/Registered
Not included are 4 trademarks pending/allowed; 16 patents are pending
Total
Trade Secrets
We own certain intellectual property, including trade secrets, which we seek to protect, in part, through confidentiality agreements with employees and other parties. Even where these agreements exist, there can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known to or independently developed by competitors.
We intend to protect our legal rights concerning intellectual property by all appropriate legal action. Consequently, we may become involved from time to time in litigation to determine the enforceability, scope, and validity of any of the foregoing proprietary rights. Any patent litigation could result in substantial cost and divert the efforts of management and technical personnel.
Government Regulation and Credits
We operate in an industry that is subject to extensive environmental regulation, which has become more stringent over time. The laws and regulations to which we are subject govern, among others, water use; air emissions; use of recycled
materials; energy sources; the storage, handling, treatment, transportation and disposal of hazardous materials; the protection of the environment, natural resources and endangered species; and the remediation of environmental contamination. Compliance with such laws and regulations at an international, regional, national, state and local level is an important aspect of our ability to continue our operations.
Environmental standards applicable to us are established by the laws and regulations of the countries in which we operate, including standards adopted by regulatory agencies as well as the permits and licenses required by such agencies. Each of these sources is subject to periodic modifications and we anticipate increasingly stringent requirements. Violations of these laws, regulations or permits and licenses may result in substantial civil and criminal fines, penalties, and possibly orders to cease the violating operations or to conduct or pay for corrective works. In some instances, violations may also result in the suspension or revocation of permits and licenses.
Emissions
In the Unites States, Europe and China, there are vehicle emissions performance standards that may provide an opportunity for us to sell emissions credits.
United States
The United States Environmental Protection Agency (EPA) issues NMOG + NOx and GHG CO2 emissions credits per §§ 86.1811 and 86.1816 and the fleet-average evaporative emission standards from § 86.1813 as described in 40 CFR part 1037, current Model Year Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles Regulation and are paid in relation to vehicles sold and registered in the U.S. (section 177 states).
California has greenhouse gas emissions standards that closely follow the standards of the EPA. The registration and sale of Zero-Emission Vehicles (ZEVs) in California will earn us ZEV credits that we can sell to other Original Equipment Manufacturers (OEMs). Other states within the United States have adopted similar standards include Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington state and Washington D.C. (Section 177 states). “Section 177 state” means a state that is administering the California ZEV requirements pursuant to section 177 of the federal Clean Air Act (42 U.S.C. § 7507). We intend to take advantage of these regimes by registering and selling ZEVs in these other states.
ZEV credits in California are calculated under the 13 California Code of Regulations (CCR) § 1962.2 Zero-Emission Vehicle Standards for 2018 through 2025 Model Year Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles Regulation and are paid in relation to ZEVs sold and registered in California including Battery Electric Vehicles (BEVs) and Fuel Cell Electric Vehicles (FCEVs).
The ZEV program assigns ZEV credits to each vehicle manufacturer. Vehicle manufacturers are required to maintain ZEV credits equal to a set percentage of non-electric vehicles sold and registered in California.
Each vehicle sold and registered in California earns a number of credits based on the drivetrain type and the all-electric range (“AER”) of the vehicle under the Urban Dynamometer Driving Schedule Test Cycle. Plug-in hybrid vehicles (“PHEVs”) receive between 0.4 and 1.3 credits per vehicle sold and registered in California. Battery electric and fuel cell vehicles receive between one and four credits per vehicle sold in California, based on range.
The credit requirement was 7% in 2019 which required about 3% of sales to be ZEVs. The credit requirement will rise to 22% in 2025, which will require about 8% of sales to be ZEVs.
If a vehicle manufacturer does not produce enough EVs to meet its quota, it can choose to buy credits from other manufacturers who do or pay fines for each credit such manufacturer is short. This could provide an opportunity for us to sell credits to other manufacturers that may not have met their quota.
EPA / CARB Emissions and Certificate of Conformity / Executive Order
The United States Clean Air Act requires that we obtain a Certificate of Conformity (CoC) issued by the EPA and a California Executive Order (EO) issued by the California Air Resources Board (CARB) concerning emissions for our vehicles. A Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act’s standards, and an Executive Order is required for vehicles sold in states that have sought and received a waiver from the EPA to utilize California standards. CARB sets the California standards for emissions control for certain regulated pollutants for new vehicles and engines sold in California. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of vehicles. There are currently eight states (Colorado, Maryland, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington state) which have adopted the California standard for heavy-duty vehicles.
The Greenhouse Gas Rule was incorporated into the Clean Air Act on August 9, 2011. Even though Mullen’s vehicles have zero-emissions, Mullen is still required to seek an EPA Certificate of Conformity for the Greenhouse Gas Rule and a CARB Executive Order for the CARB Greenhouse Gas Rule. Annual fees must be paid per the EPA’s Motor Vehicle and Engine Compliance Program (MVECP) that are required per every model year of compliant Light-Duty Vehicles, Light-Duty Trucks, Medium-Duty Vehicles and Heavy-Duty Vehicles.
Mullen has received EPA Certificate of Conformity for both Class 1 and Class 3 vehicles. In addition, the California EO has been issued by the CARB for the Mullen ONE. Approval by CARB for the Mullen THREE is expected in January 2024.
Vehicle Safety and Testing
Our vehicles will be subject to, and will be required to comply with, numerous regulatory requirements established by the National Highway Traffic Safety Administration (NHTSA), including applicable United States Federal Motor Vehicle Safety Standards (FMVSS). All Mullen products will fully comply with all applicable FMVSS without the need for any exemptions and expect our future vehicles to either fully comply or comply with limited exemptions related to specific new technologies.
As a registered manufacturer with NHTSA, we must self-certify that our vehicles comply with all applicable FMVSSs, before the vehicles can be sold in the U.S. Some examples of FMVSS rules that will apply to our vehicles are crashworthiness, crash avoidance and specific Electric Vehicle (EV) requirements. We will also be required to comply with other federal regulations administered by multiple departments within the Federal Government; the Department of Transportation (DOT), including but not limited to 49 CFR Part 541;Theft Prevention Act requirements, 49 CFR Part 575; Consumer information requirements, Early Warning Reporting requirements regarding warranty claims, field reports, 49 CFR Part 573; Defect and Noncompliance Responsibility, 49 CFR Part 577; Defect and Noncompliance Notification, the Federal Communications Commission (FCC), including but not limited to 47 CFR Part 15; Radio Frequency Devices and the EPA; including but not limited to 40 CFR Part 86; Control of Emissions from New and In-Use Highway Vehicles and Engines, 40 CFR Part 600; Fuel Economy and Greenhouse Gas Exhaust Emissions of Motor Vehicles.
The Automobile Information and Disclosure Act requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. In addition, this law allows inclusion of city and highway ‘fuel economy’ ratings, as determined by the EPA, as well as crash test ratings as determined by the NHTSA if such tests are conducted.
Human Capital Resources
Talent Attraction and Capability Assessment
Where and how we source our talent evolves as conditions and opportunities change. From a capability perspective, we are leveraging best practices in assessments and talent management to current capabilities and future pipeline while reinforcing a culture of belonging, empowerment, and innovation.
Diversity and Inclusion
We strive to attract a pool of diverse and exceptional candidates and support their career growth once they become employees. In addition, we seek to hire based on talent rather than solely on educational pedigree. We also believe that our ability to retain our workforce is dependent on our ability to foster an environment that is sustainably safe, respectful, fair, and inclusive of everyone and promotes diversity, equity and inclusion inside and outside of our business.
Our Employees
As of September 30, 2023, we employed 326 full-time employees. Most of our employees are engaged in automotive, finance, and engineering related functions. To date, we have not experienced any work stoppages and consider our relationship with our employees to be in good standing. None of our employees are represented by a labor union or subject to a collective bargaining agreement.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and file or furnish reports, proxy statements, and other information with the SEC. You can read our SEC filings over the Internet at the SEC’s website at www.sec.gov. Our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, also are available free of charge on the investors section of our website at www.mullenusa.com when such reports are available on the SEC’s website. Further corporate governance information, including our certificate of incorporation, bylaws, governance guidelines, board committee charters, and code of business conduct and ethics, is also available on the investors section of our website.
The contents of the websites referred to above are not incorporated into this filing or in any other report or document we file with the SEC, and any references to these websites are intended to be inactive textual references only.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS.
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, as well as the preceding “Business” section of this Report, before engaging in any transaction in our securities. Any of the following risks could materially and adversely affect our business, financial condition, results of operations and/or prospects, and cause the value of our securities to decline, which could cause you to lose all or part of your investment.
Risks Related to our Securities, Capital Requirements and Financial Condition
We have incurred significant losses since inception and we expect that we will continue to incur losses for the foreseeable future, which makes it difficult to assess our future viability.
We have not been profitable since operations commenced, and we may never achieve or sustain profitability. In addition, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields such as the EV industry. Development and deployment of EV technology and vehicles is a highly speculative undertaking and involves a substantial degree of risk. We have not yet commercialized any of our proposed EV products or generated any revenue from sales of such products. We have devoted significant resources to research and development and other expenses related to our ongoing operations.
We will require significant additional capital to continue operations and to execute current business strategy. Mullen cannot estimate with reasonable certainty the actual amounts necessary to successfully complete the development and commercialization of our proposed products and there is no certainty that we will be able to raise the necessary capital on reasonable terms or at all.
We will require substantial additional financing to effectuate our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development efforts or other operations.
For the years ended September 30, 2023 and 2022, we incurred net losses of $1,006.7 million and $740.3 million, respectively, and net cash used in operating activities was $179.2 million and $65.8 million, respectively. As of September 30, 2023, we had an accumulated deficit of $1,862.2 million. We will need significant capital to, among other things, conduct research and development, increase our production capacity, and expand our sales and service network. We expect to continue to incur substantial operating losses for the next several years as we advance our product development and commercialization efforts. No substantial revenue from operations will likely be available until, and unless, such efforts are successful.
We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business, and that once our cars are in production our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We will likely need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner, or on terms that are acceptable to us, or at all.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. In particular, recent disruptions in the financial markets and volatile economic conditions could affect our ability to raise capital. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through public or private equity offerings, the ownership interest of our stockholders will be diluted, and the terms of any new equity securities may have preferential rights over our common stock and further may restrict our ability to obtain additional financing even if needed to continue operations. Further, the ability to fund our needs through equity issuances, warrants or convertible debt is or may be limited by covenants in certain of our existing and future funding or other agreements. If we raise additional capital through debt financing, we would have increased debt service obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidates or operate as a business.
Additional capital may not be available when we need it, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate our establishment of sales and marketing, manufacturing or distribution capabilities, development activities or other activities that may be necessary to commercialize our proposed products or other development activities. We might not be able to obtain any funding, and we might not have sufficient resources to conduct our business as projected, both of which could mean that we would be forced to curtail or discontinue our operations.
We had a limited operating history and have not yet manufactured or sold significant number of vehicles to customers. Many of our products are still on the development stage and we may never be able to mass-produce them.
We were originally formed on April 20, 2010, went public in November 2021 and have a limited operating history in the automobile industry, which is continuously evolving, and has generated minimal revenue to date. Our vehicles are in the development stage and significant deliveries of certain models started only in December 2023. We have limited experience
as an organization in high-volume manufacturing of the planned electric commercial vehicles. In addition, as a result of our limited operating history, as well as the limited financing we have received, our management concluded that there was substantial doubt about our ability to continue as a going concern.
As we attempt to transition from research and development activities to commercial production and sales, it is difficult, if not impossible, to forecast our future results, and we have limited insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed to reach full-scale commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development activities to the large-scale manufacture and sale of vehicles. There can be no assurance that our estimates related to the costs and timing necessary to complete the design and engineering of our EVs and tool our facilities will prove accurate. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. For example, the tooling required within our facilities may be more expensive to produce than predicted, or have a shorter lifespan, resulting in additional replacement and maintenance costs, which could have a material adverse impact on our results of operations and financial condition. Similarly, we may experience higher raw material waste in the composite process than we expect, resulting in higher operating costs and hampering our ability to be profitable.
We cannot assure you that we or our partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market its electric commercial vehicles. Until such time as, and if, we obtain rights to a manufacturing site with sufficient manufacturing capability and process to meet our current business plan, we are unable to manufacture vehicles in sufficient quantities required for entrance into the marketplace. You should consider our business and prospects in light of the risks and significant challenges it faces as a new entrant into its industry, including, among other things, with respect to its ability to:
• design and produce safe, reliable and quality vehicles on an ongoing basis;
• obtain the necessary regulatory approvals in a timely manner;
• build a well-recognized and respected brand;
• establish and expand its customer base;
• successfully market not just our vehicles but also the other services it intends to or may provide;
• properly price our services, including our charging solutions, financing and lease options, and successfully anticipate the take-rate and usage of such services by users;
• successfully service its vehicles after sales and maintain a good flow of spare parts and customer goodwill;
• improve and maintain its operational efficiency;
• execute and maintain a reliable, secure, high-performance and scalable technology infrastructure;
• predict its future revenues and appropriately budget for its expenses;
• attract, retain and motivate talented employees;
• anticipate trends that may emerge and affect its business;
• anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and
• navigate an evolving and complex regulatory environment.
If we fail to adequately address any or all of these risks and challenges, its business may be materially and adversely affected.
In addition, there can be no assurance that fleet customers will embrace our products in significant numbers. Market conditions, many of which are outside of our control and subject to change, including general economic conditions, the availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for our electric commercial vehicles, and ultimately our success.
There is substantial doubt about our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to raise additional debt or equity financings or enter strategic partnerships. Since our inception, we have financed our operations through convertible debt and preferred
stock financings. We intend to continue to finance our operations through debt or equity financing and/or strategic partnerships. The failure to obtain sufficient financing or strategic partnerships could adversely affect our ability to achieve our business objectives and continue as a going concern.
We incurred non-cash impairment charges during 2023 which adversely affected our year fiscal 2023 operating results and we may be required to incur additional future impairment and other charges, which could adversely affect our operating results.
In connection with our acquisitions and other business combinations, including our acquisition of Bollinger Motors, applicable accounting standards require the net tangible and intangible assets of the acquired business to be recorded on our consolidated balance sheet at their fair values as of the date of acquisition and any excess in the purchase price paid by us over the fair value of net tangible and intangible assets of any acquired business to be recorded as goodwill. Goodwill and indefinite-lived intangible assets are not amortized, but are tested at least annually for impairment or more frequently as events and circumstances dictate. Goodwill is tested for impairment at the reporting unit level, which is generally an operating segment or underlying business component. Indefinite-lived intangible assets are tested for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate. Finite-lived intangible assets other than goodwill considered long-lived assets for impairment testing purposes, are tested for impairment as events and circumstances dictate, and are required to be amortized over their estimated useful lives and this amortization expense may be significant to our ongoing financial results.
If we determine that the anticipated future cash flows from our reporting units, indefinite-lived intangible assets or asset groups, or long-lived asset groups may be less than their respective carrying values, our goodwill, indefinite-lived intangible assets, and/or long-lived assets may be deemed to be impaired. If this occurs, applicable accounting rules may require us to write down the value of the goodwill, indefinite-lived intangible assets, and/or long-lived assets on our balance sheet to reflect the extent of any such impairment. Any such write-down of goodwill, indefinite-lived intangible assets, and/or long-lived assets would generally be recognized as a non-cash expense in our Consolidated Statements of Earnings for the accounting period during which any such write down occurs. For example, for the fiscal year ended September 30, 2023, we incurred non-cash write-downs of certain assets. We recorded $64.0 million of Bollinger goodwill impairment for twelve months ended September 30, 2023, primarily due to unfavorable market conditions and the decline of market price of our common stock. We also recorded $14.8 million write-downs of property, plant and equipment and other non-current assets and we recorded $5.9 million in intangible asset write-downs due to unfavorable market conditions and decline of the market price of our common stock.
Our financial results may vary significantly from period to period due to fluctuations in our operating costs and other factors.
We expect our period-to-period financial results to vary based on our operating costs, which we anticipate will fluctuate as the pace at which we continue to design, develop and manufacture new products and increase production capacity by expanding our current manufacturing facilities and adding future facilities, may not be consistent or linear between periods. Additionally, our revenues from period to period may fluctuate as we introduce existing products to new markets for the first time and as we develop and introduce new products. As a result of these factors, we believe that quarter-to-quarter comparisons of our financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results. If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.
We have not paid cash dividends on our common stock in the past and do not expect to pay dividends on our common stock in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the near future. We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition, cash requirements, contractual restrictions, business prospects and other business and economic factors affecting us at such time as the Board of Directors may consider relevant. If we do not pay dividends,
our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.
We may not be able to maintain compliance with the continued listing requirements of the NASDAQ Capital Markets.
Our common stock is listed on the Nasdaq Capital Markets. To maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share.
On September 7, 2022, we were notified by NASDAQ Listing Qualifications Staff about bid price deficiency. During the year ended September 30, 2023, upon approval by the Company’s stockholders, we have completed several reverse stock splits in order to maintain compliance with NASDAQ listing rules. In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock.
On September 7, 2022, the Company received a letter (the “Deficiency Notice”) from the Nasdaq Listing Qualifications staff (“Staff”) notifying the Company that the bid price of the Company’s common stock had closed below $1.00 per share for 30 consecutive business days and, as a result, the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), which sets forth the minimum bid price requirement for continued listing on the Nasdaq Capital Market (the “Bid Price Rule”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Bid Price Rule (the “Minimum Bid Price Rule Compliance Period”) and, on March 7, 2023, the Staff provided an extension of 180 days, or until September 5, 2023. On September 6, 2023, the Company received another letter from the Staff indicating that the Company did not meet the Staff’s September 5, 2023 deadline to regain compliance with the Bid Price Rule due to the Company’s failure to maintain a minimum bid price of $1.00.
On September 6, 2023, the Company requested a hearing (the “Hearing”) before the Nasdaq Listing Qualifications Panel (“Panel”) to request a further extension of time and present its plan to regain compliance with the Bid Price Rule. The requested Hearing stayed any delisting or suspension action pending the issuance of the Panel decision and the expiration of any additional extension period granted by the Panel following the Hearing. The request for a hearing was granted and held on October 19, 2023. On October 25, 2023, the Nasdaq Hearing Panel granted the Company an extension until January 22, 2024, to demonstrate compliance with Listing Rule 5550(a)(2) to allow continued listing requirement of The Nasdaq Capital Market.
Furthermore, while Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the Bid Price Rule, Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, Nasdaq may determine that it is not in the public interest to maintain our listing, even if we regain compliance with the Bid Price Rule as a result of the reverse stock split. In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet the Bid Price Rule after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for a Minimum Bid Price Rule Compliance Period. As a result, since the Company had effected an one-for-twenty-five (1-for-25) reverse stock split of its common stock on May 4, 2023, an one-for-nine (1-for-9) reverse stock split of its common stock on August 11, 2023 and another one-for-one hundred (1-for-100) reverse stock split of its common stock on December 21, 2023, if we subsequently fail to satisfy the Bid Price Rule, Nasdaq will begin the process of delisting our common stock without providing a Minimum Bid Price Rule Compliance Period. However, the Company is still eligible to request a hearing before the Nasdaq Panel to present its plan for regaining and sustaining compliance with the Bid Price Rule.
If our common stock cease to be listed for trading on the Nasdaq Capital Market, we would expect that our common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group. If Nasdaq were to delist our common stock, it would be more difficult for our stockholders to dispose of our common stock or warrants and more difficult to obtain accurate price quotations on our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock or warrants are not listed on a national securities exchange. The OTC Markets (the “OTC
Mkts”) are generally regarded as a less efficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange.
