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QuarterlyReportonForm10-QMULLEN AUTOMOTIVE INC.

Table ofQUARTERLY REPORT ON FORM 10-Q

ContentsTABLE OF CONTENTS

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​	​ Page ​ Page No.​ ​ ​ ​ PART I — FINANCIAL INFORMATIONI. Item 1.​ Financial StatementsFINANCIAL INFORMATION 3​ ​ ​ ​ ​ ​ ​ Item 1. ​ Unaudited Financial Statements: ​ 2 ​ ​ ​ ​ ​ ​ ​ Condensed Consolidated Balance Sheets – at Juneas of March 31, 2022 (unaudited) and September 30, 2021 and December 31, 2020 3​ 2 ​ ​ ​ ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss – for the Threethree and Six Months Ended June 30,six months ended March 31, 2022 and 2021 and 2020(unaudited) 4​ 3 ​ ​ ​ ​ ​ ​ ​ Unaudited Condensed Consolidated Statements of Stockholders Equity (Deficit) for the three and six months ended March 31, 2022 and 2021 (unaudited) ​ 4 ​ ​ ​ ​ ​ ​ ​ Condensed Consolidated Statements of Cash Flows – for the Six Months Ended June 30,six months ended March 31, 2022 and 2021 and 2020(unaudited) 5​ 6 ​ ​ ​ ​ ​ ​ ​ Notes to Unaudited Condensed Consolidated Interim Financial Statements 6​ 7 ​ ​ ​ ​ ​ Item 2. ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations 21​ 32 ​ ​ ​ ​ ​ Item 3. ​ Quantitative and Qualitative Disclosures About Market Risk ​ 38 ​ ​ ​ ​ ​ Item 4. ​ Controls and Procedures ​ 39 ​ ​ ​ ​ ​ PART II. 35 Item 4.​ Controls and Procedures 35 PART II — OTHER INFORMATION 36 Item 1.​ Legal Proceedings 36 Item 1A. Risk Factors 36 Item 6. Exhibits 36 Signatures 37 Table of Contents PART I — FINANCIAL INFORMATION​ Item 1 — Financial Statements​ NET ELEMENT, INC. CONDENSEDCONSOLIDATEDBALANCESHEETS (UNAUDITED)     June 30, 2021     December 31, 2020   ASSETS                 Current assets:                 Cash   $ 3,926,150     $ 4,541,013   Accounts receivable, net     10,760,417       7,109,173   Due from Mullen Technologies, Inc.     2,039,961       480,000   Prepaid expenses and other assets     1,709,847       1,837,972   Total current assets, net     18,436,375       13,968,158   Intangible assets, net     2,801,626       3,595,326   Goodwill     7,681,186       7,681,186   Operating lease right-of-use asset     732,013       801,062   Other long term assets     1,121,907       780,998   Total assets   $ 30,773,107     $ 26,826,730                     LIABILITIES AND STOCKHOLDERS' EQUITY                 Current liabilities:                 Accounts payable   $ 10,042,807     $ 7,171,376   Accrued expenses     3,082,697       4,604,097   Deferred revenue     1,461,017       1,607,329   Notes payable (current portion)     520,397       1,330,018   Operating lease liability (current portion)     72,720       140,973   Due to related party     346,331       216,657   Total current liabilities     15,525,970       15,070,450   Operating lease liability (net of current portion)     660,621       660,621   Notes payable (net of current portion)     8,428,232       8,613,587   Total liabilities     24,614,823       24,344,658                     STOCKHOLDERS' EQUITY                 Series A Convertible Preferred stock ($.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding at June 30, 2021 and December 31, 2020)     0       0   Common stock ($.0001 par value, 100,000,000 shares authorized and 5,199,185 and 4,997,349 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)     519       499   Paid in capital     191,722,577       189,700,103   Accumulated other comprehensive loss     (2,147,227 )     (2,259,410 ) Accumulated deficit     (183,123,628 )     (184,692,067 ) Non-controlling interest     (293,957 )     (267,053 ) Total stockholders' equity     6,158,284       2,482,072   Total liabilities and stockholders' equity   $ 30,773,107     $ 26,826,730   See Accompanying Notes to the Condensed Consolidated Unaudited Financial Statements. 3 Table of Contents NET ELEMENT, INC.​ ​ ​ ​ CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)Item 1.     Three Months Ended June 30,     Six Months Ended June 30,       2021     2020     2021     2020                                     Net revenues                                 Service fees   $ 33,291,935     $ 13,718,609     $ 57,077,282     $ 29,556,175   Total Revenues     33,291,935       13,718,609       57,077,282       29,556,175                                     Costs and expenses:                                 Cost of service fees     29,582,598       11,536,787       50,369,043       24,837,195   Selling, general and administrative     2,050,861       1,385,329       3,962,710       3,701,221   Non-cash compensation     11,237       7,500       22,494       45,900   Bad debt expense     514,381       33,310       1,209,058       476,088   Depreciation and amortization     528,884       772,402       1,264,562       1,551,844   Total costs and operating expenses     32,687,961       13,735,328       56,827,867       30,612,248   Income (loss) from