Although the OTC Mkts do not have any listing requirements, to be eligible for quotation on the OTC Mkts, issuers must remain current in their filings with the SEC or applicable regulatory authority. If we are not able to pay the expenses associated with our reporting obligations, we will not be able to apply for quotation on the OTC Board. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. If we are delisted to the OTC Mkts and no market is ever developed for our common stock or warrants, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all.
A reverse stock split may decrease the liquidity of the shares of our common stock and may have a dilutive effect on the ownership of existing stockholders.
The liquidity of the shares of our common stock may be affected adversely by a reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our common stock does not increase as a result of the reverse stock split. In addition, a reverse stock split may increase the number of shareholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
While we expect that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of our common stock, we cannot assure you that a reverse stock split will increase the market price of our common stock by a multiple of the reverse stock split ratio, or result in any permanent or sustained increase in the market price of our common stock. The market price of our common stock will continue to be based, in part, on our performance and other factors unrelated to the number of shares outstanding. A reverse stock split will reduce the number of outstanding shares of our common stock without reducing the number of shares of available but unissued common stock, which will also have the effect of increasing the number of shares of common stock available for issuance. The issuance of additional shares of our common stock may have a dilutive effect on the ownership of existing stockholders. The current economic environment in which we operate, the debt we carry, along with otherwise volatile equity market conditions, could limit our ability to raise new equity capital in the future.
In addition, a reverse stock split will reduce the total number of outstanding shares of common stock, which may lead to reduced trading and a smaller number of market makers for our common stock, particularly if the price per share of our common stock does not increase as a result of a reverse stock split.
Following a reverse stock split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that a reverse stock split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
Our common stock may be subject to the “penny stock” rules in the future. It may be more difficult to resell securities classified as “penny stock.”
Our common stock may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common stock is currently not considered “penny stock” since they are listed on the NasdaqCM, if we are unable to maintain that listing and our common stock are no longer listed on the NasdaqCM, unless we maintain a per-share price above $5.00, our common stock will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers
must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction.
Legal remedies available to an investor in “penny stocks” may include the following:
• If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.
• If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
• If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.
• If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
• If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.
• If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
• If a “penny stock” is sold to the investor in violation of the requirements listed above, or other federal or states securities laws, the investor may be able to cancel the purchase and receive a refund of the investment.
• If a “penny stock” is sold to the investor in a fraudulent manner, the investor may be able to sue the persons and firms that committed the fraud for damages.
These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock or our warrants and may affect your ability to resell our common stock.
Many brokerage firms will discourage or refrain from recommending investments in penny stocks. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not invest in penny stocks due, among other reasons, to the increased financial risk generally associated with these investments.
For these reasons, penny stocks may have a limited market and, consequently, limited liquidity. We can give no assurance at what time, if ever, our common stock or our warrants will not be classified as a “penny stock” in the future.
Our commitments to issue shares of common stock or securities that are convertible into shares of common stock may cause significant dilution to stockholders.
As part of the consideration to investors on investments made in June 2023, we have issued warrants that provide for a variable number of shares of common stock upon cashless exercise. As disclosed further in the notes to the consolidated financial statements, as at September 30, 2023, the remaining 382,436 Preferred D warrants (recognized as liability in the consolidated balance sheets) were exercisable into 1,438,009 shares of common stock and their exercise (on a cash or cashless basis) is available to investors for a period of approximately 5 years. The number of shares of common stock to be issued upon exercise of these warrants will increase correspondingly to decrease of market price of the shares of common stock (and decrease correspondingly to increase of market price of the shares of common stock).
The Company has also adopted the CEO Award Incentive Plan 2022, approved by the Board and by stockholders in 2022, and the CEO Award Incentive Plan 2023, approved by the Board and by stockholders in 2023. Under these plans, the Chief Executive Officer is entitled to share-based awards generally calculated as 1-3% of then outstanding number of shares of common stock, issuable upon achievement of specific financial and operational targets (milestones) that are
supposed to significantly increase value of the Company. Total shares of common stock to be issued under the Plans will depend on probability of the milestone achievement and on the number of shares of common stock outstanding on the day a milestone is achieved. See further details in the item 11 and in the notes to the financial statements.
The additional shares issued upon exercise of these warrants and upon achieving the milestones under these Incentive Plans will significantly dilute the percentage ownership interest of holders of our common stock, dilute the book value per share of our common stock and increase the number of our publicly traded shares, which will depress the market price of our common stock.
After the balance sheet date and until January 15, 2023, the Company has issued 3,012,986 shares of common stock, mainly upon exercise of 279,404 Preferred D Warrants (see Note 8) and issuance of shares under the stock-based compensation plan.
Our commitment to issue shares of common stock pursuant to the terms of our Preferred Stock, and the Warrants, and stock-based compensation arrangements could encourage short sales by third parties which could contribute to the future decline of stock price.
Our commitment to issue shares of common stock pursuant to the terms of Preferred Stock, and the Warrants, and stock-based compensation arrangements has the potential to cause significant downward pressure on the price of our common stock. In such an environment, short sellers may exacerbate any decline of our stock price. If there are significant short sales of our common stock, the share price of our common stock may decline more than it would in an environment without such activity. This may cause other holders of our common stock to sell their shares. If there are many more shares of our common stock on the market for sale than the market will absorb, the price of our shares of common stock will likely decline.
Our investors may participate in short sales of our common stock. They may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. Our investors may also sell shares of common stock short and deliver shares of common stock covered by their investments to close out short positions and to return borrowed shares in connection with such short sales. Our investors may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares. Such activity could cause a decline in the market price of the shares of our common stock.
Substantial blocks of our total outstanding shares may be sold into the market. If there are substantial sales or issuances of shares of our common stock, the price of our common stock could decline.
The price of our common stock could decline if there are substantial sales or issuances of shares of our common stock, particularly sales by significant stockholders or if there is a large number of shares of our common stock available for sale.
As of January 16, 2023, we had outstanding 5,884,693 shares of common stock. Although common stock held by directors, executive officers and other affiliates are subject to volume limitations under Rule 144 under the Securities Act, and various vesting agreements, the market price of the shares of our common stock could decline as a result of the sale of a substantial number of our shares of common stock in the public market or the perception in the market that our significant stockholders or the holders of a large number of such shares of common stock intend to sell their shares.
As of that same date, we also had outstanding 648 shares of Series A Preferred Stock convertible into an aggregate of 3 shares of common stock, 1,211,757 shares of Series C Preferred Stock convertible into an aggregate of 54 shares of common stock and 363,097 shares of Series D Preferred Stock convertible into an aggregate of 17 shares of common stock. In addition, the shares of Series D Preferred Stock contain weighted average anti-dilution provisions which, subject to limited exceptions, would increase the number of shares issuable upon conversion of such preferred stock (by reducing the conversion price of the Series D Preferred Stock) in the event that we in the future issue common stock, or securities convertible into or exercisable to purchase common stock, at a price per share lower than the conversion price then in effect.
The issuance of shares of common stock upon the conversion of such shares of Preferred Stock would dilute the percentage ownership interest of holders of our common stock, dilute the book value per share of our common stock and increase the number of our publicly traded shares, which could depress the market price of our common stock.
Furthermore, issuances of shares of our common stock pursuant to the equity and financing agreements that we may continue to utilize or enter into will continue to dilute the percentage ownership of our stockholders and may dilute the market price, the per share projected earnings (if any) or book value of our common stock.
Sales of a substantial number of shares of our common stock in the public market or other issuances of shares of our common stock, or the perception that these sales or issuances could occur, could cause the market price of our common stock to decline and may make it more difficult for you to sell your shares at a time and price that you deem appropriate
Our stock price has been volatile, and the market price of our common stock may drop below the price you pay.
Securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, has subjected the market price of our shares to wide price fluctuations regardless of our operating performance. The market price of our common stock may fluctuate significantly in response to a number of factors, many of which we cannot control, including those described under “Risks Related to Our Business and Operations” and the following:
• changes in financial estimates by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;
• downgrades by any securities analysts who follow our common stock or publications of these analysts of inaccurate or unfavorable research about our business;
• future sales of our common stock by our officers, directors and significant stockholders;
• market conditions or trends in our industry or the economy as a whole;
• investors’ perceptions of our prospects;
• announcements by us of significant contracts, acquisitions, joint ventures or capital commitments; and
• changes in key personnel.
In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the Company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.
Stockholder equity interest may be substantially diluted in any additional equity issuances.
We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
We may issue additional shares of common stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.
We may issue a substantial number of additional shares of common stock, including under our equity incentive plan. Any such issuances of additional shares of common stock:
• may significantly dilute the equity interests of our investors;
• could cause a change in control if a substantial number of shares of our common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
• may adversely affect prevailing market prices for our common stock.
Our Certificate of Incorporation designates specific courts as the exclusive forum for certain stockholder litigation matters, which could limit the ability of our stockholders to obtain a favorable forum for disputes with us or our directors, officers or employees.
Our Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against current or former directors, officers or other employees for breach of fiduciary duty, other similar actions, any other action as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware and any action or proceeding concerning the validity of our Certificate of Incorporation or our Bylaws may be brought only in the Court of Chancery in the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction thereof, any state court located in the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware), unless we consent in writing to the selection of an alternative forum. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our Certificate of Incorporation also provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. This provision may limit our stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us and our directors, officers or other employees and may have the effect of discouraging lawsuits against our directors, officers and other employees. Furthermore, our stockholders may be subject to increased costs to bring these claims, and the exclusive forum provision could have the effect of discouraging claims or limiting investors’ ability to bring claims in a judicial forum that they find favorable.
In addition, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could rule that this provision in our Certificate of Incorporation is inapplicable or unenforceable. In March 2020, the Delaware Supreme Court issued a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law. We intend to enforce this provision, but we do not know whether courts in other jurisdictions will agree with this decision or enforce it. If a court were to find the exclusive forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, prospects, financial condition and operating results.
If securities or industry analysts do not publish research or reports about our business or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock will depend on the research and reports that securities or industry analysts publish about us or our business. We do not control these analysts. As we are a publicly reporting company in the United States, we may attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline and result in the loss of all or a part of your investment in our Company.
Risks Related to our Business and Operations
Potential acquisitions may disrupt our business and dilute stockholder value.
In 2022 we have acquired a controlling interest in an entity (Bollinger Motors, Inc.) and, in 2023, we have acquired significant part of assets of another entity (Electric Last Mile Solutions, Inc.). We have sought merger or acquisition partners that are culturally similar and have experienced management and possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services.
Acquiring related electric businesses involve various risks commonly associated with acquisitions, including, among other things:
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potential exposure to unknown or contingent liabilities of the target entity;
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exposure to potential asset quality issues of the target entity;
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difficulty and expense of integrating the operations and personnel of the target entity;
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potential disruption to our business;
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potential diversion of our management’s time and attention;
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the possible loss of key employees and customers of the target entity;
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difficulty in estimating the value of the target entity; and
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potential changes in banking or tax laws or regulations that may affect the target entity.
We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other businesses. As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash, debt or equity securities may occur at any time. Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of our tangible book value and net income per share of common stock may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.
Changes in tax laws may materially adversely affect our business, prospects, financial condition and operating results.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, and failure to appropriately comply with such tax laws, statutes, rules and regulations could result in sanctions by regulatory agencies, civil money penalties and/or reputational damage, which could adversely affect our business, prospects, financial condition and operating results. Future guidance from the Internal Revenue Service (the “IRS”) with respect to the Tax Cuts and Jobs Act (the “Tax Act”) may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. The CARES Act has already modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
We may be unable to develop, manufacture and obtain required regulatory approvals for cars of sufficient quality to appeal to customers on schedule or at all, or may be unable to do so on a large scale.
Our business depends in large part on our ability to develop, manufacture, market and sell or lease our EVs. Our ability to effectively compete in the EV market will depend in large part on our entry into the EV market through the offering of competitively priced vehicles to a wider variety of potential buyers.
The continued development and the ability to start manufacturing our vehicles are and will be subject to risks, including with respect to:
● our ability to secure necessary funding;
● our ability to accurately manufacture vehicles within specified design tolerances;
● obtaining required regulatory approvals and certifications;
● compliance with environmental, safety, and similar regulations;
● securing necessary components, services, or licenses on acceptable terms and in a timely manner;
● delays in delivering final component designs to our suppliers;
● our ability to attract, recruit, hire, retain and train skilled employees;
● quality controls that prove to be ineffective or inefficient;
● delays or disruptions in our supply chain including raw material supplies;
● our ability to maintain arrangements on reasonable terms with our manufacturing partners and suppliers, engineering service providers, delivery partners, and after sales service providers; and
● other delays, backlog in manufacturing and research and development of new models, and cost overruns.
Our ability to develop, manufacture and obtain required regulatory approvals for a vehicle of sufficient quality to appeal to customers on schedule and on a large scale is unproven, and the business plan is still evolving. We may be required to introduce new vehicle models and enhanced versions of existing models. To date, we have limited experience, as a company, designing, testing, manufacturing, marketing and selling or leasing our electric vehicles and therefore cannot assure you that we will be able to meet customer expectations. Any failure to develop such manufacturing processes and capabilities within our projected costs and timelines would have a material adverse effect on our business, prospects, operating results and financial condition.
We, our third party partners and our suppliers are subject to substantial regulation and unfavorable changes to, or failure by us, our third party partners or our suppliers to comply with, these regulations could substantially harm our business and operating results.
Our EVs, and motor vehicles in general, as well as our third-party partners and our suppliers are or will be subject to substantial regulation under federal, state and local, and foreign laws. We continue to evaluate requirements for licenses, approvals, certificates and governmental authorizations necessary to manufacture, deploy or service our vehicles in the jurisdictions in which it plans to operate and intends to take such actions necessary to comply. We may experience difficulties in obtaining or complying with various licenses, approvals, certifications and other governmental authorizations necessary to manufacture, deploy or service our vehicles in any of these jurisdictions. If we, our third-party partners or our suppliers are unable to obtain or comply with any of the licenses, approvals, certifications or other governmental authorizations necessary to carry out our operations in the jurisdictions in which they currently operate, or those jurisdictions in which they plan to operate in the future, our business, prospects, financial condition and operating results could be materially adversely affected. We expect to incur significant costs in complying with these regulations. Regulations related to the electric and alternative energy vehicle industry are evolving and we face risks associated with changes to these regulations, including but not limited to:
• increased support for other alternative fuel systems, which could have an impact on the acceptance of our vehicles; and
• increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote alternative fuel vehicles.
To the extent the laws change, our vehicles may not comply with applicable federal, state and local, or foreign laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition, and operating results would be adversely affected.
Our vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame, and, if such results occur, bodily injury or death could result and could subject us to lawsuit, product recalls, or redesign efforts.
The battery packs within our proposed vehicles will make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, once our vehicles are commercially available, a field or testing failure of battery packs in our vehicles could occur, which could result in bodily injury or death and could subject us to lawsuit, product recalls, or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications, the social and environmental impacts of cobalt mining, or any future incident involving lithium-ion cells, such as a vehicle or other fire, could seriously harm our business and reputation.
The efficiency of a battery’s use over time when driving electric vehicles will decline over time, which may negatively influence potential customers’ decisions whether to purchase an electric vehicle.
The cells used in EV battery modules degrade over time, influenced primarily by the age of the cells and the total energy throughput over the life of the EV. This cell degradation results in a corresponding reduction in the vehicle’s range. Although common to all EVs, cell degradation, and the related decrease in range, may negatively influence potential customer’s EV purchase decisions.
We are substantially reliant on our relationships with OEMs, suppliers and service providers for the parts and components in our vehicles, as well as for the manufacture of our initial vehicles. If any of these OEMs, suppliers or service partners choose to not do business with us, then we would have significant difficulty in procuring and producing our vehicles and our business prospects would be significantly harmed.
Collaboration with third parties for the manufacturing of vehicles is subject to risks with respect to operations that are outside our control. We could experience delays to the extent our current or future partners do not continue doing business with us or fail to meet agreed upon timelines, experience capacity constraints or otherwise are unable to deliver components or manufacture vehicles as expected. There is a risk of potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us. In addition, although we intend to be involved in material decisions in the supply chain process, given that we also rely on our partners to meet our quality standards, there can be no assurance that we will be able to maintain high quality standards.
We may in the future enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party, and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business.
We will rely on complex machinery for our operations and production involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We will rely heavily on complex machinery for our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance and costs. It is expected that our manufacturing plant will consist of large-scale machinery combining many components. The manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, and seismic activity and natural disasters. Should operational risks materialize, they may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays and unanticipated
fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, results of operations, cash flows, financial condition or prospects.
There are complex software and technology systems that need to be developed in coordination with vendors and suppliers in order to reach production for our EVs, and there can be no assurance such systems will be successfully developed.
Our vehicles will use a substantial amount of third-party and in-house software codes and complex hardware to operate. The development of such advanced technologies is inherently complex, and we will need to coordinate with our vendors and suppliers in order to reach production for our EVs. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. Thus, our potential inability to develop the necessary software and technology systems may harm our competitive position.
We are relying on third-party suppliers to develop a number of emerging technologies for use in our products, including solid-state polymer battery technology. These technologies are not today, and may not ever be, commercially viable. There can be no assurances that our suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance useful life and warranty characteristics we anticipate in our business plan. As a result, our business plan could be significantly impacted, and we may incur significant liabilities under warranty claims which could adversely affect our business, prospects, and results of operations.
We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.
Any delay in the financing, design, manufacture, regulatory approval or launch of our vehicles, including entering into agreements for platform sharing, supply of component parts, and manufacturing, could materially damage our brand, business, prospects, financial condition and operating results and could cause liquidity constraints. Vehicle manufacturers often experience delays in the design, manufacture and commercial release of new products. To the extent we delay the launch of our vehicles, our growth prospects could be adversely affected as we may fail to establish or increase our market share. We rely on third-party suppliers for the provision and development of the key components and materials used in our vehicles. To the extent our suppliers experience any delays in providing us with or developing necessary components, we could experience delays in delivering on our timelines.
We may be unable to meet our projected construction timelines, costs and production ramps at our factories, or we may experience difficulties in generating and maintaining demand for products manufactured there.
Our ability to increase production of our vehicles on a sustained basis, make them affordable in the U.S. market by accessing supply chains and workforces and streamline delivery logistics is dependent on the construction and ramp of our current and future factories. The construction of and commencement and ramp of production at these factories are subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion, supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale. Moreover, we will have to establish and ramp production of our proprietary battery cells and packs at our factories, and we additionally intend to incorporate sequential design and manufacturing changes into vehicles manufactured at each factory. If we experience any issues or delays in meeting our projected timelines, costs, capital efficiency and production capacity for our new factories, expanding and managing teams to implement iterative design and production changes there, maintaining and complying with the terms of any debt financing that we obtain to fund them or generating and maintaining demand for the vehicles we manufacture there, our business, prospects, operating results and financial condition may be harmed.
We may be negatively impacted by any early obsolescence of our manufacturing equipment.
We depreciate the cost of our manufacturing equipment over their expected useful lives. However, product cycles or manufacturing technology may change periodically, and we may decide to update our products or manufacturing processes more quickly than expected. Moreover, improvements in engineering and manufacturing expertise and efficiency may result in our ability to manufacture our products using less of our currently installed equipment. Alternatively, as we ramp and mature the production of our products to higher levels, we may discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations may be harmed.
We will be dependent on our suppliers, a significant number of which are single or limited source suppliers, and the inability of these suppliers to deliver necessary components of our vehicles in a timely manner and at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.
While we plan to obtain components from multiple sources whenever possible, many of the components used in our vehicles will be purchased by us from a single source. While we believe that we may be able to establish alternate supply relationships and can obtain or engineer replacement components for our single source components, we may be unable to do so in the short term (or at all) at prices or quality levels that are acceptable to us. In addition, we could experience delays if our suppliers do not meet agreed upon timelines or experience capacity constraints.
Any disruption in the supply of components, whether or not from a single source supplier, could temporarily disrupt production of our vehicles until an alternative supplier is able to supply the required material. Changes in business conditions, unforeseen circumstances, governmental changes, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. Any of the foregoing could materially and adversely affect our results of operations, financial condition and prospects.
If any of our suppliers become economically distressed or go bankrupt, we may be required to provide substantial financial support or take other measures to ensure supplies of components or materials, which could increase our costs, affect our liquidity or cause production disruptions.
We expect to purchase various types of equipment, raw materials and manufactured component parts from our suppliers. If these suppliers experience substantial financial difficulties, cease operations, or otherwise face business disruptions, we may be required to provide substantial financial support to ensure supply continuity or would have to take other measures to ensure components and materials remain available. Any disruption could affect our ability to deliver vehicles and could increase our costs and negatively affect our liquidity and financial performance.
We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future. There is substantial doubt about our ability to continue as a going concern.
We have incurred a net loss since our inception and particularly incurred losses in the operation of its business related to research and development activities since our inception. We believe that we will continue to incur operating and net losses each quarter until at least the time we begin significant deliveries of our vehicles. Even if we are able to successfully develop, manufacture, and sell or lease our vehicles, there can be no assurance that they will be commercially successful.
We expect the rate at which we will incur losses to be significantly higher in future periods as we, among other things: design, develop and manufacture our vehicles; build up inventories of parts and components for our vehicles; increase our sales and marketing activities; develop our distribution infrastructure; and increase our general and administrative functions to support our growing operations. We may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in revenues, which would further increase our losses.
Our independent registered public accounting firm has included an emphasis of matter paragraph regarding our ability to continue as a going concern in its opinion on our September 30, 2023, consolidated financial statements due to our lack of revenues and insufficient capital for us to fund our operations.
Our business model has yet to be tested and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.
Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses while establishing or entering new markets, setting up operations and undertaking marketing activities. The likelihood of our success must be considered in light of these risks, expenses, complications, delays, and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business model will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditure. Any investment in our company is therefore highly speculative and could result in the loss of your entire investment.
We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.
It is difficult to predict our future revenues and appropriate budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. We will be required to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our prospective customers. Currently, there is no historical basis for making judgments on the demand for our vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we overestimate our requirements, our suppliers may have excess inventory, which indirectly would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt the manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our business, financial condition and operating results.
We could experience cost increases or disruptions in the supply of raw materials or other components used in our vehicles. If we are unable to establish an arrangement for the sustainable supply of batteries for our vehicles, our business would be materially and adversely harmed.
We may be unable to adequately control the costs associated with our operations. We expect to incur significant costs related to procuring raw materials required to manufacture and assemble our vehicles. The prices for these raw materials fluctuate depending on factors beyond our control. Our business also depends on the continued supply of battery cells for our vehicles. We are exposed to multiple risks relating to availability and pricing of quality solid-state polymer battery cells and lithium-ion battery cells.
Furthermore, currency fluctuations, tariffs or shortages in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs. Substantial increases in the prices for our raw materials or components would increase our operating costs and could reduce our margins. In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result in shortages, which would result in increased costs in raw materials to us or impact our prospects.
If our vehicles fail to perform as expected, our ability to develop, market, and sell or lease our electric vehicles could be harmed.
Once production commences, our vehicles may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair, recalls, and design changes. Our vehicles will use a substantial amount of software code to operate, and software products are inherently complex and often contain defects and errors when first
introduced. We have a limited frame of reference by which to evaluate the long-term performance of our systems and vehicles. There can be no assurance that we will be able to detect and fix any defects in the vehicles prior to their sale to consumers. If any of our vehicles fail to perform as expected, we may need to delay deliveries and/or initiate product recalls, and/or compensate damages to our dealers or customers, possibly exceeding the revenues received upon sales, - which could adversely affect our brand in our target markets and could adversely affect our business, prospects, and results of operations.
Our services may not be generally accepted by our users. If we are unable to provide quality customer service, our business and reputation may be materially and adversely affected.
Our servicing may primarily be carried out through third parties certified by us. Although such servicing partners may have experience in servicing other vehicles, they will initially have limited experience in servicing our vehicles. There can be no assurance that our service arrangements will adequately address the service requirements of our customers to their satisfaction, or that us or any of our proposed service partners will have sufficient resources to meet these service requirements in a timely manner as the volume of vehicles we deliver increases.
The automotive market is highly competitive, and we may not be successful in competing in this industry.
Both the automobile industry generally, and the electric vehicle segment, in particular, are highly competitive, and we will be competing for sales with both internal combustion engine (“ICE”) vehicles and other EVs. Many of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale and support of their products, including their electric vehicles. We expect competition for electric vehicles to intensify due to increased demand and a regulatory push for alternative fuel vehicles, continuing globalization, and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects.
The automotive industry and our technology are rapidly evolving and may be subject to unforeseen changes. Developments in alternative technologies, including but not limited to hydrogen, may adversely affect the demand for our electric vehicles.
We may be unable to keep up with changes in EV technology or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative technologies, such as advanced diesel, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the ICE, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to successfully react to changes in existing technologies could materially harm our competitive position and growth prospects.
We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could result in our failure to accurately or timely report our financial condition or results of operations, which could have a material adverse effect on our business and stock price.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Our management has concluded that our internal control over financial reporting was not effective as of September 30, 2023 due to material weaknesses, certain policies and procedures that are not all formalized in a written procedure format that is up to date, absence of formalized review of key controls processes and/or insufficiently formalized documentation evidencing, certain design deficiencies in management and analytical review of controls associated with the financial close process, lack of in-house accounting expertise, and lack of disclosure controls and procedures to ensure the Company properly presents certain related party disclosures. Management is working to remediate our current material weaknesses and prevent potential future material weaknesses by implementing procedures such as, hiring additional qualified accounting and financial reporting personnel, and further reviewing and enhancing our accounting processes, which are further described under “Item 9A. Controls and Procedures” of this Report. We may not
be able to fully remediate any future material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. If we are not able to maintain effective internal control over financial reporting, our financial statements and related disclosures may be inaccurate, which could have materially adverse effects on our business and our stock price.
Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. The effectiveness of our controls and procedures may be limited by a variety of factors, including:
• faulty human judgment and simple errors, omissions, or mistakes;
• fraudulent action of an individual or collusion of two or more people;
• inappropriate management override of procedures; and
• the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.
Our ability to comply with the annual internal control report requirements will depend on the effectiveness of our financial reporting and data systems and controls across our company. We expect these systems and controls to involve significant expenditures and to become increasingly complex as our business grows. To effectively manage this complexity, we will need to continue to improve our operational, financial, and management controls, and our reporting systems and procedures. Our inability to successfully remediate our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations or result in material misstatements in our financial statements, which could limit our liquidity and access to capital markets, adversely affect our business and investor confidence in us, and reduce our stock price.
Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt, electric vehicles.
Our future growth is dependent on the demand for, and upon consumers’ willingness to adopt electric vehicles, and even if electric vehicles become more mainstream, consumers choosing us over other EV manufacturers. Demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations, including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition, and operating results.
In addition, the demand for our vehicles and services will highly depend upon the adoption by consumers of new energy vehicles in general and electric vehicles in particular. The market for alternative fuels, hybrid and EVs is new and untested and is characterized by rapidly changing technologies, price competition, numerous competitors, evolving government regulation and industry standards and uncertain customer demands and behaviors.
Other factors that may influence the adoption of alternative fuel vehicles, and specifically electric vehicles, include:
• perceptions about EV quality, safety, design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles, whether or not such vehicles are produced by us or other manufacturers;
• perceptions about the limited range over which EVs may be driven on a single battery charge;
• concerns over access to charging and charging stations, as well as the time required to charge EVs
• perceptions about the limited range over which EVs may be driven on a single battery charge;
• fuel prices, including volatility in the cost of fossil fuels
• competition, including from other types of alternative fuel, including hydrogen or compressed natural gas (CNG) vehicles, plug-in hybrid EVs and high fuel-economy internal combustion engine vehicles
• the availability of new energy vehicles, including plug-in hybrid EVs;
• concerns over access to charging and charging stations, as well as the time required to charge EVs;
• electric grid capacity and reliability;
• government regulations, ESG restrictions, and economic incentives
• the environmental consciousness of consumers, and their adoption of EVs;
• perceptions of overall EV vehicle safety, such as those relating to battery combustibility;
• perceptions about and the actual cost of alternative fuel.
Any of the factors described above may cause current or potential customers not to purchase EVs in general, and our EVs in particular. If the market for EVs does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be affected.
The unavailability, reduction or elimination of government and economic incentives could have a material adverse effect on our business, prospects, financial condition and operating results.
Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, or the reduced need for such subsidies and incentives due to the perceived success of the electric vehicle or for other reasons, may result in the diminished competitiveness of the alternative fuel and electric vehicle industry generally or our electric vehicles in particular. This could materially and adversely affect the growth of the alternative fuel automobile markets and our business, prospects, financial condition and operating results.
While certain tax credits and other incentives for alternative energy production, alternative fuel and electric vehicles have been available in the past, there is no guarantee these programs will be available in the future. If current tax incentives are not available in the future, our financial position could be harmed.
In addition, we may apply for federal and state grants, loans and tax incentives under government programs designed to stimulate the economy and support the production of alternative fuel and electric vehicles and related technologies, and our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects could be materially adversely affected.
If we fail to manage our future growth effectively, we may not be able to develop, manufacture, market and sell or lease our vehicles successfully.
We intend to expand our operations significantly, which will require hiring, retaining and training new personnel, controlling expenses, establishing facilities, and implementing administrative infrastructure, systems and processes. In addition, because our electric vehicles are based on a different technology platform than traditional ICE vehicles, individuals with sufficient training in electric vehicles may not be available to be hired, and we will need to expend significant time and expense training employees we hire. We also require sufficient talent in additional areas such as software development. Furthermore, as we are a relatively young company, our ability to train and integrate new employees into our operations may not meet the growing demands of our business, which may affect our ability to grow. Any failure to effectively manage our growth could materially and adversely affect our business, prospects, operating results and financial condition.
For example, to manage the expected growth of our operations and increasing complexity, we will need to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.
Insufficient warranty reserves to cover future warranty claims could materially adversely affect our business, prospects, financial condition and operating results.
Once we have achieved significant sales of our products to customers, we will need to maintain warranty reserves to cover warranty-related claims. If our warranty reserves are inadequate to cover future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be materially and adversely affected. We may become subject to significant and unexpected warranty expenses. There can be no assurances that then-existing warranty reserves will be sufficient to cover all claims.
We may not succeed in establishing, maintaining and strengthening the Mullen brand, which would materially and adversely affect customer acceptance of our vehicles and components and our business, revenues and prospects.
Once our vehicles are in high volume production, our business and prospects will heavily depend on our ability to develop, maintain and strengthen the Mullen brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Our ability to develop, maintain and strengthen the Mullen brand will depend heavily on the success of our marketing efforts. The automobile industry is intensely competitive, and we may not be successful in building, maintaining and strengthening our brand. Many of our current and potential competitors, particularly automobile manufacturers headquartered in the United States, Japan, the European Union and China, have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Doing business internationally creates operational and financial risks for our business.
Our business plan includes eventual expansion into other international markets. Conducting and launching operations on an international scale requires close coordination of activities across multiple jurisdictions and time zones and consumes significant management resources. If we fail to coordinate and manage these activities effectively, our business, financial condition or results of operations could be adversely affected. International sales entail a variety of risks, including currency exchange fluctuations, challenges in staffing and managing foreign operations, tariffs and other trade barriers, unexpected changes in legislative or regulatory requirements of foreign countries into which we sell our products and services, difficulties in obtaining export licenses or in overcoming other trade barriers, laws and business practices favoring local companies, political and economic instability, difficulties protecting or procuring intellectual property rights, and restrictions resulting in delivery delays and significant taxes or other burdens of complying with a variety of foreign laws.
We are highly dependent on the services of David Michery, our Chief Executive Officer.
We are highly dependent on the services of David Michery, our founder and Chief Executive Officer. Mr. Michery is the source of many, if not most, of the ideas and execution driving us. If Mr. Michery were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.
We are exposed to risks relating to our relationship with a related party.
Prior to its spinoff as a separate entity and the closing of the Merger on November 5, 2021, the Company operated as a division of Mullen Technologies, Inc. (“MTI”), an entity in which the Company’s CEO has a controlling financial interest and of which he is also CEO and Chairman. The Company and MTI entered into a Transaction Services Agreement pursuant to which the Company incurred approximately $1.2 million and $0.9 million of disbursements on behalf of MTI during the years ended September 30, 2022 and 2023, respectively. On March 31, 2023, the Company converted approximately $1.4 million of the advances to a note receivable from MTI. For a further description, see “Note 20. Related Party Transactions - Related Party Note Receivable” of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K to the Company’s consolidated financial statements.
In all related party transactions, there is a risk that even if the Company personnel negotiating on behalf of the Company with the related party are striving to ensure that the terms of the transaction are arms-length, the related party’s influence may be such that the transaction terms could be viewed as favorable to that related party. Plus, the related part transaction
could be perceived as a potential conflict of interest since the transaction may benefit the related party. Such conflicts could cause an individual in our management to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related party transactions could impair the confidence of our investors.
Our business may be adversely affected by labor and union activities.
Although none of our employees are currently represented by a labor union, it is common throughout the automobile industry generally for many employees at automobile companies to belong to a union, which can result in higher employee costs and increased risk of work stoppages. We may also directly and indirectly depend upon other companies with unionized work forces, such as parts suppliers and trucking and freight companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results.
Our business could be adversely impacted by global or regional catastrophic events.
Our business could be materially adversely affected by terrorist acts, widespread outbreaks of infectious diseases (such as COVID-19), government responses emplaced to limit the impact of infectious diseases (such as shelter-in-place directives), or the outbreak or escalation of wars including, but not limited to, the invasion of Ukraine by the Russian Federation. Such events in the geographic regions in which we do business, including escalations of political tensions and military conflicts in the U.S., Europe, Asia, and any governmental sanctions enacted in reaction thereto, could result in a global energy crisis, economic inflation, supply-chain disruptions, or the confiscation or destruction of our facilities; all and any of these outcomes could have material, adverse impacts on our results of operations, financial condition, and cash flows.
Reservations for our passenger vehicles are cancellable.
The potentially long wait from the time a reservation is made until the time the vehicle is delivered, and any delays beyond expected wait times, could impact user decisions on whether to ultimately make a purchase. Any cancellations could harm our financial condition, business, prospects, and operating results.
Failure of information security and privacy concerns could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.
We expect to face significant challenges with respect to information security and privacy, including the storage, transmission and sharing of confidential information. We will transmit and store confidential and private information of our customers, such as personal information, including names, accounts, user IDs and passwords, and payment or transaction related information.
We have adopted information security policies and deployed measures to implement the policies, including, among others, encryption technologies, and plans to continue to deploy additional measures as we grow. However, advances in technology, an increased level of sophistication and diversity of our products and services, an increased level of expertise of hackers, new discoveries in the field of cryptography or other factors can still result in a compromise or breach of the measures that we use. If we are unable to protect our systems, and hence the information stored in our systems, from unauthorized access, use, disclosure, disruption, modification or destruction, such problems or security breaches could cause a loss, give rise to our liabilities to the owners of confidential information or even subject us to fines and penalties. In addition, complying with various laws and regulations could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business.
In addition, we will need to comply with increasingly complex and rigorous regulatory standards enacted to protect business and personal data in the United States, Europe and elsewhere. For example, the European Union adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018, and the State of California adopted the California Consumer Privacy Act of 2018 (“CCPA”). Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored. Compliance with existing, proposed and recently enacted laws (including implementation of the
privacy and process enhancements called for under the GDPR) and regulations can be costly; any failure to comply with these regulatory standards could subject us to legal and reputational risks.
Compliance with any additional laws and regulations could be expensive and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us, and misuse of or failure to secure personal information could also result in violation of data privacy laws and regulations, proceedings against us by governmental entities or others, and damage to our reputation and credibility, and could have a negative impact on revenues and profits.
Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, could cause our customers to lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online retail and other online services generally, which may reduce the number of orders we receive.
We may need to defend ourselves against patent or trademark infringement claims, and we may not be able to prevent others from unauthorized use of our intellectual property, which may be time-consuming and would cause us to incur substantial costs and harm our business and competitive position.
Companies, organizations, or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability to make, use, develop, sell, lease or market our vehicles or components, which could make it more difficult for us to operate our business. From time to time, we may receive communications from holders of patents or trademarks regarding their proprietary rights. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights or otherwise assert their rights and urge us to take licenses. Our applications and uses of trademarks relating to our design, software or artificial intelligence technologies could be found to infringe upon existing trademark ownership and rights. In addition, if we are determined to have infringed upon a third party’s intellectual property rights, we may be required to do one or more of the following:
● cease selling or leasing, incorporating certain components into, or using vehicles or offering goods or services that incorporate or use the challenged intellectual property;
● pay substantial damages;
● seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms, or at all;
● redesign our vehicles or other goods or services; or
● establish and maintain alternative branding for our products and services.
In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business, prospects, operating results and financial condition could be materially and adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
Further, we may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely or will rely on a combination of patents, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyrights, trademarks, intellectual property licenses, and other contractual rights to establish and protect our rights in our technology. Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and the steps we have taken or will take may not prevent misappropriation. From time to time, we may have to
resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources.
Patent, trademark, and trade secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced outside of the United States. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which, would adversely affect our business, prospects, financial condition and operating results.
Patent applications that we may file may not issue as patents and any patents that may be granted to us may expire and may not be extended, our rights may be contested, circumvented, invalidated or limited in scope, or our rights may not protect us effectively, all of which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to theirs.
We cannot be certain that we are the first inventor of the subject matter to which we may file a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application for the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition or operating results.
We cannot assure you that we will be granted patents pursuant to any applications that we may file. Even if we file patent applications and we are issued patents in accordance with them, it is still uncertain whether these patents will be contested, circumvented or invalidated in the future. In addition, the rights granted under any issued patents may not provide us with meaningful protection or competitive advantages. The claims under any patents that are issued from our patent applications may not be broad enough to prevent others from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could also bar us from licensing and exploiting any patents that are issued from our applications. Numerous patents and pending patent applications owned by others exist in the fields in which we have developed and are developing our technology. These patents and patent applications might have priority over our patent applications and could subject our patent applications to invalidation. Finally, in addition to those who may claim priority, any of our patents may also be challenged by others on the basis that they are otherwise invalid or unenforceable.
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers.
Many of our employees were previously employed by other automotive companies or by suppliers to automotive companies. We may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our products, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and demand on management resources.
Our vehicles are subject to motor vehicle standards and substantial regulation, and the failure to satisfy such mandated safety standards or regulations, or unfavorable changes to such regulations, would have a material adverse effect on our business and operating results.
All vehicles sold must comply with international, federal, and state motor vehicle safety standards. In the United States, vehicles that meet or exceed all federally mandated safety standards are certified under the federal regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving federal certification. Failure by us to have our future model electric vehicle satisfy motor vehicle standards would have a material adverse effect on our business and operating results.