operations     603,974       (16,719 )     249,415       (1,056,073 ) Interest expense     (363,312 )     (341,020 )     (719,592 )     (689,433 ) Gain on debt forgiveness     441,492       0       441,492       0   Late fees due from Mullen     559,986       0       1,559,961       0   Other income     8,971       19,325       10,261       29,065   Net income (loss) from continuing operations before income taxes     1,251,111       (338,414 )     1,541,537       (1,716,441 ) Income taxes     0       0       0       0   Net income (loss) from continuing operations     1,251,111       (338,414 )     1,541,537       (1,716,441 ) Net income attributable to the non-controlling interest     12,764       13,724       26,903       24,953   Net income (loss) attributable to Net Element, Inc. stockholders     1,263,875       (324,690 )     1,568,440       (1,691,488 ) Foreign currency translation     93,601       (65,990 )     112,183       64,824   Comprehensive income (loss) attributable to common stockholders   $ 1,357,476     $ (390,680 )   $ 1,680,623     $ (1,626,664 )                                   Income (loss) per share - basic and diluted   $ 0.21     $ (0.08 )   $ 0.26     $ (0.41 )                                   Weighted average number of common shares outstanding - basic and diluted     5,966,123       4,175,148       5,944,636       4,146,396   See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements. 4 Table of Contents ​ Legal ProceedingsNET ELEMENT, INC. ​ 40 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS​ (UNAUDITED)​ ​ ​ ​ Item 1A. ​ Risk Factors ​ 40 ​ ​ ​ ��� ​ Item 2. ​ Unregistered Sales of Equity Securities and Use of Proceeds ​ 41 ​ ​ ​ ​ ​ Item 3. ​ Defaults Upon Senior Securities ​ 41 ​ ​ ​ ​ ​ Item 4. ​ Mine Safety Disclosures ​ 41 ​ ​ ​ ​ ​ Item 5. ​ Other Information ​ 41 ​ ​ ​ ​ ​ Item 6. ​ Exhibits ​ 42 ​ ​ ​ ​ ​ SIGNATURES ​ 43     Six Months Ended June 30,       2021     2020   Cash flows from operating activities                 Net income (loss) attributable to Net Element, Inc. stockholders   $ 1,568,440     $ (1,691,488 ) Adjustments to reconcile net loss to net cash used in operating activities:                 Non-controlling interest     (26,903 )     (24,953 ) Share based compensation     22,494       45,899   Deferred revenue     (146,312 )     (109,414 ) Provision for bad debt     872       (8,668 ) Depreciation and amortization     1,264,562       1,551,844   Non cash interest     438,151       46,552   Changes in assets and liabilities:                 Accounts receivable     (3,592,063 )     700,506   Due from Mullen Technologies, Inc.     (1,559,961 )     0   Prepaid expenses and other assets     (58,402 )     (287,386 ) Accounts payable and accrued expenses     896,151       (538,178 ) Net cash used in operating activities     (1,192,971 )     (315,286 )                   Cash flows from investing activities:                 Client acquisition costs     (333,050 )     (359,350 ) Purchase of equipment and changes in other assets     (53,588 )     (35,666 ) Net cash used in investing activities     (386,638 )     (395,016 )                   Cash flows from financing activities:                 Proceeds from SBA Loans     0       651,392   Proceeds from indebtedness     2,287,339       174,314   Repayment of indebtedness     (994,959 )     0   Lease liability     (68,253 )     (64,868 ) Related party advances     2,295       159,432   Net cash provided by financing activities     1,226,422       920,270                     Effect of exchange rate changes on cash     (61,767 )     14,589   Net (decrease) increase in cash and restricted cash     (414,954 )     224,557                     Cash and restricted cash at beginning of period     5,322,011       1,116,255   Cash and restricted cash at end of period   $ 4,907,057     $ 1,340,812                     Supplemental disclosure of cash flow information                 Cash paid during the period for:                 Interest   $ 281,441     $ 336,120   Taxes   $ 205,200     $ 0   Non Cash activities:                 Shares issued for redemption of indebtedness   $ 1,999,980     $ 0   ​ See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.​ ​ 1 5 Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements ​ MULLEN AUTOMOTIVE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31, 2022      September 30, 2021 ​ ASSETS   ​      ​    ​ CURRENT ASSETS   ​      ​    ​ Cash and cash equivalents ​ $ 65,150,095 ​ $ 42,174 ​ Restricted Cash ​ ​ 131,793 ​ ​ — ​ Materials and supplies ​   55,753 ​   55,753 ​ Deferred advertising ​   48,855 ​   261,550 ​ Prepaid Expenses ​   3,282,245 ​   6,201,247 ​ Other current assets ​   51,553 ​   250,331 ​ Notes Receivable ​   15,090,552 ​   90,552 ​ TOTAL CURRENT ASSETS ​   83,810,846 ​   6,901,607 ​ Property, equipment and leasehold improvements, net ​   13,053,935 ​   1,181,477 ​ Intangibles assets, net ​   2,296,016 ​   2,495,259 ​ Right-of-use assets ​   2,066,049 ​   2,350,929 ​ Other assets ​   3,979,334 ​   4,243,222 ​ TOTAL ASSETS ​ $ 105,206,180 ​ $ 17,172,494 ​ ​ ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ​      ​      ​ CURRENT LIABILITIES ​      ​      ​ Accounts payable ​ $ 4,173,500 ​ $ 5,206,310 ​ Accrued expenses and other current liabilities ​   21,596,300 ​   19,126,765 ​ Liability to issue shares ​   — ​   7,027,500 ​ Lease liabilities, current portion ​   651,494 ​   599,898 ​ Notes payable, current portion ​   16,859,080 ​   39,200,970 ​ TOTAL CURRENT LIABILITIES ​   43,280,374 ​   71,161,443 ​ Notes payable, net of current portion ​   5,228,788 ​   247,612 ​ Lease liabilities, net of current portion ​   1,523,158 ​   1,857,894 ​ Other liabilities ​   5,617,192 ​   5,617,192 ​ TOTAL LIABILITIES ​   55,649,512 ​   78,884,141 ​ Commitments and Contingencies (Note 17) ​      ​      ​ ​ ​ ​ ​ ​ ​ ​ ​ STOCKHOLDERS' EQUITY (DEFICIT) ​      ​      ​ Preferred Stock; $0.001 par value; 58,000,000 shares authorized; 11,088,916 and 5,667,682 shares issued and outstanding at March 31, 2022 and September 30, 2021 respectively. ​   11,089 ​   5,668 ​ Common Stock; $0.001 par value; 500,000,000 shares authorized; 289,784,112 and 7,048,387 issued and outstanding at March 31, 2022 and September 30, 2021 respectively. ​   289,782 ​   7,048 ​ Additional Paid-in Capital ​   268,667,769 ​   88,650,286 ​ Accumulated Deficit ​   (219,411,972) ​   (150,374,649) ​ TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ​   49,556,668 ​   (61,711,647) ​ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) ​ $ 105,206,180 ​ $ 17,172,494 ​ ​ See accompanying notes to condensed consolidated interim financial statements. ​ ​ 2 Table of Contents MULLEN AUTOMOTIVE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) NET ELEMENT, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31,       Six months ended March 31,  ​ ​      2022      2021 ​ 2022      2021 ​ OPERATING EXPENSES   ​      ​    ​ ​      ​ ​ ​ General and administrative ​ $ 29,269,433 ​ $ 4,676,740 ​ $ 42,170,516 ​ $ 7,629,418 ​ Research and development ​   1,183,437 ​   538,271 ​   2,340,761 ​   1,056,294 ​ Total Operating Expense ​   30,452,870 ​   5,215,011 ​   44,511,277 ​   8,685,712 ​ Loss from Operations ​   (30,452,870) ​   (5,215,011) ​   (44,511,277) ​   (8,685,712) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​   (2,120,515) ​   (4,092,759) ​   (24,559,459) ​   (6,499,089) ​ Loss on debt settlement ​   — ​   — ​   (41,096) ​   — ​ Gain on extinguishment of indebtedness, net ​   — ​   10,000 ​   74,509 ​   890,581 ​ Net Loss ​ $ (32,573,385) ​ $ (9,297,770) ​ $ (69,037,323) ​ $ (14,294,220) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss per Share ​ $ (0.63) ​ $ (1.81) ​ $ (1.99) ​ $ (2.85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding, basic and diluted ​   51,392,988 ​   5,135,797 ​   34,639,857 ​   5,020,144 ​ ​ See accompanying notes to condensed consolidated interim financial statements. ​ ​ ​ ​ 3 Table of Contents MULLEN AUTOMOTIVE, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Preferred Stock ​                ​           ​           ​      Deficiency in ​ ​ Series A ​ Series B ​ Series C ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders' ​ ​ Shares      Amount      Shares      Amount      Shares      Amount      Shares      Amount      Capital      Deficit      Equity Balance, September 30, 2020   116,789 ​ $ 116 ​ 5,567,319 ​ $ 5,568 ​ — ​ $ — ​ 5,086,225 ​ $ 5,086 ​ $ 63,619,280 ​ $ (106,134,069) ​ $ (42,504,019) Warrant issuances   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 2,092,337 ​ ​ — ​ ​ 2,092,337 Beneficial Conversion Feature -Debt   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 172,663 ​ ​ — ​ ​ 172,663 Stock-based compensation   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 38,561 ​ ​ 39 ​ ​ 1,241,366 ​ ​ — ​ ​ 1,241,405 Net loss   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (4,996,450) ​ ​ (4,996,450) Balance, December 31, 2020   116,789 ​ ​ 116 ​ 5,567,319 ​ ​ 5,568 ​ — ​ ​ — ​ 5,124,786 ​ ​ 5,125 ​ ​ 67,125,646 ​ ​ (111,130,519) ​ ​ (43,994,064) Shares issued for cash   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 23,126 ​ ​ 23 ​ ​ 1,104,779 ​ ​ — ​ ​ 1,104,802 Warrant issuances   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 870,428 ​ ​ — ​ ​ 870,428 Stock-based compensation   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 1,631,660 ​ ​ — ​ ​ 1,631,660 Beneficial conversion feature of convertible debt   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ 98,335 ​ ​ — ​ ​ 98,335 Net loss   — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (9,297,770) ​ ​ (9,297,770) Balance, March 31, 2021   116,789 ​ $ 116 ​ 5,567,319 ​ $ 5,568 ​ — ​ $ — ​ 5,147,912 ​ $ 5,148 ​ $ 70,830,848 ​ $ (120,428,289) ​ $ (49,586,609) ​ 4 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Preferred