Additionally, our electric vehicles, and the sale of motor vehicles in general, are subject to substantial regulation under international, federal, state, and local laws. We expect to incur significant costs in complying with these regulations. Regulations related to the electric vehicle industry and alternative energy are currently evolving and we face risks associated with changes to these regulations.
To the extent the laws change, our vehicles may not comply with applicable international, federal, state or local laws, which would have an adverse effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results would be adversely affected. Further, certain federal, state and local laws and industry standards currently regulate electrical and electronics equipment. Our vehicles may become subject to additional international, federal, state, and local regulation in the future. Compliance with these regulations could be burdensome, time consuming, and expensive.
Our vehicles are subject to environmental and safety compliance with various federal and state regulations, including regulations promulgated by the Environmental Protection Agency, the National Highway Traffic and Safety Administration and various state boards, and compliance certification is required for each new model year. The cost of these compliance activities and the delays and risks associated with obtaining approval can be substantial. The risks, delays and expenses incurred in connection with such compliance could be substantial.
Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell or lease vehicles directly to consumers could have a negative and material impact on our business, prospects, financial condition and results of operations.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
We may become subject to product liability claims, even those without merit, which could harm our business, prospects, operating results, and financial condition. The automobile industry experiences significant product liability claims and we face inherent risk of exposure to claims in the event our vehicles do not perform as expected or malfunction resulting in personal injury or death. Our risks in this area are particularly pronounced given we have limited field experience for our vehicles. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of other future vehicle candidates, which would have material adverse effect on our brand, business, prospects and operating results. Any insurance coverage might not be sufficient to cover all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have a material adverse effect on our reputation, business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we do face liability for our products and are forced to make a claim under our policy.
We face risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries.
We are, and may in the future become, subject to various litigations, other claims, suits, regulatory actions and government investigations and inquiries. See the description of certain current legal proceedings described under “Note 19, Contingencies and Claims”, of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
In addition, from time to time, we may be involved in other legal proceedings arising in the ordinary course of business, including those relating to employment matters, relationships with collaboration partners, intellectual property disputes, and other business matters. Any such claims or investigations may be time-consuming, costly, divert management resources, or otherwise have a material adverse effect on our business or result of operations.
The results of the current legal proceedings and any future legal proceedings cannot be predicted with certainty and adverse judgments or settlements in some or all of these legal proceedings may result in materially adverse monetary damages or injunctive relief against us. Any such payments or settlement arrangements in current or future litigation, could have a material adverse effect on our business, operating results or financial condition. Even if the plaintiffs’ claims are not successful, current or future litigation could result in substantial costs and significantly and adversely impact our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock. In addition, such legal proceedings may make it more difficult to finance our operations.
We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and non-compliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.
We are or will be subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct or in the future may conduct activities, including the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act 2010, and other anti-corruption laws and regulations. The FCPA and the U.K. Bribery Act 2010 prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. The U.K. Bribery Act also prohibit non-governmental “commercial” bribery and soliciting or accepting bribes. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation. Our policies and procedures designed to ensure compliance with these regulations may not be sufficient and our directors, officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.
Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.
Failure to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements and rules governing revenue and expense recognition and any inability to do so will adversely affect our billing and reporting.
To manage the expected growth and increasing complexity of our operations, we will need to improve our operational and financial systems, procedures, and controls and continue to increase systems automation to reduce reliance on manual operations. Any inability to do so will affect our billing and reporting. Our current and planned systems, procedures and controls may not be adequate to support our complex arrangements and the rules governing revenue and expense recognition for our future operations and expected growth. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.
Failure to build our finance infrastructure and improve our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.
As a public company, we will operate in an increasingly demanding regulatory environment, which requires us to comply with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the regulations of the Nasdaq CM, the rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules. Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures. Effective internal controls
are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. The Company must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing. Prior to the Closing, we have never been required to test our internal controls within a specified period and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.
We anticipate that the process of building our accounting and financial functions and infrastructure will require significant additional professional fees, internal costs and management efforts. We expect that we will need to implement a new internal system to combine and streamline the management of our financial, accounting, human resources and other functions. However, such a system would likely require us to complete many processes and procedures for the effective use of the system or to run our business using the system, which may result in substantial costs. Any disruptions or difficulties in implementing or using such a system could adversely affect our controls and harm our business. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management’s attention. In addition, we may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If we cannot provide reliable financial reports or prevent fraud, our business and results of operations could be harmed, investors could lose confidence in our reported financial information and we could be subject to sanctions or investigations by the Nasdaq CM, the SEC or other regulatory authorities.
All of our debt obligations and our senior equity securities will have priority over our common stock with respect to payment in the event of liquidation, dissolution or winding up, and our outstanding senior securities restrict our ability to pay dividends on our common stock.
If we were to liquidate, dissolve or wind up, our common stock would rank below all debt claims against us and claims of all of our outstanding shares of preferred stock. As a result, holders of common stock of the combined company will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the combined company until after all our obligations to our debt holders have been satisfied and holders of senior equity securities have received any payment or distribution due to them.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES.
Our corporate headquarters is in Brea, CA, where we occupy approximately 24,730 rentable square feet under a sublease that expires in March 2026 with lease payments of $34,403 per month. We use this space primarily for our senior management, technology, product design, sales and marketing, finance, legal, human resources, general administrative and information technology teams.
On August 1, 2022, the Company announced the opening of its Automotive Development Center in Irvine, CA. The 16,000 square foot facility houses the Automotive Team, which includes Engineering Design and Development, Styling, Program Management, Marketing and Finance. In August 2022, the lease was modified to include the second floor of the building. The leased space increased to 31,603 square feet, and the lease payments are approximately $79,000 per month which includes rent, insurance, and CAM.
Our Battery Innovation Center is located in Monrovia, CA. We lease 71,753 square foot space. Lease payments are $85,737 per month.
We own the manufacturing facility located in Robinsonville, Tunica County, MS, which was purchased in November 2021. The Advanced Manufacturing Engineering Center is 124,000 square foot engineering facility on 100 acres.
On November 30, 2022, the Company purchased an automobile manufacturing facility in Mishawaka, St. Joseph County, IN as part of the ELMS asset acquisition. The site gross area is 1,392,395 square feet. The Mishawaka assembly plant consists of a body shop, paint shop, general assembly area, and water treatment plant.
The Company leases 31,002 square feet of office space in Troy, MI. The lease payments are $22,750 per month. The Detroit EV Team is comprised of Engineering and Technology Teams.
Bollinger Motors maintains its offices within a 36,300 square foot building located in Oak Park, MI and has operated at this facility since August 2020. The lease payments for this facility were approximately $25,000 per month during 2022. Bollinger Motors entered into a new five-year lease agreement for this Oak Park facility which became effective January 1, 2023 with initial lease payments of approximately $27,000 per month. Additionally, Bollinger Motors still maintains a lease in Ferndale, MI from where the company previously operated prior to August 2020. The lease payments for this facility were approximately $6,000 per month in 2023. However, the Ferndale facility was subleased for the entirety of 2023 with sublease income of approximately $7,000 per month. The sublease is in place until October 2024 when this lease is set to expire.
On August 1, 2023, Bollinger Motors executed a lease agreement for a building at 26650 Harding Ave, Oak Park, MI, adjacent from their Oak Park headquarters. The five-year lease provides 10,774 square feet of space at an annual rate of $7 per square foot. The space is intended as a mixed-use space, including supplemental warehousing, vehicle storage and repair, and office space.
On November 1, 2023, the Company entered a 5-year lease agreement for premises of approximately 122,000 sq. ft. in Fullerton, California, designated for light manufacturing and distribution of electric vehicle batteries. Base rent is $2,992 thousand for the first year (and increases approximately 4% every year) and additional operating expenses are approximately $715 thousand in the first year with subsequent annual recalculation. Security deposit payable to the landlord is approximately $1 million.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS.
Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, are described in the “Note 19 - Contingencies and Claims” of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K and incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock began trading on the NASDAQ Capital Market under the symbol “NETE” on October 3, 2012. In connection with the reverse merger, the ticker symbol for the Company’s common stock changed from “NETE” to “MULN” at the opening of trading on November 5, 2021.
Holders
As of September 30, 2023, our common stock was held by 789 registered shareholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies. Our transfer agent is Continental Stock Transfer & Trust Company.
Dividends
We have not historically declared any dividends on common stock. We have no present intention of paying any cash dividends on our common stock in the foreseeable future, as any earnings will be used to help generate growth. The decision on the payment of dividends in the future rests within the discretion of the Board of Directors and will depend upon, among other things, our earnings, capital requirements and financial condition, as well as other relevant factors. There are no restrictions in our certificate of incorporation or bylaws that restrict us from declaring dividends.
Securities Authorized for Issuance Under Equity Compensation Plans
The information included under Item 12 of Part III of this Report is hereby incorporated by reference into Item 5 of Part II of this Report.
Recent Sales of Unregistered Securities
There were no sales of unregistered securities of the Company during the three months ended September 30, 2023.
Issuer Purchases of Equity Securities
On July 6, 2023, the Board of the Company authorized a stock buyback program, pursuant to which the Company may, until December 31, 2023, purchase up to $25 million in shares of its outstanding common stock. The shares may be repurchased, from time to time, in the open market or in privately negotiated transactions depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The authorization of the stock buyback program did not obligate the Company to purchase any shares and may be terminated or amended by the Board at any time prior to its expiration date.
As of December 31, 2023, the Company had purchased through a broker from unrelated parties, on an open market, 57,000 shares of common stock. The shares of common stock purchased according to this stock buyback program have been immediately retired.
The Company made two stock repurchase transactions in August 2023. Stock repurchase activity during the three months ended September 30, 2023 was as follows after reflecting the 1:100 reverse stock split of the Company’s common stock that was effected on December 21, 2023:
Period
Total Number of Shares Purchased
Average Purchase Paid
Number of Shares Purchased as Part of a Publicly Announced Plan or Program
Maximum Amount that May be Purchased Under the Announced Plan or Program
July 6 - July 31
-
-
-
-
Aug. 1 - Aug. 31
57,000
$99.1
57,000
-
Sept. 1 -Sept. 30
-
-
-
-
Total:
57,000
57,000
-(1)
(1) The stock repurchase program expired on December 31, 2023.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis is intended to help the reader understand Mullen’s results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes included elsewhere in this Report.
In connection with the Merger Agreement (as defined below), and as disclosed in our Current Report on Form 8-K filed with the SEC on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 2022. As a result, and unless otherwise indicated, references to our fiscal year 2023 and prior years mean the fiscal year ended on September 30 of such year.
Cautionary Note Regarding Forward-Looking Statements
This Report includes 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”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section titled “Risk Factors” in Item 1A above. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation (and expressly disclaim any obligation) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under the section titled “Risk Factors” in Item 1A above may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Mullen Investment Properties LLC, a Mississippi corporation, Ottava Automotive, Inc., a California corporation, Mullen Real Estate, LLC, a Delaware corporation, as well as a 60%-owned subsidiary Bollinger Motors Inc., a Delaware corporation. Intercompany accounts and transactions have been eliminated, if any. The financial statements reflect the consolidated financial position and results of operations of Mullen, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States.
Components of Results of Operations
We are an early-stage company, and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.
Results of Operations
Comparison of the Year Ended September 30, 2023 to the Year Ended September 30, 2022
The following table sets forth our historical operating results for the periods indicated:
Year Ended
September 30,
$ Change
% Change
(dollar amounts, except percentages)
Revenue
Vehicle sales
$
366,000
$
-
$
366,000
%
Cost of sales
(273,882)
-
(273,882)
%
Gross Margin
$
92,118
$
-
$
92,118
%
Operating expenses:
General and administrative
215,846,132
75,338,256
140,507,876
%
Research and development
77,387,336
21,650,840
55,736,496
%
Impairment of goodwill
63,988,000
-
63,988,000
%
Impairment of property, plant, and equipment, and other non-current assets
14,770,000
-
14,770,000
%
Impairment of intangible assets
5,873,000
-
5,873,000
%
Loss from Operations
$
(377,772,350)
$
(96,989,096)
$
(280,783,254)
%
Other income (expense):
Other financing costs - initial recognition of derivative liabilities
(506,238,038)
(484,421,258)
(21,816,780)
%
Gain / (loss) on derivative liability revaluation
(116,256,212)
(122,803,715)
6,547,503
(5)
%
Gain / (loss) extinguishment of debt, net
(6,246,089)
33,413
(6,279,502)
(18,794)
%
Loss on financing
(8,934,892)
-
(8,934,892)
%
Gain / (loss) on sale of fixed assets
386,377
(50,574)
436,951
(864)
%
Loss on lease termination
(125,000)
-
(125,000)
%
Interest expense
(4,993,140)
(26,949,081)
21,955,941
(81)
%
Penalty for insufficient authorized shares
-
(3,495,000)
3,495,000
(100)
%
Other income (expense), net
2,532,034
(5,647,841)
8,179,875
(145)
%
Net loss before income tax benefit
$
(1,017,647,310)
$
(740,323,152)
$
(277,324,158)
%
Income tax benefit/ (provision)
10,988,482
(1,600)
10,990,082
(686,880)
%
Net loss
$
(1,006,658,828)
$
(740,324,752)
$
(266,334,076)
%
Net loss attributable to noncontrolling interest
(34,404,246)
(791,946)
(33,612,300)
4,244
%
Net loss attributable to stockholders
$
(972,254,582)
$
(739,532,806)
$
(232,721,776)
%
Waived/(Accrued) accumulated preferred dividends
7,360,397
(40,516,440)
47,876,837
(118)
%
Net loss attributable to common stockholders after preferred dividends
$
(964,894,185)
$
(780,049,246)
$
(184,844,939)
%
Net Loss per Share
(1,574.14)
(63,085.26)
Weighted average shares outstanding, basic and diluted
612,964
12,365
Revenues
We are a development stage company and have only recently started to generate notable revenues. Vehicle production and deliveries began in June 2023. As we expand production and commercialization of vehicles, we expect the majority of our revenue to be derived from sales of commercial vehicles. We are planning to ramp up production and reach sufficient revenue levels in subsequent periods - primarily from sales of Commercial Delivery Vehicles (Class 1 - 6). As we continue to develop our product line, we expect additional revenue streams in the future, also from the sales of Sport Utility Vehicles ("SUVs") and the flexible leasing of our electric vehicles ("EVs").
In accordance with accounting standards, we recognize revenue from the sale of electric vehicles upon transfer of control to a customer. In general, the control is transferred at the point of delivery to the customer but certain contracts with our dealers contain a return provision, stating that they may return unsold vehicles after 1 year. Since the Company does not have sufficient relevant statistics of returns yet, we defer revenue recognition until the vehicles have been sold by such dealer or until there is sufficient evidence to justify a reasonable estimate for consideration to which the Company expects to be entitled. Payments from customers are generally expected to be received within 30 days after delivery.
The tables below disclose information on deliveries of vehicles, revenue recognized, revenue deferred, and payments received from our customers over the recent periods.
Invoiced during the year ended September 30, 2023
#
Type
Units Invoiced
Amount invoiced
Cash received
Revenue recognized
Urban Delivery (UD0)
366,000
366,000
366,000
Mullen 3 (UU)
652,200
652,200
-
Total
$ 1,018,200
$ 1,018,200
$ 366,000
Invoiced during the quarter ended December 31, 2023
#
Type
Units Invoiced
Amount invoiced
Cash received
Revenue recognized
Mullen 3 (UU)
8,543,820
-
-
Urban Delivery (UD1)
3,363,500
-
-
Total
$ 11,907,320
$ -
$ -
Cost of Goods Sold
The costs of goods sold primarily include vehicle components and parts, labor costs, amortized tooling costs, provisions for estimated warranty expenses, and other relevant costs associated with the production of these vehicles.
Research and Development
Research and development expenses increased by approximately $55.7 million or 257% from approximately $21.7 million through the twelve months ended September 30, 2022, to approximately $77.4 million through the twelve months ended September 30, 2023. Research and Development costs are expensed as incurred. To date, our research and development expenses have consisted primarily of engineering and consulting services in connection with the development and design of our EVs. As we ramp up for commercial operations, we expect research and development expenses to increase as we continue to invest in new vehicle model design and development of technology.
General and Administrative
General and administrative (“G&A”) expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, salaries, rent, repairs and maintenance, utilities and office expense, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses increased by approximately $140.5 million or 187% from approximately $75.3 million in the twelve months ended September 30, 2022, to approximately $215.8 million in the twelve months ended September 30, 2023, primarily due to increases in marketing, listing and regulatory fees, office expenses, settlements and penalties, and payroll related expenses with the growth of personnel and resources.
Interest Expense
Interest expense decreased by approximately $22.0 million or 81% from approximately $26.9 million through the twelve months ended September 30, 2022, to approximately $5.0 million through the twelve months ended September 30, 2023, primarily due to a decrease in convertible debt that has been fully converted in Q1 and Q2 of the 2023 fiscal year.
Impairment
Due to unfavorable market conditions and decline of the market prices of the Company’s common stock, we have tested long-lived asset for recoverability. As a result of the impairment test performed on September 1, 2023 by independent professional appraisers, the Company has recognized impairment losses in amount of $84,631,000 that related to goodwill (Bollinger segment), property, plant, and equipment, and intangible assets (ELMS/Mullen segment). See more details below.
Net Loss
The net loss attributable to common stockholders (after preferred dividends) was $964.9 million, or $1,574.14 net loss per share, for the twelve months ended September 30, 2023, as compared to a net loss attributable to common stockholders after preferred dividends of $780.0 million, or $63,085.26 loss per share, for the twelve months ended September 30, 2022.
Operating segments
The Company is currently comprised of 2 major operating segments:
- Bollinger Motors. The Company acquired the controlling interest of Bollinger Motors Inc. (60%) on September 7, 2022. This acquisition positions Mullen into the medium duty truck classes 4-6, along with the Sport Utility and Pick Up Trucks EV segments.
- Mullen/ELMS. By November 30, 2022, Mullen acquired ELMS’ manufacturing plant in Mishawaka Indiana and all the intellectual property needed to engineer and build Class 1 and Class 3 electric vehicles.
Reverse Stock Splits and NASDAQ listing rules compliance
During the calendar year ended December 31, 2023 we have completed 3 reverse stock splits. In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. The last 1-for-100 reverse stock split was effectuated in December 2023.
The 1-for-25 reverse stock split was reflected in our unaudited condensed consolidated financial statements for the six months ended March 31, 2023 and 2022. The 1-for-25 and 1-for-9 reverse splits were reflected in our unaudited condensed consolidated financial statements for the nine months ended June 30, 2023 and 2022. The last 1-for-100 reverse stock split effected on December 21, 2023 has been recognized in our consolidated financial statements for the year ended September 30, 2023 (comparatives for the year ended September 30, 2022 have also been retroactively adjusted).
As a result of these reverse splits, our issued and outstanding common stock decreased from 833,468,180 shares to 37,043 shares as of September 30, 2022, and from 7,048,387 shares to 313 shares as of September 30, 2021.
The Nasdaq Hearings Panel, on October 26, 2023, allowed Mullen Automotive to continue its listing on The Nasdaq Capital Market, subject to certain conditions, including maintaining a minimum stock price and holding an annual shareholder meeting.
Liquidity and Capital Resources
To date, we have yet to generate any significant revenue from our business operations. We have funded our capital expenditure and working capital requirements through the sale of equity securities, as further discussed below. Our ability to successfully expand our business will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.
The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $155.7 million as of September 30, 2023. During the twelve months ended September 30, 2023, the Company used approximately $179.2 million of cash for operating activities. The net working capital on September 30, 2023 was positive and amounted to approximately $58.5 million, or approximately $133.3 million after excluding derivative liabilities and liabilities to issue stock that are supposed to be settled by issuing common stock without using cash. For the year ended September 30, 2023, the Company has incurred a net loss of $1,006.7 million and, as of September 30, 2023, our accumulated deficit is $1,862.2 million.
The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt, or entering other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. However, given the impact of the economic downturn on the U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all.
Despite these efforts, there can be no assurance that our plans will be successful in alleviating the substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty, such as the potential need to liquidate assets, restructure operations, or make other significant changes to the business model.
Debt
To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, convertible preferred stock and common stock. Debt comprises an insignificant component of our funding needs.
The short-term debt classification primarily is based upon loans due within twelve-months from the balance sheet date, in addition to loans that have matured and remain unpaid. Management plans to renegotiate matured loans with creditors for favorable terms, such as reduce interest rate, extend maturities, or both; however, there is no guarantee favorable terms will be reached. Until negotiations with creditors are resolved, these matured loans remain outstanding and will be classified within short-term debt on the balance sheet. Interest and fees on loans are being accounted for within accrued interest.
The following is a summary of our debt as of September 30, 2023:
Net Carrying Value
Unpaid Principal
Contractual
Type of Debt
Balance
Current
Long-Term
Interest Rate
Maturity
Matured notes
$
2,398,881
$
2,398,881
$
-
0.00 - 10.00%
%
2019 - 2021
Real Estate note
5,000,000
5,000,000
-
8.99%
%
2023-2024
Loan advances
332,800
332,800
-
0.00 - 10.00%
%
2016 - 2018
Less: debt discount
(270,189)
(270,189)
-
NA
NA
Total Debt
$
7,461,492
$
7,461,492
$
-
Cash Flows
The following table provides a summary of our cash flow data for the years ended September 30, 2023 and 2022:
Years Ended September 30,
Net cash provided by (used in):
Operating activities
$
(179,172,191)
$
(65,795,610)
Investing activities
(107,923,309)
(47,154,109)
Financing activities
358,416,885
197,282,630
Cash Flows used in Operating Activities
Our cash flow used in operating activities to date has been primarily comprised of costs related to research and development, payroll and other general and administrative activities. As we continue to ramp up hiring ahead of starting commercial operations, we expect our cash used in operating activities to increase significantly before we start to generate any material cash flow from our business.
Net cash used in operating activities was $179.2 million in the twelve months ended September 30, 2023, a 172% increase from $65.8 million net cash used during the twelve months ended September 30, 2022.
Cash Flows used in Investing Activities
Our cash flows used in investing activities, to date, have been comprised mainly of purchases of equipment. We expect these costs to increase substantially in the near future as we ramp up activity ahead of commencing commercial operations.
Net cash used in investing activities was $107.9 million in the year ended September 30, 2023, a 129% increase from $47.1 million used in investing activities the year ended September 30, 2022. The primary factor in the increased cash outflows was the ELMS assets acquisition.
Cash Flows provided by Financing Activities
Through September 30, 2023, we have financed our operations primarily through the issuance of convertible notes and equity securities.
Net cash provided by financing activities was $358.4 million for the year ended September 30, 2023 primarily due to issuance of preferred shares and other convertible instruments in lieu of preferred shares, as compared to $197.3 million net cash provided by financing activities for the year ended September 30, 2022.
Contractual Obligations and Commitments
The following tables summarizes our contractual obligations and other commitments for cash expenditures as of September 30, 2023, and the years in which these obligations are due:
Operating Lease Commitments
Scheduled
Years Ended September 30,
Payments
$
3,135,400
2,639,884
803,759
584,468
206,919
Thereafter
1,579,534
Total Future Minimum Lease Payments
$
8,949,964
New lease contracts
On November 1, 2023, the Company entered a 5-year lease agreement for premises of approximately 122,000 sq. ft. in Fullerton, California, designated for light manufacturing and distribution of electric vehicle batteries. Base rent is $2,992 thousand for the first year (and increases approximately 4% every year) and additional operating expenses are approximately $715 thousand in the first year with subsequent annual recalculation. Security deposit payable to the landlord is approximately $1 million.
Non-convertible secured promissory note
On December 18, 2023, Mullen entered into a Debt Agreement to issue a non-convertible secured promissory note (the “Note”) with a principal amount of $50 million, purchased for $32 million, reflecting an $18 million original issue discount. The Note, which does not include conversion rights, stock, warrants, or other securities, aims to raise capital for the Company's manufacturing operations. The issuance of this non-convertible Note is scheduled for the first trading day when all closing conditions are met. By January 15, 2024, the loan has not been received.
The Note will incur 10% annual interest, escalating to 18% post-Event of Default. It matures three months post-issuance. The Note's terms allow for accelerated repayment upon default, requiring the Company to pay the principal, accrued interest, and other due amounts. The Note is secured by the Company’s assets and imposes restrictions on the Company, limiting additional debt, asset liens, stock repurchases, outstanding debt repayment, and affiliate transactions, except for specified exceptions. It mandates prepayment of the principal from net proceeds of any subsequent financing.
Scheduled Debt Maturities
The following are scheduled debt maturities as of September 30, 2023:
Years Ended September 30,
Thereafter
Total
Total Debt
$
2,717,804
$
4,743,688
$
-
$
-
$
-
$
-
$
-
$
-
$
7,461,492
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements, as defined under SEC rules.
Critical Accounting Policies and Estimates
Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, our management is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Management considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described in Note 3 to the consolidated financial statements. Management believes none of the accounting estimates are considered critical for the preparation of these consolidated financial statements.
In preparation of these financial statements, management applied critical estimates and assumptions while performing impairment test for goodwill and other long-lived assets. We identified Bollinger and ELMS/Legacy Mullen (refer to Note 21 - Segment information) as our reporting units for the purposes of assessing impairments.
Critical accounting estimates for goodwill and indefinite-lived intangibles assets impairment tests
Our goodwill and indefinite-lived intangible assets, which primarily consist of in-process research and development assets and patents, pertain to the Bollinger acquisition on September 7, 2022 (refer to Note 4 for more details).
Fair value determinations require significant judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of the reporting units and in-process research and development assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, or income tax rates, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then our reporting units or in-process research and development assets might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could in the future lead to goodwill or in-process research and development assets impairments.
We utilize the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Some of the more significant assumptions inherent in estimating the fair value include the estimated future annual net cash flows for the reporting units (including net sales, cost of products sold, sales, general, and administrative costs (“SG&A”), depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, and a discount rate that appropriately reflects the risks inherent in each future cash flow stream. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product line growth rates, management’s plans, and comparable company market multiples.
We utilize the excess earnings method under the income approach to estimate the fair value of our in-process research and development assets. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net cash flows for the in-process research and development assets (including net sales, cost of products sold, and SG&A), contributory asset charges, income tax considerations, economic depreciation rate, a discount rate that reflects the level of risk associated with the future earnings attributable to the in-process research and development assets, and management’s intent to invest in the in-process research and development assets indefinitely. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product line growth rates, management’s plans, and comparable company market multiples.
As a result of our quantitative impairment assessment of goodwill, we reassessed the fair value of the reporting units and recorded a goodwill impairment loss of $63,988,000 within the consolidated statement of operations. As a result of our quantitative impairment assessment of in-process research and development assets, we determined that the fair value exceeded the carrying amount and as such, no impairment loss was recorded.
The discount rate and long-term growth rate used to estimate the fair value of our reporting units, and the carrying amount of goodwill used in our quantitative impairment assessment were as follows:
Goodwill Carrying Amount
Discount Rate
Long-Term Growth Rate
Reporting units
$ 92,834,832
50%
3%
The discount rate and economic depreciation rate used to estimate the fair value of our in-process research and development assets, and the carrying amount used in our quantitative impairment assessment were as follows:
Indefinite-lived Intangible Assets Carrying Amount
Discount Rate
Economic Depreciation Rate
In-process research and development assets (excess earnings method)
$ 58,304,612
55%
10%
Assumptions used in impairment assessments are made at a point in time and therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment assessment date. Additionally, these assumptions are generally interdependent and do not change in isolation. However, as it is reasonably possible that changes in assumptions could occur, as a sensitivity measure, we have presented the estimated effects of isolated changes in discount rates and long-term growth rates on the fair values of our reporting units. We have also presented the estimated effects of isolated changes in discount rates and economic depreciation rate on the fair value of the in-process research and development assets. These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.
If we had changed the following assumptions used to estimate the fair value of the reporting units and in-process research and development assets as part of the quantitative impairment assessment, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of reporting units and in-process research and development assets, respectively, as follows:
Discount Rate
Long-Term Growth Rate
250-Basis-Point
50-Basis-Point
Increase
Decrease
Increase
Decrease
Reporting units
$
(19,000,000)
$
20,000,000
$
-
$
-
Discount Rate
Economic Depreciation Rate
250-Basis-Point
250-Basis-Point
Increase
Decrease
Increase
Decrease
In-process research and development assets (excess earnings method)
$
(9,000,000)
$
10,000,000
$
(11,000,000)
$
13,000,000
Critical accounting estimates for other long-lived assets impairment tests
Our long-lived assets primarily consist of equipment, real property and finite-lived intangible assets subject to amortization, which for us are capitalized engineering design assets. The long-lived assets primarily pertain to Legacy Mullen and to assets acquired as part of the ELMS asset acquisition by November 30, 2022 (refer to Note 4 for more details).
We review our long-lived asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Such conditions could include significant adverse changes in the business climate, current period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. Recoverability of long-lived asset groups to be held and used is measured by a comparison of the carrying amount of the asset group to future undiscounted net cash flows expected to be generated by the asset group. If the asset group is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Due to a prolonged decrease in our market capitalization, including a significant decline in stock price and budgeted performance targets not achieved as compared to acquisition date budgets, we assessed the long-lived assets for impairment.
We utilized the discounted cash flow method under the income approach to estimate the fair value of our long-lived assets. Some of the more significant assumptions inherent in estimating the fair value include the estimated future annual net cash flows for the long-lived assets (including net sales, cost of products sold, SG&A, depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, and a discount rate that appropriately reflects the risks inherent in each future cash flow stream. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, management’s plans, and comparable company market multiples. Impairment losses on long-lived assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. As a result of our impairment assessment of long-lived assets, we reassessed the fair value of the long-lived assets and recorded an impairment loss of $20,643,000 within the consolidated statement of operations.
The discount rates and long-term growth rates used to estimate the fair values of our long-lived assets, as well as the long-lived assets carrying amount used in our impairment assessment were as follows:
Long-lived Assets Carrying Amount
Discount Rate
Long-Term Growth Rate
Other long -lived assets
$ 110,330,000
35%
3%
Assumptions used in impairment assessments are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each assessment date. Additionally, these assumptions are generally interdependent and do not change in isolation. However, as it is reasonably possible that changes in assumptions could occur, as a sensitivity measure, we have presented the estimated effects of isolated changes in discount rates and long-term growth rates on the fair values of our long-lived assets. These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.
If we had changed the following assumptions used to estimate the fair value of the long-lived assets as part of the impairment assessment, these isolated changes, which are reasonably possible to occur, would have led to the following increase/(decrease) in the aggregate fair value of the long-lived assets:
Discount Rate
Long-Term Growth Rate
250-Basis-Point
50-Basis-Point
Increase
Decrease
Increase
Decrease
Other long-lived assets
$
(22,000,000)
$
26,000,000
$
-
$
(1,000,000)
a
Recent Accounting Pronouncements
Accounting standard updates issued but not yet effective were assessed and determined to be either not applicable or not expected to have a material impact on our consolidated financial statements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and notes thereto and the reports of the independent registered public accounting firm are filed as part of this Report and incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We are responsible for establishing and maintaining disclosure controls and procedures (“DCP”) that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is: (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (b) accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosures.
We conducted an evaluation pursuant to Rule 13a-15 of the Exchange Act of the effectiveness of the design and operation of our DCP as of September 30, 2023, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our DCP were not effective at the reasonable assurance level as of September 30, 2023 because of material weaknesses in the Company’s internal control over financial reporting described below.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and our dispositions of the assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2023 due to material weaknesses described below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. In conducting our review of our internal control over financial reporting, we identified the following material weaknesses described below.
◾ Based on management’s review of key accounting and information technology policies and procedures, we have determined that although such policies and procedures exist, they are not all formalized in a written procedure format that is up to date.
◾ As a result of absence of formalized review of key controls across several business processes and/or insufficiently formalized documentation evidencing such review, management’s ability to evaluate the design and monitor the effective operation of these preventative and detective internal controls is limited. Accordingly, management’s ability to timely detect, prevent and remediate deficiencies and potential risks has been assessed as inadequate.
◾ The Company identified certain design deficiencies in its management and analytical review controls associated with the financial close process. These deficiencies, individually or in the aggregate, combined with inadequate compensating controls, created a reasonable possibility that a material misstatement to the consolidated financial statements might not be prevented or detected on a timely basis.
◾ The Company lacks in-house accounting expertise to identify rights and obligations reflected in non-standard agreements, requiring specialized accounting for complex transactions.
◾ The Company’s internal control system as well as disclosure controls and procedures failed to ensure the Company properly presents certain related party disclosures in the financial statements for the year ended September 30, 2022, as further discussed in the Note 20 to the financial statements for the year ended September 30, 2023.
During the year ended September 30, 2023, these control deficiencies did not result in identified material misstatements in our consolidated financial statements; however, the control deficiencies described above created a more than remote possibility that a material misstatement in the consolidated financial statements would not be prevented or detected on a timely basis. Therefore, our management concluded that the deficiencies represent material weaknesses.
Based on the performance of additional procedures by management designed to ensure reliability of financial reporting, the Company’s management has concluded that, notwithstanding the material weaknesses described above, the consolidated financial statements, included in this Form 10-K, fairly present, in all material respects, the Company’s financial position, results of operations, and cash flows as of the dates, and for the periods presented, in conformity with U.S. GAAP.
Remediation Efforts to Address the Material Weaknesses and Other Changes in Internal Control Over Financial Reporting
The aforementioned material weaknesses were first identified in 2022. While the Company has significantly improved its internal control over financial reporting, the material weaknesses remain un-remediated as of September 30, 2023, and the Company’s remediation efforts will continue to take place in 2024.
During the year ended September 30, 2023, the management completed the following actions in accordance with the remediation plan:
◾ Hired critical leadership roles with sufficient public company and internal control experience, and experience and knowledge in GAAP financial reporting matters, responsible for designing, implementing, and monitoring our internal controls.
◾ Identified, prioritized and implemented several of the critically important accounting policies and procedures, e.g., additional analytical reviews of financial statements before they get filed; controls to enhance communication between departments of the Company intended to timely capture events that require disclosures or journal entries; using GAAP Disclosure and SEC Reporting Checklists etc.
◾ Designed, developed, and deployed a number of systems and IT tools to enable the effectiveness and consistent execution of controls over timely and accurate accounting for certain transactions, such as warrant liabilities, stock-based compensation to employees and stock-based compensation to non-employees, in accordance with relevant US GAAP.
◾ Engaged third-party accounting consulting firm to assist us in documenting our application of GAAP on complex transactions such as significant asset acquisitions, equity-based compensation, debt, and equity financing transactions.
In addition, the following changes in internal control took place during the year ended September 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting:
◾ In the fourth quarter of the year ended September 30, 2022, the Company acquired a controlling interest (60%) in a substantial subsidiary, Bollinger Motors, Inc. During the year ended September 30, 2023, as part of our ongoing integration activities, the management has been considering the controls design to be incorporated into this business concurrent with the augmentation of our Company-wide controls.
◾ During the year ended September 30, 2023, the Company started production and sales activities and is implementing internal control procedures related to ASC 606.
◾ The management of the Company has launched a substantial upgrade of information systems to implement a new enterprise resource planning system (SAP) that is expected to go live in the beginning of the 2024 calendar year.
In addition to the remedial actions taken to date, the Company is considering the full extent of the procedures to implement in order to remediate the material weaknesses described above. Currently, the remediation plan includes:
◾ revising and enhancing effectiveness of the controls put in place during previous periods, including those mentioned above.
◾ continuing to implement processes and controls to better manage and monitor our financial reporting risks, including enhancing the usage of technology and tools.
◾ continuing professional training and education on accounting subjects for accounting staff.
◾ enhancing management review controls related to our financial statement close and financial reporting involving estimates, judgments, and assumptions.
◾ augmenting the design of the financial statement closing and financial reporting process including documentation of accounting treatment of significant and unusual transactions.
The actions that we are taking are subject to ongoing management review and audit committee oversight. We believe these measures will aid to remediate the control deficiencies that gave rise to the material weaknesses, but the material weaknesses will not be considered fully remediated until controls have been designed and implemented for a sufficient period of time, and properly tested for our management to conclude that the control environment is operating effectively.
We are committed to continuing to improve our internal control processes, and, as we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and processes as well as internal control over financial reporting, we recognize that any controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Because of its inherent limitations, any internal control system, no matter how well designed and operated, is based upon certain judgments and assumptions, and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. As a non-accelerated filer, we are not subject to the attestation requirement.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
Trading Arrangements
On August 18, 2023, Jonathan New, the Company’s Chief Financial Officer, entered into a Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K) for the sale of only those shares of common stock necessary to satisfy payment of applicable withholding taxes as a result of stock awards. The trading arrangement terminates upon the sale of all shares. During the three months ended September 30, 2023, no other director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The directors and executive officers of the Company and their respective ages, and positions with the Company and certain business experience as of the date of this Report are set forth below. There are no family relationships among any of the directors or executive officers.
There are no material legal proceedings to which any director or executive officer of the Company, or any associate of any director or executive officer of the Company, is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.
Name
Age
Position
Director Class
David Michery
Chief Executive Officer, President, and Chairman of the Board
Class I
Jonathan New
Chief Financial Officer
Calin Popa
President-Mullen Automotive
Mary Winter
Secretary and Director
Class I
Ignacio Novoa
Director
Class I
Kent Puckett
Director
Class II
Mark Betor
Director
Class II
William Miltner
Director
Class III
John Anderson
Director
Class III
Pursuant to the Second Amended and Restated Certificate of Incorporation, the Company’s Board of Directors is classified into three classes with staggered three-year terms designated as follows:
● Class I - David Michery, Mary Winter, and Ignacio Novoa whose terms will expire in 2025 at our annual meeting of stockholders or until their respective successors are elected and qualified;
● Class II - Kent Puckett and Mark Betor, whose terms will expire at our annual meeting of stockholders in 2025.
● Class III - William Miltner and John Anderson whose terms will expire at our annual meeting of stockholders in 2024.
At each annual meeting of stockholders, the successors to directors whose terms expire will be elected to serve from the time of election and qualification until the third annual meeting following their election and until the successors are duly elected and qualified. This classification of the Board may have the effect of delaying or preventing changes in Mullen’s
control of management. These directors may be removed for cause by the affirmative vote of the holders of at least two-thirds (2/3) of Mullen’s voting stock.
David Michery has served as the Chairman of the Board, President and Chief Executive Officer of the Company since the closing of the Merger in November 2021 and held those same positions at Mullen Technologies since its inception in 2018. His automotive experience began with the acquisition of Mullen Motor Company in 2012. Mr. Michery brings over 25 years within executive management, marketing, distressed assets, and business restructuring. He acquired the assets of Coda Automotive, formerly an independent EV manufacturer, through bankruptcy as an entryway into the EV business. We believe that Mr. Michery is qualified to serve as a director because of his operational and historical expertise gained from serving as our Chief Executive Officer, and his experience within various businesses, including automotive.