Stock      ​      ​ ​      ​ ​      ​ ​ ​ Deficiency in ​ ​ Series A ​ Series B ​ Series C ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders' ​ ​ Shares      Amount ​      Shares      Amount ​      Shares      Amount ​ ​ Shares ​ Amount ​ ​ Capital ​ ​ Deficit ​      Equity ​ Balance, September 30, 2021   100,363   $ 100   5,567,319 ​ $ 5,568   —   $ — ​ 7,048,387   $ 7,048   $ 88,650,286   $ (150,374,649)   $ (61,711,647) Common shares issued for cash   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ 7,704,082 ​ ​ 7,704 ​ ​ 10,886,955 ​ ​ — ​ ​ 10,894,659 Common shares issued for asset   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ 109,412 ​ ​ 109 ​ ​ 140,891 ​ ​ — ​ ​ 141,000 Preferred shares issued for cash   — ​ ​ —   — ​ ​ —   2,263,970 ​ ​ 2,264 ​ — ​ ​ — ​ ​ 19,997,736 ​ ​ — ​ ​ 20,000,000 Preferred shares issued to settle liability to issue   — ​ ​ —   — ​ ​ —   84,900 ​ ​ 85 ​ — ​ ​ — ​ ​ 704,915 ​ ​ — ​ ​ 705,000 Warrant issuances   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ — ​ ​ — ​ ​ 10,491,621 ​ ​ — ​ ​ 10,491,621 Preferred shares issued in exchange for conversion of debt   — ​ ​ —   — ​ ​ —   2,829,029 ​ ​ 2,829 ​ — ​ ​ — ​ ​ 24,988,926 ​ ​ — ​ ​ 24,991,755 Stock-based compensation   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ 443,124 ​ ​ 443 ​ ​ 4,424,825 ​ ​ — ​ ​ 4,425,268 Common shares issued to settle liability to issue   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ 131,477 ​ ​ 131 ​ ​ 1,034,681 ​ ​ — ​ ​ 1,034,812 Prefunded warrant issuance   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ — ​ ​ — ​ ​ 15,000,000 ​ ​ — ​ ​ 15,000,000 Issuance of common stock for conversion of preferred stock   (84,996) ​ ​ (85)   — ​ ​ —   — ​ ​ — ​ 8,499,680 ​ ​ 8,500 ​ ​ (8,415) ​ ​ — ​ ​ — Net loss   — ​ ​ —   — ​ ​ —   — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (36,463,938) ​ ​ (36,463,938) Balance, December 31, 2021   15,367 ​ ​ 15   5,567,319 ​ ​ 5,568   5,177,899 ​ ​ 5,178 ​ 23,936,162 ​ ​ 23,935 ​ ​ 176,312,421 ​ ​ (186,838,587) ​ ​ (10,491,470) Shares issued for cash ​ — ​ ​ — ​ — ​ ​ — ​ 4,974,266 ​ ​ 4,974 ​ 57,998,313 ​ ​ 57,998 ​ ​ 73,536,483 ​ ​ — ​ ​ 73,599,455 Share-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 5,868,482 ​ ​ 5,868 ​ ​ 21,536,148 ​ ​ — ​ ​ 21,542,016 Cashless Warrant exercise ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ 196,005,353 ​ ​ 196,005 ​ ​ (196,005) ​ ​ — ​ ​ — Issuance of common stock for conversion of preferred stock ​ (13,433) ​ ​ (13) ​ (2,783,660) ​ ​ (4,633) ​ (1,848,842) ​ ​ — ​ 5,975,802 ​ ​ 5,976 ​ ​ (1,330) ​ ​ — ​ ​ — Dividends accumulated on preferred stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2,519,948) ​ ​ ​ ​ ​ (2,519,948) Net Loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ (32,573,385) ​ ​ (32,573,385) Balance, March 31, 2022   1,934   $ 2   2,783,659 ​ $ 935   8,303,323   $ 10,152 ​ 289,784,112   $ 289,782   $ 268,667,769   $ (219,411,972)   $ 49,556,668 ​ See accompanying notes to condensed consolidated interim financial statements. ​ ​ 5 Table of Contents MULLEN AUTOMOTIVE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended March 31,  ​      2022      2021 Cash Flows from Operating Activities   ​      ​    Net Loss ​ $ (69,037,323) ​ $ (14,294,220) Adjustments to reconcile net loss to net cash used in operating activities: ​      ​      Depreciation and amortization ​   608,496 ​   223,331 Employee stock compensation ​   3,292,987 ​   932,872 Issuance of shares for services ​   24,042,060 ​   1,291,129 Non-cash interest and other operating activities ​   1,713,103 ​   — Non-cash lease expense ​   284,879 ​   272,067 Amortization of debt discount ​   19,400,483 ​   1,405,450 Loss on asset disposal ​   1,298 ​   — (Gain) on extinguishment of debt ​   (74,509) ​   (890,581) Loss on debt settlement ​   41,096 ​   — ​ ​ ​ ​ ​ ​ ​ Changes in operating assets and liabilities: ​      ​      Other current assets ​   3,330,474 ​   123,691 Other assets ​   (858,692) ​   (158,601) Accounts payable ​   (1,032,810) ​   664,093 Accrued expenses and other liabilities ​   (6,300,181) ​   5,070,319 Lease liabilities ​   (283,141) ​   (259,267) Net cash (used) provided by operating activities ​   (24,871,780) ​   (5,619,717) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Investing Activities ​      ​      Purchase of equipment ​   (10,491,547) ​   (60,818) Purchase of intangible assets ​   (246,132) ​   (41,250) Net cash (used) in investing activities ​   (10,737,679) ​   (102,068) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Financing Activities ​      ​      Changes in net parent investment ​   (223,067) ​   2,636,711 Proceeds from issuance of notes payable ​   12,142,791 ​   4,068,500 Proceeds from issuance of common stock ​   40,151,308 ​   — Proceeds from liability to issue preferred C shares ​   63,925,000 ​   — Payment of notes payable ​   (15,146,860) ​   (164,486) Net cash provided by financing activities ​   100,849,172 ​   6,540,725 ​ ​ ​ ​ ​ ​ ​ Increase (decrease) in cash ​   65,239,713 ​   818,940 Cash, beginning of period ​   42,174 ​   33,368 Cash, ending of period ​ $ 65,281,887 ​ $ 852,308 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of Cash Flow information: ​      ​      Cash paid for interest ​ $ 1,489,908 ​ $ 7,783 Supplemental disclosure for non-cash activities: ​      ​      Preferred shares issued in exchange for convertible debt ​ $ 24,991,755 ​ $ — See accompanying notes to condensed consolidated interim financial statements. ​ ​ ​ 6 MULLEN AUTOMOTIVE, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) ​ NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Description of Business Mullen Automotive, Inc. (“MAI”, “Mullen”, “we” or the “Company”) is a development-stage electronic vehicle (EV) manufacturer. The Company operated as the EV division of Mullen Technologies, Inc. (“MTI”) until November 5, 2021, at which time the Company underwent a capitalization and corporate reorganization by way of a spin-off by MTI to its shareholders, followed by a reverse merger with and into Net Element, Inc. (“NETE”). Basis of Presentation and Principles of Consolidation The accompanying June 30, 2021 interimunaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission""Commission"). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”GAAP”) have been condensed or omitted pursuant to those rules and regulations, but we believe the disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation have been included in the condensed consolidated financial statements included herein. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K10-K filed with the Commission for the year ended December 31, 2020. September 30, 2021.The results of operations for the periods presented are not necessarily indicative of results to be expected for the full fiscal year or any other periods. The accompanying condensed consolidated unaudited financial statements contained in this report include the accounts of Net Element, Inc.,the Company and its wholly owned subsidiaries.subsidiary, Mullen Investment Properties, LLC, which was established in August 2021 to hold our real estate. Intercompany accounts and transactions have been eliminated, if any. As of March 31, 2022, Mullen Investment Properties, LLC holds the Advanced Manufacturing and Engineering Center or “AMEC” in Tunica County, MS. As MTI has not historically prepared financial statements for Mullen, and Mullen did not exist as a legal entity prior to November 5, 2021, these financial statements have been prepared from the financial records of MTI on a carve-out basis. The condensed consolidated balance sheets include all of the MAI Assets. The condensed consolidated Statements of operations for each of the three and six months ended March 31, 2022 and 2021, reflect all expenses and activities directly attributable to MAI, and an allocation of MTI’s general and administrative expenses incurred in each of those years, as these expenditures were shared by MAI. In some instances, certain expenses were not allocated as they would have related directly to MAI. All significant intercompanyinter-entity balances and transactions have been eliminated in consolidation.eliminated. NOTE 2. ORGANIZATION AND OPERATIONS Net Element, Inc. (collectively with its subsidiaries, “Net Element”, “we”, “us”, “our” or the “Company”) is a financial technology-driven group specializing in payment acceptance and value-added solutions across multiple channelsThe equity capital presented in the United Statesfinancial statements reflect the retrospective application of the November 5, 2021 capitalization and selected international markets. We are differentiatedcorporate reorganization arising from the merger transaction with NETE. These financial statements have been prepared based upon the historical cost amounts recorded by our proprietary technology which enables us to provide a broad suiteMTI. These financial statements may not be indicative of payment productsMAI financial performance and end-to-end transaction processing services. Our transactional services business enables merchants to accept credit cardsdo not necessarily reflect what its financial position, results of operations, and cash flows would have been had Mullen operated as well as other forms of payment, including debit cards, checks, gift cards, loyalty programs and alternative payment methods in traditional card-present or swipe transactions, as well as card-not-present transactions, such as those conducted overan independent entity during the phone or through the Internet or a mobile device. We operate in years presented. 7 two reportable business operating segments: (i) North American Transaction Solutions, and (ii) International Transaction Solutions. We are able to deliver our services across multiple points of access, or “multi-channel,” including brick and mortar locations, software integration, e-commerce, mobile operator billing, mobile and tablet-based solutions. In the United States, via our U.S. based subsidiaries, we generate revenues from transactional services and other payment technologies for small and medium-sized businesses. Through PayOnline, we provide transactional services, mobile payment transactions, online payment transactions and other payment technologies in emerging countries in the Eurasian Economic Community ("EAEC"), Europe and Asia. Our transactional services business enables merchants to accept credit cards as well as other forms of payment, including debit cards, checks, gift cards, loyalty programs and alternative payment methods in traditional card-present or swipe transactions, as well as card-not-present transactions, such as those conducted over the phone or through the Internet or a mobile device. We market and sell our services through both independent sales groups (“ISGs”), which are non-employee, external sales organizations and other third-party resellers of our products and services, and directly to merchants through electronic media, telemarketing and other programs, including utilizing partnerships with other companies that market products and services to local and international merchants. We have agreements with several banks that sponsor us for membership in the Visa ®, MasterCard ®, American Express ®, and Discover ® card associations and settle card transactions for our merchants. These sponsoring banks include Esquire Bank, N.A. and Wells Fargo Bank, N.A. From time to time, we may enter into agreements with additional banks. We perform core functions for merchants such as application processing, underwriting, account set-up, risk management, fraud detection, merchant assistance and support, equipment deployment and chargeback services. Our Mobile Solutions business, PayOnline, provides relationships and contracts with mobile operators that gives us the ability to offer our clients in-app, premium SMS (short message services, which is a text messaging service), Wireless Application Protocol (WAP)-click, one click and other carrier billing services. PayOnline provides flexible high- tech payment solutions to companies doing business on the Internet or in the mobile environment. PayOnline specializes in integration and customization of payment solutions for websites and mobile apps. In particular, PayOnline arranges payment on the website of any commercial organization, which increases the convenience of using the website and helps maximize the number of successful transactions. In addition, PayOnline is focused on providing online and mobile payment acceptance services to the travel industry through direct integration with leading Global Distribution Systems (“GDS”), which include Amadeus® and Sabre®. Key geographic regions that PayOnline serves include Eastern Europe, Central Asia, Western Europe, North America and Asia major sub regions. The PayOnline office is located in Moscow, Russia. Also part of our transactional services business, Aptito is a proprietary, cloud-based payments platform for the hospitality industry, which creates an online consumer experience in offline commerce environments via tablet, mobile and all other cloud-connected devices. Aptito’s easy to use point-of-sale (“POS”) system makes things easier by providing a comprehensive solution to the hospitality industry to help streamline management and operations. Orders placed tableside by customers directly speed up the ordering process and improve overall efficiency. Aptito's mobile POS system provides portability to the staff while performing all the same functions as a traditional POS system. 6 Table of Contents ​ NOTE 3.2 – LIQUIDITY, CAPITAL RESOURCES, AND GOING CONCERN CONSIDERATIONSCONSIDERATION Our consolidatedThe accompanying financial statements have been prepared on the basis that the Company will continue as a going concern basis, which contemplates the realizationconcern. Our principal source of assetsliquidity consists of existing cash and the settlement of liabilities and commitments in the normal course of business. We had net income attributable to common stockholdersrestricted cash of approximately $1.6$65.3 million forat March 31, 2022. During the six months ended June 30, 2021 March 31, 2022, the Company used $27.9 million of cash for operating activities and ahad net loss attributable to common stockholders of approximately $5.9 million for the year ended December 31, 2020 and have an accumulated deficit of approximately $183,123,628 and a positive working capital of approximately $2.9$40.5 million at June 30, 2021. A significant portionMarch 31, 2022. During the three months ended March 31, 2022, the Company obtained additional financing in the amount of this positive working capital at June 30, 2021 relates to amounts due$5.0 million in notes payable; and $73.6 million in equity issuances. During the six months ended March 31, 2022, the Company obtained additional financing in the amount of $12.2 million in notes payable; $10 million in equity from Mullen Technologies which remains unpaid (See Note 5 - Due from Mullen). Net Element merger; and $93.6 million in equity issuances. The COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, promotion of social distancing measures, “shelter-in-place,Coronavirus (“COVID-19” “stay-at-home,” total lock-down orders, business limitations or shutdowns and similar orders.  