Jonathan New was appointed by the Board as Chief Financial Officer of the Company, effective September 19, 2022. He served as a director of the Company from November 2021 until September 19, 2022. From January 2020 until September 2022, Mr. New served as the Chief Financial Officer of Motorsport Games, Inc. (NASDAQ: MSGM), a racing game developer, publisher and esports ecosystem provider. Previously, from July 2018 to January 2020, Mr. New was Chief Financial Officer of Blink Charging Co (NASDAQ: BLNK), an owner, operator and provider of electric vehicle charging equipment and networked electric vehicle charging services, and, from 2008 to July 2018, he was Chief Financial Officer of Net Element, Inc., a global technology and value-added solutions group that supports electronic payments acceptance in a multi-channel environment. Mr. New is a Florida Certified Public Accountant and a member of the American Institute of Certified Public Accountants.
Calin Popa has served as President of the Automotive Electric Vehicles Division of Mullen Technologies since 2017. He has 34 years of experience within the automotive industry. Previously, Mr. Popa was Vice President of Manufacturing Engineering at Karma Automotive, LLC, f/k/a Fisker Automotive, from 2010 to 2017. Mr. Popa has held senior positions within product development, vehicle launch and manufacturing at well-known companies, including MAN, Ford, and Chrysler.
Mary Winter has served as director of the Company since the closing of the Merger and has been a director of Mullen Technologies since 2018. Ms. Winter has been an integral part of Mullen since inception. She currently serves as the Secretary of the Company and Board of Directors. Formerly, she was the Vice President of Operations for Mullen Technologies since 2014. We believe that Ms. Winter is qualified to serve as a director because of her business and operational knowledge of Mullen Technologies.
Ignacio Novoa has served as a director of the Company since July 2022.Mr. Novoa has been a realtor at Las Lomas Realty since January 2015. Prior to that, from August 2008 to March 2021, Mr. Nova served as police officer with the Federal Reserve Police and, from September 2008 to March 2013, as program security at Northrup Grumman. We believe that Mr. Novoa is qualified to serve as a director because of his experience in managing real estate.
Kent Puckett has served on Mullen Technologies’ Board of Directors since 2018, serving as the Audit Committee Chair during that time. Previously, he served as the Chief Financial Officer of Mullen Technologies from 2012 to 2018. Mr. Puckett has many years of experience as a CFO with a proven track record of establishing cross-functional partnerships to deliver stellar results. He has led many companies in their audit and disclosure requirements, creating operations, marketing, and sales division budgets of multi-million dollars, and being accountable for the allocation of resources to exceed profit and sales goals. Mr. Puckett has a B.S. in Business Administration from Pensacola Christian College, and Advanced Studies in Management, Finance, Compliance, Insurance, Financial Consulting, Taxation and Financial Reporting, with an emphasis on Public Companies reporting and audit requirements. We believe that Mr. Puckett is qualified to serve as a director because of his finance and accounting background and experience.
Mark Betor has served as a director of the Company since the closing of the Merger and a director of Mullen Technologies since 2018, serving on the Compensation Committee. Mr. Betor is a retired businessman and law enforcement officer. Since retirement, he has been involved with real estate investments and private business. We believe that Mr. Betor is qualified to serve as a director because of his vast experience within investments and private businesses.
William Miltner has served as a director of the Company since the closing of the Merger. He has served as a litigation attorney for over 30 years. He is the co-founder of Miltner & Menck, APC, a full-service law firm, in San Diego, CA. Mr. Miltner successfully co-founded and co-managed the law firm of Perkins & Miltner, LLP, a respected San Diego litigation firm for 13 years. In 2006, when co-founder David Perkins left the practice of law, Miltner Law Group, APC, was founded. Mr. Miltner has represented many publicly traded and private companies including residential developers, construction contractors, title insurance companies and banking and lending institutions. His substantial experience includes representing and defending clients in complex real property, general business, construction, title insurance and lender litigation and transactional matters. Mr. Miltner is member of the American and San Diego County Bar Associations and American Business Trial Lawyers Association. He was admitted to The State Bar of California in 1988. We believe that Mr. Miltner is qualified to serve as a director because of his knowledge and experience within law practice areas and litigation matters.
John Andersen has served as director of the Company since September 2022. Mr. Andersen owned and operated various businesses since 1972, concentrating on real estate investment and management, primarily of multi-family residential units along with commercial sales and leases, in California, Utah and Wyoming, since 1980. From 1986 to 1996, Mr. Anderson was a partner in a large real estate company with over 300 sales agents and an escrow company, loan company and other real estate services. Since 2013, he has been a director and officer of Eminence Escrow, Inc. and, since 2015, he has owned and operated DNJ Investments, Inc., both of which provide escrow services. We believe that Mr. Anderson is qualified to serve as a director because of his extensive and in-depth experience in operating and growing businesses.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct that applies to all our directors, officers and employees, including our principal executive officer and our principal financial and accounting officer. A copy of our Code of Ethics and Business Conduct has been posted to the "Investor Relations-Governance" section of our Internet website at http://www.mullensua.com. We will provide a copy of our Code of Ethics and Business Conduct to any person without charge, upon written request to our Secretary at 1405 Pioneer Street, Brea, California 92821, phone (714) 613-1900, e-mail address InvestorRelations@mullenusa.com.
Committees of the Board of Directors
The Board of Directors currently has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Audit Committee
The Audit Committee of the Board of Directors consists of Kent Puckett, Chair, Mark Betor, and John Andersen. The Board determined that Kent Puckett is an “audit committee financial expert,” as defined under the applicable rules of the SEC. The primary functions of the Audit Committee include, among other things:
● reviewing and approving the engagement of the independent registered public accounting firm to perform audit services and any permissible non-audit services for the Company;
● evaluating the performance of the Company’s independent registered public accounting firm and deciding whether to retain their services;
● monitoring the rotation of partners on the engagement team of the Company’s independent registered public accounting firm;
● reviewing the Company’s annual and quarterly financial statements and reports and discussing the statements and reports with the Company’s independent registered public accounting firm and management, including a review of disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
● considering and approving or disapproving all related party transactions for the Company;
● reviewing, with the Company’s independent registered public accounting firm and management, significant issues that may arise regarding accounting principles and financial statement presentation, as well as matters concerning the scope, adequacy and effectiveness of the Company’s financial controls;
● conducting an annual assessment of the performance of the Audit Committee and its members, and the adequacy of its charter; and
● establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding financial controls, accounting, or auditing matters.
Each member of the Audit Committee satisfies the independence requirements under Nasdaq Capital Market listing standards and Rule 10A-3(b)(1) of the Exchange Act and is a person who the Board of Directors has determined has the requisite financial expertise required under the applicable requirements of Nasdaq Capital Market. In arriving at this determination, the Board of Directors examined each Audit Committee member’s scope of experience and the nature of their employment in the corporate finance sector.
Compensation Committee
The Compensation Committee of the Board of Directors consists of Kent Puckett, Chair, John Andersen, and Mark Betor. The functions of the Compensation Committee include, among other things:
● determining the compensation and other terms of employment of the Company’s chief executive officer and our other executive officers and reviewing and approving corporate performance goals and objectives relevant to such compensation;
● reviewing and recommending to the full Board of Directors the compensation of the Board of Directors;
● evaluating and administering the equity incentive plans, compensation plans and similar programs advisable for the Company, as well as reviewing and recommending to the Board of Directors the adoption, modification or termination of the Company’s plans and programs;
● establishing policies with respect to equity compensation arrangements;
● if required, reviewing with management the Company’s disclosures under the caption “Compensation Discussion and Analysis” and recommending to the full Board of Directors its inclusion in the Company’s periodic reports to be filed with the SEC; and
● reviewing and evaluating, at least annually, the performance of the Compensation Committee and the adequacy of its charter.
The Board of Directors has determined that each member of the Compensation Committee is independent under Nasdaq Capital Market listing standards, a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and an “outside director” as that term is defined in Section 162(m) of the Code.
Nominating and Corporate Governance Committee
The Nominating and Governance Committee of the Board of Directors currently consists of Mark Betor, Chair, Mary Winter and Kent Puckett. The functions of the Nominating and Corporate Governance Committee include, among other things, the following:
● reviewing periodically and evaluating director performance on the Board of Directors and its applicable committees, and recommending to the Board of Directors and management areas for improvement;
● interviewing, evaluating, nominating and recommending individuals for membership on the Board of Directors;
● reviewing and recommending to our board of directors any amendments to the Company corporate governance policies; and
● reviewing and assessing, at least annually, the performance of the Nominating and Corporate Governance committee and the adequacy of its charter.
The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is independent under Nasdaq Capital Market listing standards.
Compensation Committee Interlocks and Insider
Composition of the Compensation Committee for the combined company has been determined. Each member appointed to the Compensation Committee is an “outside” director as that term is defined in Section 162(m) of the Internal Revenue Code, a “non-employee” director within the meaning of Rule 16b-3 of the rules promulgated under the Exchange Act and independent within the meaning of the independent director guidelines of the Nasdaq Capital Market. None of the Company’s executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who is serves on the Company’s Board of Directors or Compensation Committee following the merger.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers, and the persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to us. Based solely on the reports received by us and on the representations of the reporting persons, we believe each greater than ten percent holder complied with all applicable filing requirements during the fiscal year ended September 30, 2023, except for the following: David Michery did not timely file two Form 4s reporting 2 transactions; Jonathan New did not timely file one Form 4 reporting 1 transaction; Mary Winter did not timely file one Form 4 reporting 1 transaction; Kent Puckett did not timely file two Form 4s reporting 2 transactions; Mark Betor did not timely file one Form 4 reporting 1 transaction; and Ignacio Novoa did not timely file one Form 4 reporting 1 transaction.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Summary Compensation Table
The following table sets forth certain information about the compensation earned during the years ended September 30, 2023 and 2022 to our Chief Executive Officer and each of our two most highly compensated executive officers other than our Chief Executive Officer who were serving as executive officers at September 30, 2023, and whose annual compensation exceeded $100,000 during such year or would have exceeded $100,000 during such year if the executive officer were employed by the Company for the entire fiscal year (collectively the “named executive officers”).
Stock Awards ($)
Salary
Bonus
Common
All Other
Name and Principal Position
Year
($)
($)
Shares (1)
Compensation
Total ($)
David Michery
$
750,000
$
-
$
48,879,463
$
-
$
49,629,463
Chief Executive Officer
721,154
750,000
10,053,286
-
11,524,440
Jonathan New (2)
425,000
10,000
198,300
633,300
Chief Operating Officer
Calin Popa
304,000
1,199,201
1,503,201
President - Ottava Automotive
304,000
1,323,001
1,627,001
(1) Represents share-based compensation based on the grant date fair value of common stock earned and accounted for in accordance with FASB ASC Topic 718, i.e. for common stock earned per labor contract - market price of the shares on the date immediately preceding the employment contract date, for common stock earned by CEO per Award Incentive Plans - market price of the shares on the date immediately preceding the date when the shares have been issued (see the list of performance awards in the CEO Performance Award chapter, and the list of achieved milestones in the CEO Performance Award Table below). The stock-based compensation to Mr. Michery for the year ended
September 30, 2023 in the enclosed financial statements is higher by $7.6 million due to a liability accrued per ASC 718 that have not been earned and paid by September 30, 2023, but will probably be earned and paid later. See further Note 11 of the enclosed financial statements for discussion on stock-based compensation. Comparatives in this table have been restated to correctly reflect awards calculated in accordance with ASC 718. During the year ended September 30, 2023 and 2022, Mr. Michery earned 113,531 shares and 526 shares of common stock, respectively; Mr. New earned 13 shares of common stock, and Mr. Popa earned 18 shares and 7 shares of common stock, respectively (giving effect to reverse stock splits, see Note 1 to the financial statements).
(2) Mr. New was appointed Chief Financial Officer effective September 19, 2022.
The primary elements of compensation for the Company’s named executive officers are base salary, bonus and equity-based compensation awards. The named executive officers also participate in employee benefit plans and programs that we offer to our other full-time employees on the same basis.
Base Salary
The base salary payable to our named executive officers is intended to provide a fixed component of compensation that reflects the executive’s skill set, experience, role, and responsibilities.
Bonus
Although we do not have a written bonus plan, the Board may, in its discretion, award bonuses to our executive officers on a case-by-case basis. These awards are structured to reward named executive officers for the successful performance of Mullen as a whole and of each participating named executive officer as an individual. The bonus amounts awarded were on an entirely discretionary basis. In addition, as described under the heading “Employment and Severance Agreements,” each of the named executive officers is eligible under the terms of their respective employment agreements to receive set bonus amounts based on Mullen’s achievement of certain financial milestones.
Share-based Compensation
2022 Equity Incentive Plan
On July 26, 2022, at the 2022 Annual Meeting, the Company’s stockholders approved the 2022 Equity Incentive Plan (the “2022 Plan”). Additional details about the 2022 Plan are set forth in the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on July 10, 2023.
The 2022 Plan provides for grants of stock options, stock appreciation rights, stock awards and restricted stock units, all of which are sometimes referred to individually, to employees, consultants, non-employee directors of the Company and its subsidiaries. Stock options may be either incentive stock options, as defined in Section 422 of the Internal Revenue Code, or non-qualified stock options. The 2022 Plan, as amended, has reserved for issuance 59,000,000 shares, of which 52,000,000 additional shares were approved on August 3, 2023 (such shares are not subject to adjustment for any decrease or increase in the number shares of common stock resulting from a stock spilt, reverse stock split, recapitalization, combination, reclassification, the payment of a stock dividend on the common stock or any other decrease in the number of such shares of common stock effected without receipt of consideration by the Company).
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not have a formal policy with respect to the grant of equity incentive awards to our executive officers or any formal equity ownership guidelines applicable to them. Historically, the Company has not granted options as equity awards.
Clawback Policy
In November 2023, the Board of Directors adopted a clawback policy that may be applied in the event of a material financial restatement. The clawback policy covers current and former executive officers and includes all incentive compensation. Specifically, in the event of an accounting restatement, the Company must recover, reasonably promptly, any excess incentive compensation during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement. Compensation that may be recoverable under the policy includes cash or equity-based compensation for which the grant, payment or vesting is or was based wholly or in part on the attainment of a financial reporting measure. The amount to be recovered will be the excess of the incentive compensation paid based on the erroneous data over the incentive compensation that would have been paid had it been based on the restated results.
In connection with the correction of related party disclosures pertaining to services provided to, and amounts owed from, Mullen Technologies, Inc., of which Mr. Michery is CEO and Chairman as well as the controlling shareholder, and as further described in Note 20. Related Party Transactions - Related Party Note Receivable to the Company’s consolidated financial statements, the Compensation Committee conducted a review of our clawback policy and awards issued to Mr. Michery pursuant to the PSA Agreements (as further described below under “CEO Performance Awards”). As a result of this review, the Compensation Committee determined that no recovery of awarded compensation was required under the clawback policy as the awards issued under the PSA Agreements during the fiscal years ended 2023 and 2022 were not based on financial reporting measures.
Outstanding Equity Awards at Fiscal Year End 2023
There were no outstanding equity awards that have not vested held by the named executive officers as of September 30, 2023.
CEO Performance Awards
On May 5, 2022, the Company entered into to a Performance Stock Award Agreement (the “2022 PSA Agreement”) pursuant to which the Company agreed to grant performance equity awards to the Chief Executive Officer (“2022 CEO Performance Award”) and on July 26, 2022, the Company’s stockholders approved, for purposes of complying with Nasdaq Listing Rule 5635(c), of the issuance of shares of common stock to the Company’s Chief Executive Officer, David Michery, pursuant to the 2022 PSA Agreement. On June 8, 2023, since only a few milestone opportunities remained under the 2022 PSA Agreement and certain of them have lapsed, the Compensation Committee further (1) determined that the grant of performance equity awards to the Chief Executive Officer (“2023 CEO Performance Award”) pursuant to the 2023 Performance Stock Award Agreement (the “2023 PSA Agreement” and together with the 2022 PSA Agreement, the “PSA Agreements”) was advisable and in the best interests of the Company and its stockholders and (2) approved entering into the 2023 PSA Agreement and the grant of the 2023 CEO Performance Award. On August 3, 2023, at the 2023 Annual Meeting, the Company’s stockholders approved, for purposes of complying with Nasdaq Listing Rule 5635(c), of the issuance of shares of common stock to the Company’s Chief Executive Officer, David Michery, pursuant to the 2023 PSA Agreement.
Pursuant to each PSA Agreement, Mr. Michery is eligible to receive shares of common stock of the Company based on the achievement of milestones as described below, and within each milestone the achievement of certain performance tranches, with each tranche representing a portion of shares of common stock that may be issued to Mr. Michery upon achievement of such tranche. Upon the achievement of each tranche of one of the milestones and subject to Mr. Michery continuing as the Chief Executive Officer as of the date of satisfaction of such tranche and through the date the Compensation Committee determines, approves and certifies that the requisite conditions for the applicable tranche have been satisfied, the Company will issue shares of its common stock as specified in the tranche. Each milestone must be achieved within the performance period specified for such milestone, and the latest milestone that may be achieved is December 31, 2024, under the 2022 PSA Agreement, and December 31, 2025, under the 2023 PSA Agreement.
2022 PSA Agreement - Description of Milestones
● Vehicle Delivery Milestones: For each of the following five vehicle delivery milestone that is satisfied within the performance period specified, the Company will issue to Mr. Michery a number of shares of common stock equal
to 2% of the Company’s then-current total issued and outstanding shares of common stock: (i) Delivery of the Company’s Class One Van to customers for a pilot program under the captured fleet exemption by the end of December 2022; (ii) Procuring full USA certification and homologation (or vehicle approval process) for the sale and delivery of its Class One Van by end of August 2023; (iii) Full USA certification and homologation of the Dragonfly RS sports car by August 2024; (iv) Producing a drivable prototype of its Mullen 5 vehicle for consumers to test by end of October 2023; and (v) Producing a drivable prototype of its Mullen 5 RS High Performance vehicle for consumers to test by end of January 2023.
On October 3, 2022, the Company delivered its Class One Van to Hotwire Communications, a South Florida-based telecommunications company and Internet Service Provider for a pilot program under the captured fleet exemption.
On August 20, 2023, a drivable porotype of the Mullen 5 vehicle was part of the Mullen road tour and available for consumers to test drive.
● Capital Benchmark Milestones: For each $100 million raised (a “Capital Tranche”), and subject to an aggregate maximum of raised of $1.0 Billion in equity or debt financing between the date of the award agreement and the end of July 2024, the Company will issue a number of shares of common stock equal to 1%, of the Company’s then-current total issued and outstanding shares of common stock; as of the date a Capital Tranche is achieved.
Additionally, if the Company is included in the Russell Index, the Company will issue to Mr. Michery a number of shares of common stock equal to 2% of Mullen’s then-current total issued and outstanding shares as of the date the Company is approved to be included on the Russell Index.
On June 7, 2022, the Company entered into a Securities purchase agreement which, along with subsequent amendments, allowed the Company to raise more than $400 million to date through the issuance of preferred stock, prefunded warrants and common stock in lieu of preferred stock and other warrants.
On June 27, 2022, the Company joined the Russell 2000 and 3000 Indexes.