More recently, many news agencies have reported the spread of new variants of COVID-19, such as the Delta variant, that are significantly more contagious than previous strains. The spread of these new strains are causing some government authorities to reimplement the aforementioned measures, and some businesses to implement their own restrictions, to try to reduce the spread of COVID-19 that had become less prevalent.  The COVID-19 pandemic and these measures have significantly impacted, and may continue) continues to impact the restaurantcountries, communities, supply chains and hospitalitymarkets, global financial markets, and various industries. AsTo date, COVID-19 has had a result, the Company’s revenues, which are largely tied to processing volumesmaterial and disruptive impact on our strategy in these verticals, were materially impacted during 2020. Since the quarter ended December 31, 2020, the Company has seen a significant recovery in its end-to-end payment volumes as some merchants began resuming their normal operations. However, while end-to-end volumes for the three and six months ended June 30, 2021 have exceeded those for the respective three and six months ended June 30, 2020, the ultimate impact that the COVID-19 pandemic and, in particular, the highly contagious Delta variant, will have on the Company’s consolidated results of operations in future periods remains uncertain and will depend on future developments, which are continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemicEV product development and the Delta variant,ability to obtain external financing to fund its severity,development activities. Company management is unable to predict whether the emergence and severity of other variants, the availability and the efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them, other protective actions taken to contain the virus or treat its impact, such as restrictions on indoor dining, travel and transportation, and how quickly and to what extent normal economic and operating conditions will continue. The Companyglobal pandemic will continue to evaluate the naturehave a material impact on our future financial condition and extent of these potential impacts to its business, consolidated results of operations,operations. Going Concern As an early-stage development company, our ability to access capital is critical. Our management plans to raise additional capital through a combination of equity and liquidity. During March 2020, ourdebt financings, strategic alliances, and licensing arrangements. Company management has evaluated whether there are any conditions and events, considered in aggregate, which raise substantial doubt about its liquidity position, future operating plans, and its labor force, which included a reduction in the labor force and compensation to executives and other employees, in order to maintain current payment processing functions, capabilities, and continued customer service to its merchants. We are also seeking sources of capital to pay our contractual obligations as they come due, in light of these uncertain times. Management believes that its operating strategy will provide the opportunity for usability to continue as a going concern as long asover the next twelve months from the date of filing this report. Since inception, we have incurred significant accumulated losses of approximately $219.4 million, and management expects to continue to incur operating losses over the near future. Proceeds from the business combination with Net Element, the exercise of warrants, and a qualified public offering, should they materialize, are ableexpected to obtain additional financing. At this time, due to the unprecedentedprovide Mullen with sufficient liquidity and rapid spread of COVID-19 and its variants, we cannot predict the impact of these conditions on our ability to obtain financing necessary for the Companycapital resources to fund its future workingoperating expenses and capital requirements.  