● Feature Milestone: If Mullen enters into an agreement with a manufacturer or provider of equipment, accessory, feature or other product (collectively, “Feature”) by the end of 2023 that sets the Company or its vehicle apart from its competitors or that provides the Company a first mover or first disclosure advantage over its competitors for the Feature, the Company will issue to Mr. Michery a number of shares of common stock equal to 5% of the Company’s then-current total issued and outstanding shares of common stock as of the date the Feature milestone is achieved.
On September 1, 2022, the Company announced that it signed partnership with Watergen Inc. to develop and equip Mullen’s portfolio of electric vehicles with technology that will produce fresh drinking water from the air for in-vehicle consumer and commercial application. On October 12, 2022, the Company entered into the Distributorship Agreement attached as Exhibit A hereto whereby Watergen will be integrating its unique atmospheric water generating and dehumidifying technology into the Company’s vehicles and granting exclusivity to the Company for the integration design developed specifically for its vehicles.
● Distribution Milestone: For each vehicle distribution milestone set forth below that is satisfied by entering into a joint venture or other distribution agreement by December 31, 2024, the Company will issue to Mr. Michery a number of shares of common stock equal to 2% of Mullen’s then-current total issued and outstanding shares of common stock for each distribution milestone achieved: (i) agreement with an established local, US dealer or franchise network; and (ii) agreement with an established Latin American or other non-US based dealer or franchise network.
On November 8, 2022, the Company entered into an agreement into an agreement to appoint Newgate Motor Group as the marketing, sales, distribution and servicing agent for the Mullen I-GO in Ireland and the United Kingdom.
On December 12, 2022, the Company entered into a Dealer Agreement with Randy Marion Isuzu, a large USA dealer, to purchase and distribute the Company’s vehicles.
2023 PSA Agreement
● Vehicle Completion Milestones: For each vehicle completion Milestone set forth below that is satisfied within the performance period specified, the Company will issue to Mr. Michery a number of shares of common stock equal to 3% of Mullen’s then-current total issued and outstanding shares of common stock: (i) Procuring full USA certification and homologation of its Class Three Van by end of December 2023; (ii) Full USA certification and homologation of the Bollinger B1 SUV by end of June 2025; and (iii) Full USA certification and homologation of the Bollinger B2 truck by end of June 2025.
● Revenue Benchmark Milestones: For each $25 Million of revenue recognized by the Company (each a “Revenue Tranche”), and subject to an aggregate maximum of recognized revenue of $250 Million between the date of grant and the end of December 2025, the Company will issue to Mr. Michery a number of shares of common stock equal to 1% of Mullen’s then-current total issued and outstanding shares of common stock as of the date a Revenue Tranche is achieved.
● Battery Development Milestones: For each Battery Development Milestone set forth below that is satisfied within the performance period specified, the Company will issue to Mr. Michery a number of shares of common stock equal to 2% of Mullen’s then-current total issued and outstanding shares of common stock: (i) the Company either directly or in collaboration with a joint venture partner develops or produces new and more advanced battery cells by the end of December 2024; (ii) the Company either directly or in collaboration with a joint venture partner scales its battery cells in the USA to the vehicle pack level for the Mullen Class 1 vehicle by the end of December 2024; (iii) the Company either directly or in collaboration with a joint venture partner scales its battery cells in the USA to the vehicle pack level for the Mullen Class 3 vehicle by the end of December 2024.
● JV-Acquisition Milestones: If Mullen enters into a partnership, joint venture, purchase and sale agreement or similar transaction by the end of 2025 where the Company acquires a majority interest in an enterprise that manufacturers or provides vehicles, vehicle equipment, battery cells, accessories or other products beneficial to the Company, the Company will issue to Mr. Michery a number of shares of common stock equal to 3% of Mullen’s then-current total issued and outstanding shares of common stock as of date the JV-Acquisition Milestone is achieved.
● Accelerated Development Milestone: If Mullen acquires a facility with existing equipment that allows the Company to expedite scaling of battery pack production in the USA, the Company will issue to Mr. Michery a number of shares of common stock equal to 2% of Mullen’s then-current total issued and outstanding shares of common stock as of date the Accelerated Development Milestone is achieved.
On September 6, 2023, the Company acquired the battery production assets of Romeo Power including intellectual property, machinery and equipment that allows the Company to expedite scaling of battery pack production in the USA.
To date the following shares of common stock have been issued pursuant to the PSA Agreements based on the achievement of the milestones and tranches listed in the table below (giving effect to reverse stock splits, see note 1 in the consolidated financial statements):
CEO Performance Award Table
Date
Tranche
% of O/S
Shares
Shares O/S
Shares Issued
Stock Price
Stock
Compensation ($)
9/21/2022
PSA2022. Russell Index Tranche
2%
21,386
9,225
$
3,945,799
10/12/2022
PSA2022. Features Milestone
5%
39,897
1,995
5,625
11,221,088
11/9/2022
PSA2022. Non-USA Distribution
2%
54,718
1,094
6,075
6,648,217
11/30/2022
PSA2022. Capital Benchmark (>$200 mln)
2%
63,923
1,278
4,500
5,753,090
12/16/2022
PSA2022. USA Distribution
2%
75,274
1,505
6,750
10,161,979
2/16/2023
PSA2022. Vehicle Delivery - Pilot
2%
37,079
7,650
5,673,024
6/13/2023
PSA2022. Capital Benchmark (>$300 mln)
1%
292,533
2,925
605,542
7/5/2023
PSA2022. Capital Benchmark (>$400 mln)
1%
714,863
7,149
378,877
10/10/2023
PSA2022. Vehicle Delivery - Mullen 5
2%
1,844,064
36,881
985,468
10/10/2023
PSA2023. Accelerated development milestone
2%
2,484,730
49,695
1,327,840
Total Shares
Awarded
103,692
$
46,700,924
Employment and Severance Agreements
We have entered into employment agreements with each of our named executive officers described below.
Chairman of the Board, President and Chief Executive Officer
Effective June 1, 2021, David Michery and the Company entered into an employment agreement pursuant to which Mr. Michery receives an annual salary of $750,000 plus incentive compensation and 1,000,000 shares of common stock each year. Mr. Michery is also entitled to reimbursement compensation for all reasonable expenses up to $500,000 per year.
In the event (a) the Company terminates Mr. Michery’s employment without cause, (b) Mr. Michery leaves as a result of constructive discharge by the Company, (c) of Mr Michery’s death, or (d) there is a change of control of the Company or the Company’s stockholders receive a proxy request or tender offer for a transaction which could result in a change of control and Mr. Michery at his option terminates his employment, then the Company is obligated to pay Mr. Michery (i) his then-current annual compensation multiplied by a number of years equal to 10 minus the number of complete years since the date of the agreement, to be paid within 90 days of termination, and (ii) an amount equal to 10% of the Company’s market capitalization at such time, to be paid 180 days after termination. To the extent that Mr. Michery’s benefits from any pension or any other retirement plan or program (whether tax qualified or not) are not fully vested at the time of such termination, the Company will obtain and pay the premium upon an annuity policy to provide the benefits as though Mr. Michery had been fully vested on the date of termination. Upon termination for cause, the employment agreement will terminate, except for certain provisions such as post-employment noncompetition and nonsolicitation, and the Company will not be obligated to make any further payments, except for any remaining payments of annual compensation, benefits which are required by applicable law to be continued, and reimbursement of expenses.
Pursuant to the agreement, “cause” means conviction of or a plea of no contest to a felony, or incapacity due to alcoholism or substance abuse. “Constructive discharge” means (a) diminution in title(s), responsibilities, or the then-current annual compensation, (b) failure by the Company to comply with the compensation provisions of the agreement, (c) location of place of employment outside the United States, and (d) engagement in any material and intentional breach by the Company of its principal obligations under the agreement which is not remedied within 15 business days after receipt of written notice. A “change of control” means a sale of all or substantially all of the assets of the Company, or any transaction, or any series of transactions consummated in a 12-month period, pursuant to which any person acquires (by merger, acquisition, or otherwise) all or substantially all of the assets of the Company or the then outstanding equity securities of the Company and the Company is not the surviving entity, the Company being deemed surviving if and only if the majority of the Board of Directors of the ultimate parent of the surviving entity were directors of the Company prior to its organization.
During a disability, the Company will continue to pay to Mr. Michery his full amount of his then-current annual compensation for the one-year period next succeeding the date upon which such disability has been certified, as well as a prorated amount of any incentive compensation which would have been paid at the end of the year. Thereafter, if the disability continues, the agreement will terminate and all of Mr. Michery’s obligations will cease and Mr. Michery will be entitled to receive the benefits, if any, as may be provided by any insurance to which he may have become entitled as well as the acceleration of the exercise date of any incentive stock options granted prior to disability. A “disability” means a written determination by an independent physician mutually agreeable to the Company and Mr. Michery that he is physically or mentally unable to perform his duties of CEO under the agreement and that such disability can reasonably
be expected to continue for a period of six consecutive months or for shorter periods aggregating 180 days in any 12-month period.
The agreement contains non-competition and non-solicitation covenants. For one year after voluntary separation from the Company, Mr. Michery cannot engage in competitive business activity within the Company territory; prevents him from participating in any transaction that occurred within 24-month period preceding from incident in questions; and prevents him from contacting employees for any business and employment opportunities.
Chief Financial Officer
On September 19, 2022, the Company entered into an employment agreement with Jonathan New. He receives an annual salary of $425,000 and 300,000 restricted shares of common stock. Stock compensation is payable quarterly. A prorated tranche for the period September 19, 2022 through December 31, 2022 of 84,066 of the share compensation vested on January 1, 2023, and quarterly tranches of 75,000 shares will be vested and due at the end of December, March, June, and September of each calendar year, beginning January 1, 2023. Mr. New also received $25,000 in relocation allowance from Florida to California. Additionally, the Company reimbursed Mr. New of up to $2,000 per month for temporary accommodation costs. The reimbursement terminated on the first to occur: date of permanent housing or February 1, 2023. If Mr. New is terminated for any reason other than due to negligence, failure to deliver services or perform at the level hired or for any other just cause, he is entitled to a payment of $200,000, paid in the Company’s usual payroll cycle.
President - Mullen Automotive
Effective July 7, 2021, the Compensation Committee approved the employment contract for Calin Popa. Mr. Popa receives an annual salary of $304,000 plus incentive compensation and 100,000 restricted shares of common stock per year. Employment agreement contains standard terms (“employment at will”) and vacation. There is no severance agreement.
Consulting Agreements
William Miltner
William Miltner is a litigation attorney who provides legal services to Mullen Automotive and its subsidiaries. Mr. Miltner also is an elected Director for the Company, beginning his term in August 2021. For the fiscal year ending September 30, 2023, Mr. Miltner received $1,058,105 for services rendered. Mr. Miltner has been providing legal services to us since 2020.
Mary Winter
On October 26, 2021, the Company entered into a consulting agreement with Mary Winter, Corporate Secretary and Director, to compensate for Corporate Secretary Services and director responsibilities for the period from October 1, 2021 to September 30, 2023, in the amount of $60,000 annually or $5,000 per month. As of September 30, 2023, Ms. Winter has received $60,000 in consulting payments.
Change of Control Agreements - CEO and Non-Employee Directors
On August 11, 2023, the Company entered into Change in Control Agreements with each non-employee director (John Andersen, Mark Betor, William Miltner, Ignacio Novoa, and Kent Puckett) and David Michery, its Chief Executive Officer. Pursuant to the Change in Control Agreements with each non-employee director, upon a change in control of the Company, any unvested equity compensation will immediately vest in full and such non-employee director will receive $5 million. Pursuant to the Change in Control Agreement with Mr. Michery, upon a change in control of the Company, any unvested equity compensation will immediately vest in full and Mr. Michery will receive an aggregate percentage of the transaction proceeds as follows: 10% of the transaction proceeds that are up to and including $1 billion; plus an additional 5% of transaction proceeds that are more than $1 billion and up to $1.5 billion; and an additional 5% of transaction proceeds that are more than $1.5 billion. A change in control, as defined in the agreements occurs upon (i) any person becoming the beneficial owner of 50% or more of the total voting power of the Company’s then outstanding voting
securities, (ii) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors (as defined in the Change in Control Agreements), or (iii) the consummation of a merger or consolidation of the Company (except when the total voting power of the Company continues to represent at least 50% of the surviving entity), any liquidation, or the sale or disposition by the Company of all or substantially all of its assets.
Non-Employee Director Compensation
For the fiscal year ended September 30, 2023, our non-employee directors received compensation for service on our board of directors and committees of our board of directors as follows:
●
Each non-employee director was entitled to receive $25,000 annually as a cash retainer for he/she board service, with additional annual cash retainers of (i) $2,000 for each member of our compensation committee or nominating and governance committee; (ii) $5,000 for the chairman of our compensation committee or nominating and governance committee; (iii) $8,000 for each member of our audit committee; and (iv) $45,000 for the chairman of our audit committee. All cash retainers were paid quarterly in arrears.
●
Additionally, each non-employee director received an annual stock option award under the Company’s equity plan to purchase such number of shares of our common stock equal to $75,000 divided by the closing trading price of our common stock on the date of each such grant, which vest one year from the date of grant. Upon the occurrence of certain corporate events, including a change of control of the Company, all such stock option awards immediately vest.
Our non-employee directors are entitled to reimbursement of ordinary, necessary and reasonable out-of-pocket travel expenses incurred in connection with attending in-person meetings of our board of directors or committees thereof. In the event our non-employee directors were required to attend greater than four in-person meetings or 12 telephonic meetings during 2023, such non-employee directors were entitled to additional compensation in the amount of $500 for each additional telephonic meeting beyond the 12 telephonic meeting threshold, and $1,000 for each additional in-person meeting beyond the four in-person meeting threshold.
The following table sets forth information regarding compensation earned by each person who served as a non-employee member of our board of directors during 2023.
Name of Director
Fees earned and payable in cash ($)
Awards earned and payable in stock ($)
Total ($)
John Anderson
$
44,000
$
81,250
$
125,250
Mark Betor
54,375
81,250
135,625
William Miltner
32,750
81,250
114,000
Mary Winter
32,500
81,250
113,750
Ignacio Novoa
31,250
81,250
112,500
Kent Puckett
83,125
81,250
164,375
Total
$
278,000
$
487,500
$
765,500
Effective July 1, 2023, the Company’s Board of Directors approved the following compensation for non-employee directors for service on the Board and its committees:
● Each non-employee director will receive $50,000 annually as a cash retainer for their Board service, with additional annual cash retainers of (i) $5,000 for each member of the Company’s Compensation Committee or Nominating and Corporate Governance Committee; (ii) $7,500 for the Chairman of the Compensation Committee or Nominating and Corporate Governance Committee; (iii) $10,000 for each member of the Audit Committee; (iv) $45,000 for the chair of the Audit Committee; and (v) $25,000 to the Lead Independent Director. All cash retainers are paid quarterly in arrears.
● Additionally, each non-employee director shall receive an annual stock award under the Company’s equity plan equal to $100,000 divided by the closing trading price of the Company’s common stock on the date of each such grant.
● The non-employee directors are entitled to reimbursement of ordinary, necessary, and reasonable out-of-pocket travel expenses incurred in connection with attending in-person meetings of the Board or committees thereof. In the event non-employee directors are required to attend greater than four in-person meetings or 15 telephonic meetings during any fiscal year, such non-employee directors will be entitled to additional compensation in the amount of $500 for each additional telephonic meeting beyond the 15 telephonic meeting threshold, and $1,000 for each additional in-person meeting beyond the four in-person meeting threshold.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The table below contains information regarding the beneficial ownership of our common stock by (i) each person who is known to us to beneficially own more than 5% of our common stock, (ii) each of our directors and director-nominees, (iii) each of our named executive officers and (iv) all of our directors and executive officers as a group. The table below reflects the 1:25 reverse stock split that was effected on May 4, 2023, the 1:9 reverse stock split that was effected on August 11, 2023 and the 1:100 reverse stock split that was effected on December 21, 2023, where each fractional share resulting from such reverse stock splits held by a stockholder was rounded up to the next whole share. Beneficial ownership is determined in accordance with SEC rules and regulations.
Each stockholder’s percentage of ownership in the following table is based upon, as applicable, the following shares outstanding as of January 12, 2024:
Class
Number of
Shares
As converted to common stock
Votes/Share
Number of
Votes
Common Stock
5,884,693
N/A
One/share
5,884,693
Series A Preferred Stock
1,000/share until November 5, 2024
648,000
Series B Preferred Stock
One/share on an as-converted to common basis
Series C Preferred Stock
1,211,757
One/share on an as-converted to common basis
Series D Preferred Stock
363,097
One/share, only protective voting
363,097
Each share of Series A Preferred Stock is entitled to 1,000 votes per share and converts into 0.0044 shares of Common Stock. Each share of Series C Preferred Stock is entitled to one vote for each share of common stock into which such share of Series C Preferred Stock can then be converted. Each share of Series D Preferred Stock is entitled to one vote for each share. Holders of the Series D Preferred Stock have no voting rights except a majority of the outstanding Series D Preferred Stock, voting separately, is required for approval of the authorization or issuance of an equity security having a preference over the Series D Preferred Stock, amendment of the Company’s Certificate of Incorporation or bylaws that adversely affect the rights of the Series D Preferred Stock, merger or consolidation of the Company, or dissolution, liquidation or bankruptcy, as set forth in Section 8 of the Certificate of Designation for Series D Preferred Stock.
Under the terms of the Preferred Stock and warrants, a holder may not convert or exercise, as applicable, the Preferred Stock or warrants into common stock to the extent such exercise would cause such holder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99%, as applicable, of our then outstanding common stock following such conversion or exercise, excluding for purposes of such determination common stock issuable upon conversion of other convertible securities which have not been converted or exercised. The number of shares in the table does not reflect this limitation.
To our knowledge, except as otherwise noted below and subject to applicable community property laws, each person or entity named in the following table has the sole voting and investment power with respect to all shares that he,
she or it beneficially owns. Unless otherwise indicated, the address of each beneficial owner listed below is c/o Mullen Automotive Inc. 1405 Pioneer Street, Brea, CA 92821.
Common Stock(1)
Total Voting Power(2)
Name of Beneficial Owners
Shares
%
%
Named Executive Officers and Directors
David Michery
109,897
1.9
%
1.7
%
Jonathan New
*
*
Calin Popa
*
*
Mary Winter
*
*
Jonathan K. Andersen
*
*
Mark Betor
*
*
William Miltner
*
*
Ignacio Novoa
*
*
Directors and Executive Officers as a Group (9 Persons)
109,967
1.9
%
1.7
%
5% Beneficial Owners:
Acuitas Group Holdings, LLC(3)
870,743
12.9
%
*
%
*
Less than 1%.
(1)In computing the number of shares of common stock beneficially owned by a person and the percentage of beneficial ownership of that person, shares of common stock underlying notes, options, warrants or shares of Preferred Stock held by that person that are convertible or exercisable, as the case may be, within 60 days of the Record Date are included. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
(2) Percentage total voting power represents voting power with respect to all outstanding shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock; and excludes the Series D Preferred Stock, which is only entitled to limited voting rights. Percentage total voting power also excludes shares of common stock issuable upon exercise of warrants.
(3)The amount beneficially owned consists of 870,743 shares of common stock issuable upon exercise of warrants calculated as of January 12, 2024 pursuant to the terms thereof. All shares may be deemed to be beneficially owned by Terren Peizer, who serves as the Chief Executive Officer of Acuitas Capital LLC. The address for Acuitas Capital, LLC is 200 Dorado Beach Drive #3831, Dorado, Puerto Rico 00646.
Equity Compensation Plan Table
The following table summarizes our equity compensation plan information as of September 30, 2023, including shares remaining under 2022 Equity Incentive Plan, as amended (the “2022 Plan”), designated for compensation to employees and consultants, as well as shares reserved for compensation under 2022 and 2023 PSA Agreements with CEO. The 2022 Plan, as amended, has reserved for issuance 59,000,000 shares, of which 52,000,000 additional shares were approved on August 3, 2023 (such shares are not subject to adjustment for any decrease or increase in the number shares of common stock resulting from a stock spilt, reverse stock split, recapitalization, combination, reclassification, the payment of a stock dividend on the common stock or any other decrease in the number of such shares of common stock effected without
receipt of consideration by the Company). For information about the 2022 and 2023 PSA Agreements, see “CEO Performance Awards” under “Item 11. Executive Compensation” in this Annual Report.
(c)
(a)
(b)
Number of securities
Number of securities
Weighted-average
remaining available
to be issued upon
exercise price per
for future issuance
exercise of outstanding options,
share of outstanding options,
under equity compensation
Plan Category
warrants and rights
warrants and rights
plans (excluding securities
Equity compensation plans approved by stockholders
-
$
-
42,528,111
Equity compensation plans not approved by stockholders
-
$
-
-
Total
-
-
(1)
42,528,111
As of September 30, 2023, there was 42,234,250 shares of common stock remaining available for future issuance under the 2022 Plan. Shares remaining available for future issuance under the 2022 and 2023 PSA Agreements is based on remaining shares registered on Registration Statements on Form S-8; additional shares may be registered and issued pursuant to the terms of such agreements.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Director Independence
The Board determined that Mary Winter, Kent Puckett, Mark Betor and John Andersen, qualify as independent directors, as defined under the listing rules of the Nasdaq, and the Board consists of a majority of “independent directors” as defined under the rules of the SEC and Nasdaq listing requirements. In addition, we are subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit, as discussed below.
Certain Relationships and Related Party Transactions
Prior to its spinoff as a separate entity and the closing of the Merger on November 5, 2021, the Company operated as a division of MTI, an entity in which the Company’s CEO had a controlling financial interest and of which he was CEO and Chairman during the fiscal years ended September 30, 2023 and 2022.
Subsequent to the spinoff transaction and Merger on November 5, 2021, the Company processed and disbursed payroll and related compensation benefits for 11 employees that provided services only to MTI and rent costs for facilities utilized by MTI pursuant to the TSA. The terms of the TSA require MTI to repay monthly the amounts advanced by the Company, with the lower of the prime rate plus 1% or the maximum rate under applicable law charged on the unpaid amounts. The terms of the TSA do not provide for any other payment processing service fee from MTI to the Company except the interest fee on overdue advance balances. The Company incurred approximately $1.2 million and $0.9 million of disbursements on behalf of MTI during the years ended September 30, 2022 and 2023, respectively. No amounts have been collected for the funds advanced through September 30, 2023.
On March 31, 2023, the Company converted approximately $1.4 million of these advances to MTI to a note receivable from MTI. The note bears interest at 10% per year and matures on March 31, 2025 with a default rate of 15% per annum. By the end of the 2023 fiscal year, the note principal has been increased by additional $0.4 million. Remaining advances, note and interest receivable as at September 30 2023 and 2022 are presented within non-current assets of the consolidated balance sheets.
On January 16, 2023, the Company terminated the Transition Services Agreement between the Company and Mullen Technologies, Inc., and received payment in full settlement of all amounts outstanding (including outstanding notes receivable, advances and related interest) of approximately $2.7 million (refer to Note 20 - Related party transactions)..
William Miltner is a litigation attorney who provides legal services to Mullen Automotive and its subsidiaries. Mr. Miltner also is an elected Director for the Company, beginning his term in August 2021. For the fiscal years ended September 30, 2023 and 2022, Mr. Miltner received $1,058,205 and $881,248, respectively, for services rendered to us. Mr. Miltner has been providing legal services to us since 2020.
The Company and Mr. Novoa entered into a one year Consulting Agreement, dated January 12, 2022, whereby Mr. Novoa provides electric vehicle market research, analysis of market trends in the electric vehicle industry and other research and services. Mr. Novoa was issued an aggregate of 255,500 shares of Common Stock with a value of $400,000 pursuant to the terms of the Consulting Agreement pursuant to the terms of the Consulting Agreement.
For further information, see Note 20 - Related Party Transactions, of the notes to the Company’s consolidated financial statements.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
The following tables sets forth the aggregate accounting fees paid by (or due from) by the Company for the year ended September 30, 2023 to the independent audit firm RBSM LLP. Audit of the financial statements for the year ended September 30, 2022 as well as review of the interim financial statements for the first quarter of the year ended September 30, 2023 was performed by another firm (Daszkal Bolton LLP).
RBSM LLP
Year Ended
Year Ended
September 30,
September 30,
Type of Fees
Audit fees (including year-end audit and review of quarters 2 and 3)
$
376,336
$
-
Audit related fees
-
-
Tax fees
-
-
Total
$
376,336
$
-
Daszkal Bolton LLP
Year Ended
Year Ended
September 30,
September 30,
Type of Fees
Audit fees (including review of quarter 1)
$
28,822
$
212,958
Audit related fees
-
50,320
Tax fees
-
-
Total
$
28,822
$
263,278
Types of Fees Explanation
Audit Fees. The aggregate fees, including expenses, billed by (expected to be billed by) our principal accountant for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q and other services that are normally provided in connection with statutory and regulatory filings.
Audit-Related Fees. The aggregate fees, including expenses, billed by (expected to be billed by) our principal accountant for other assurance and related services that are reasonably related to the performance of the audit or review of our financial statements not reported under “Audit Fees” above.
Tax Fees. The aggregate fees, including expenses, billed by (expected to be billed by) our principal accountant for services rendered for tax compliance, tax advice and tax planning.
Audit Committee Pre-Approval Policy
Our audit committee is responsible for approving in advance the engagement of our principal accountant for all audit services and non-audit services, based on independence, qualifications and, if applicable, performance, and approving the fees and other terms of any such engagement. The audit committee may in the future establish pre-approval policies and
procedures pursuant to which our principal accountant may provide certain audit and non-audit services to us without first obtaining the audit committee’s approval, provided that such policies and procedures (i) are detailed as to particular services, (ii) do not involve delegation to management of the audit committee’s responsibilities described in this paragraph and (iii) provide that, at its next scheduled meeting, the audit committee is informed as to each such service for which the principal accountant is engaged pursuant to such policies and procedures. In addition, the audit committee may in the future delegate to one or more members of the audit committee the authority to grant pre-approvals for such services, provided that the decisions of such member(s) to grant any such pre-approval must be presented to the audit committee at its next scheduled meeting.
All audit and audit-related services performed by our principal accountant during the fiscal years ended September 30, 2023, and 2022 were pre-approved by our Audit Committee or by our Board of Directors, then acting in the capacity of an audit committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules.
(a) The following documents are filed as a part of this Annual Report on Form 10-K:
1. Financial Statements.
The consolidated financial statements of Mullen Automotive Inc. and notes thereto and the reports of the independent registered public accounting firms thereon are set forth beginning on page and filed as part of this Report.
2. Exhibits.
The exhibits filed or furnished as part of this Annual Report on Form 10-K are those listed in the following Exhibit Index.
EXHIBIT INDEX
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
2.1
Common Stock Purchase Agreement, dated as of September 7, 2022, by and among Mullen Automotive Inc., Bollinger Motors, Inc., and Robert Bollinger.
8-K
001-34887
2.1
09/08/2022
2.1(a)
First Amendment to the Common Stock Purchase Agreement, dated as of October 7, 2022, by and among Mullen Automotive Inc., Bollinger Motors, Inc., and Robert Bollinger.
8-K
001-34887
2.1
10/14/2022
2.1(b)
First Amendment to the Cash Escrow Agreement, dated as of October 7, 2022, by and among Mullen Automotive Inc., Bollinger Motors, Inc., Robert Bollinger and Continental Stock Transfer & Trust Company.
8-K
001-34887
2.2
10/14/2022
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
2.1(c)
First Amendment to the Stock Reservation Agreement, dated as of October 7, 2022, by and among Mullen Automotive Inc., Bollinger Motors, Inc., Robert Bollinger and Continental Stock Transfer & Trust Company.
8-K
001-34887
2.3
10/14/2022
2.2
Common Stock Purchase Agreement, dated as of September 7, 2022, by and among Mullen Automotive Inc. and Robert Bollinger.
8-K
001-34887
2.2
09/08/2022
2.3
Common Stock Purchase Agreement, dated as of September 7, 2022, by and among Mullen Automotive Inc. and John Masters.
8-K
001-34887
2.3
09/08/2022
2.4
Common Stock Purchase Agreement, dated as of September 7, 2022, by and among Mullen Automotive Inc. and Seaport Global Asset Management SPV LLC - Series A.
8-K
001-34887
2.4
09/08/2022
2.5
Asset Purchase Agreement dated September 16, 2022 between the Company and David W. Carickhoff, solely as Chapter 7 trustee of the Bankruptcy Estates of Electric Last Mile Solutions, Inc. and Electric Last Mile, Inc.
8-K
001-34887
10.1
09/19/2022
3.1(a)
Second Amended and Restated Certificate of Incorporation of Mullen Automotive Inc., dated November 5, 2021
8-K
001-34887
3.2
11/12/2021
3.1(b)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Mullen Automotive Inc., dated March 8, 2022
8-K
001-34887
3.1
03/10/2022
3.1(c)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on July 26, 2022
8-K
001-34887
3.1
07/27/2022
3.1(d)
Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock.
S-3ASR
333-267502
4.1(c)
09/19/2022
3.1(e)
Certificate of Mullen Automotive Inc. Increasing Number of Shares of Preferred Stock Designated as Series D Convertible Preferred Stock.
S-3ASR
333-267913
4.1(d)
10/17/2022
3.1(f)
Certificate of Designation of Series AA Preferred Stock, filed November 14, 2022
8-K
001-34887
3.1
11/14/2022
3.1(g)
Certificate of Cancellation filed on January 30, 2023
8-K
001-34887
3.1
01/30/2023
3.1(h)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on January 30, 2023
8-K
001-34887
3.2
01/30/2023
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
3.1(i)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on May 3, 2023
8-K
001-34887
3.1
05/05/2023
3.1(j)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on August 10, 2023
8-K
001-34887
3.1
08/11/2023
3.1 (k)
Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation filed on December 20, 2023
8-K/A
001-34887
3.1
12/21/2023
3.2
Amended and Restated Bylaws, as of November 30, 2023
✓
4.1
Description of Company’s Securities.
10-K/A
001-34887
4.4
01/30/2023
4.2
Form of Warrant (related to Series D Preferred Stock Securities Purchase Agreement dated June 7, 2022)
8-K
001-34887
10.1
(Exhibit A)
06/10/2022
4.3
Warrant dated March 14, 2023 issued to Qiantu Motor USA, Inc.
10-Q
001-34887
4.2
05/15/2023
10.1#
Mullen Automotive Inc. 2022 Equity Incentive Plan
DEF 14A
001-34887
Appx B
06/24/2022
10.1(a)#
Amendment to 2022 Equity Incentive Plan dated August 3, 2023
8-K
001-34887
10.1
08/07/2023
10.1(b)#
Form of Stock Option Agreement under 2022 Equity Incentive Plan
10-K
001-34887
10.2(a)
1/13/2023
10.1(c)#
Form of Restricted Stock Agreement under 2022 Equity Incentive Plan
10-K
001-34887
10.2(b)
1/13/2023
10.1(d)#
Form of Restricted Stock Unit Agreement under 2022 Equity Incentive Plan
10-K
001-34887
10.2(c)
1/13/2023
10.2#
CEO Performance Stock Award Agreement dated May 5, 2022 between Mullen Automotive Inc. and David Michery
8-K
001-34887
10.2
07/27/2022
10.3#
CEO Performance Stock Award Agreement dated June 8, 2023 between Mullen Automotive Inc. and David Michery
8-K
001-34887
10.2
08/07/2023
10.4
Amended and Restated Secured Convertible Note and Security Agreement dated June 17, 2022 Esousa Holdings LLC
8-K
001-34887
10.1
06/21/2022
10.4(a)
Letter Agreement (Sale of Note) dated June 17, 2022
8-K
001-34887
10.2
06/21/2022
10.4(b)
Exchange Agreement, dated as of October 14, 2022, by and among Mullen Automotive Inc. and Esousa Holdings LLC.
8-K
001-34887
10.1
10/21/2022
10.4(c)
Secured Convertible Note and Security Agreement dated October 14, 2022 with Esousa Holdings LLC.
8-K
001-34887
10.2
10/21/2022
10.5#
Amended and Restated Employment Agreement, dated as of June 1, 2021, by and between David Michery and Mullen Technologies, Inc.
S-4/A
333-256166
10.10
07/22/2021
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
10.6
Transition Services Agreement, dated as of May 12, 2021, by and between Mullen Technologies, Inc. and Mullen Automotive Inc.
S-4/A
333-256166
10.14
07/22/2021
10.6(a)
Termination Agreement, dated January 15, 2024, by and between Mullen Technologies, Inc. and Mullen Automotive Inc.
✓
10.7
Tax Sharing Agreement, dated May 12, 2021, by and among Mullen Technologies, Inc. and Mullen Automotive Inc.
S-4/A
333-256166
10.15
07/22/2021
10.8
Consultant Agreement dated October 26, 2021 between the Company and Mary Winter
10-K
001-34887
10.25
12/29/2021
10.9
Loan Commitment with NuBridge Commercial Lending executed February 23, 2022
8-K
001-34887
10.2
02/28/2022
10.9(a)
Guaranty dated March 7, 2022 between NuBridge Commercial Lending, LLC and David Michery
10-Q
001-34887
10.4(a)
05/16/2022
10.10
Securities Purchase Agreement dated June 7, 2022 for Series D Preferred Stock and Warrants
8-K
001-34887
10.1
06/10/2022
10.10(a)
Amendment No. 1 dated June 23, 2022 to Securities Purchase Agreement dated June 7, 2022
8-K
001-34887
10.1
06/24/2022
10.10(b)
Amendment No. 2 dated September 19, 2022 to Securities Purchase Agreement dated June 7, 2022
S-3ASR
333-267502
99.3
09/19/2022
10.10(c)
Amendment No. 3 to the Securities Purchase Agreement, dated November 15, 2022, by and between Mullen Automotive Inc. and the buyers named therein
8-K
001-34887
10.1
11/21/2022
10.10(d)
Form of Convertible Note dated November 15, 2022
8-K
001-34887
10.2
11/21/2022
10.10(e)
Amendment No. 4 to the Securities Purchase Agreement, dated April 3, 2023, by and between Mullen Automotive Inc. and the buyers named therein
8-K
001-34887
10.1
04/07/2023
10.10(f)
Form of Promissory Note
8-K
001-34887
10.2
04/07/2023
10.10(g)
Letter Agreement, dated May 15, 2023, by and among Mullen Automotive Inc. and the buyers named therein
8-K
001-34887
10.1
05/19/2023
10.10(h)
Letter Agreement, dated June 5, 2023, by and between Mullen Automotive Inc. and Acuitas Capital LLC
8-K
001-34887
10.1
06/05/2023
10.10(i)
Letter Agreement, dated June 12, 2023, by and between Mullen Automotive Inc. and the buyers named therein
8-K
001-34887
10.1
06/12/2023
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
10.10(j)
Letter Agreement, dated June 22, 2023, by and between Mullen Automotive Inc. and the buyers named therein.
8-K
001-34887
10.1
06/26/2023
10.10(k)
Letter Agreement, dated June 26, 2023, by and between Mullen Automotive Inc. and Ault Lending, LLC
8-K
001-34887
10.2
06/26/2023
10.10(l)
Letter Agreement, dated June 20, 2023, by and between Mullen Automotive Inc. and Acuitas Capital LLC.
8-K
001-34887
10.3
06/26/2023
10.11
Lease dated June 29, 2022 between the Company and with the Lakeview Business Center, LLC
10-Q
001-34887
10.7
08/12/2022
10.12
Consulting Agreement dated January 12, 2022 between the Company and Ignacio Novoa
10-Q
001-34887
10.8
08/12/2022
10.13
Firm Order Agreement dated December 12, 2022, between Randy Marion Isuzu, LLC and the Company
8-K
001-34887
10.1
12/15/2022
10.14#
Offer Letter with Jonathan New dated September 7, 2022
10-K
001-34887
10.22
1/13/2023
10.15
Settlement Agreement dated January 13, 2023 with Acuitas, J. Fallon and Mank Capital
10-K
001-34887
10.23
1/13/2023
10.15(a)
Form of Promissory Note
10-K
001-34887
10.23(a)
1/13/2023
10.16
Waiver Agreement dated January 12, 2023 with Series C Preferred Stockholders
10-K
001-34887
10.24
1/13/2023
10.17
Settlement Agreement dated January 13, 2023 with respect to Series D Securities Purchase Agreement
10-K
001-34887
10.25
1/13/2023
10.17(a)
Form of Warrant
10-K
001-34887
10.25(a)
1/13/2023
10.17(b)
Amendment to the Settlement Agreement, dated March 2, 2023, by and between Mullen Automotive Inc. and Acuitas Capital LLC
8-K
001-34887
10.1
03/06/2023
10.18
Settlement Agreement, dated as of March 14, 2023, by and among Mullen Automotive Inc., Qiantu Motor (Suzhou) Ltd., and Qiantu Motor USA, Inc.
10-Q
001-34887
10.5
05/15/2023
10.18(a)
Intellectual Property and Distribution Agreement, dated as of March 14, 2023, by and among Mullen Automotive Inc., Qiantu Motor (Suzhou) Ltd., and two affiliates of Qiantu Motor (Suzhou) Ltd.
10-Q
001-34887
10.5(a)
05/15/2023
10.19#
Employment Agreement between the Company and Chester Bragado dated March 21, 2023
10-Q
001-34887
10.6
05/15/2023
10.20
Promissory Note dated March 31, 2023 from Mullen Technologies, Inc. to Mullen Automotive Inc., and Addendum dated August 12, 2023
✓
Incorporated by Reference
Exhibit No.
Exhibit Description
Form
File No.
Exhibit
Filing Date
Filed/
Furnished
Herewith
10.21
Change of Control Agreement dated August 14, 2023 between Mullen Automotive Inc. and David Michery
✓
10.22
Form of Change of Control Agreement dated August 14, 2023 between Mullen Automotive Inc. and each non-employee director
✓
16.1
Letter from Daszkal Bolton LLP dated March 3, 2023
8-K
001-34887
16.1
03/03/2023
19.1
Insider Trading Policy
✓
21.1
List of Subsidiaries
10-K
001-34887
21.1
1/13/2023
24.1
Power of Attorney (included on signature page)
10-K
001-34887
24.1
1/13/2023
23.1
Consent of Independent Registered Public Accounting Firm (RBSM LLP)
✓
23.2
Consent of Independent Registered Public Accounting Firm (Daszkal Bolton LLP)
✓
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934
✓
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934
✓
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350
✓
97.1
Clawback Policy
✓
101.INS
The following financial information from the Annual Report on Form 10-K for the fiscal year ended September 30, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language), is filed electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations and Comprehensive Loss; (iii) Consolidated Statement of Changes in Stockholders’ Equity (Deficit); (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
✓
Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101).
✓
# Indicates management contract or compensatory plan or arrangement.
* Furnished herewith.