Our Company has also decided to explore strategic alternatives and potential optionsrequirements for its business, including sale ofat least the Company or certain assets, licensing of technology, spin-offs, or a business combination. Accordingly, the Company has entered into a merger agreement in connection with the contemplated merger with Mullen Automotive (as defined below) and certain related transactions, including a divestiture of the Company’s existing business operations. See below and Note 14 – Subsequent Events for additional information. There can be no assurance, at this time, regarding the eventual outcome of our planned strategic alternatives, including such merger and the related transactions. On March 27, 2020, our Company entered into a Master Exchange Agreement (the “ESOUSA Agreement”) with ESOUSA Holdings, LLC ("ESOUSA"), a related party. Prior to entering into the ESOUSA Agreement, ESOUSA agreed to acquire an existing promissory note that had been previously issued by the Company, of up to $2,000,000 in principal amount outstanding plus interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the ESOUSA Agreement, the Company had the right, at any time prior to March 27, 2021, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange this promissory note in tranches on the dates when the Company instructs ESOUSA, for such number of shares of the Company’s common stock (“Common Stock”) as determined under the ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such exchange amount from RBL. Each such tranche to be $148,000 unless otherwise agreed to by the Company and ESOUSA. On April 23, 2020 and August 3, 2020, the Company entered into certain amendments to the ESOUSA Agreement, which together increased from $2,000,000 to $15,000,000 the principal amount and unpaid interest of one or more promissory notes of the Company or its direct or indirect subsidiaries that ESOUSA either purchased in whole or has an irrevocable right to purchase in tranches from RBL in connection with the ESOUSA Agreement. On March 27, 2020, the Company received its first tranche of RBL promissory notes in the aggregate amount of $148,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. Included in other accrued expenses at June 30, 2021 is approximately $145,000 in connection with this first tranche for which shares of Common Stock have not yet been issued. Concurrently with this transaction, the Company received an equivalent aggregate amount of $148,000 from RBL under the Loan and Security Agreement (“Credit Facility”) with RBL. On April 28, 2020, the Company received its second tranche of RBL promissory notes in the aggregate amount of $143,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.next 12 months. The Company issued 65,862 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $143,000 from RBL under the Credit Facility.  On August 11, 2020, the Company received its third tranche of RBL promissory notes in the aggregate amount of $707,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 66,190 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $707,000 from RBL under the Credit Facility.  On August 21, 2020, the Company received its fourth tranche of RBL promissory notes in the aggregate amount of $401,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 45,654 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $401,000 from RBL under the Credit Facility.  On September 25, 2020, the Company received its fifth tranche of RBL promissory notes in the aggregate amount of $426,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 50,000 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $426,000 from RBL under the Credit Facility.  On December 30, 2020, the Company received its sixth tranche of RBL promissory notes in the aggregate amount of $1,960,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. The Company issued 200,000 shares of Common Stock to ESOUSA in connection with this exchange. Concurrently with this transaction, the Company received an equivalent aggregate amount of $1,960,000 from RBL under the Credit Facility. On July 9, 2021, the Company entered into a new Master Exchange Agreement with ESOUSA.  See Note 14 - Subsequent Events for additional information. Mullen Merger and Related Transactions On August 4, 2020, the Company entered into an Agreement and Plan of Merger with Mullen Technologies, Inc., a California corporation (“Mullen”), and Mullen Acquisition, Inc., a California corporation and wholly owned subsidiary of the Company (“Merger Sub”), which was amended on December 29, 2020, March 30, 2021 and April 30, 2021 (as amended, the “Original Merger Agreement”). Pursuant to, and on the terms and subject to the conditions of, the Original Merger Agreement, Merger Sub was to be merged with and into Mullen, with Mullen continuing as the surviving corporation in such merger. On May 14, 2021, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Prior Restated Merger Agreement”) with Mullen, Merger Sub and Mullen Automotive, Inc. (“Mullen Automotive”), a California corporation and a wholly-owned subsidiary of Mullen, which amended, restated and replaced in its entirety the Original Merger Agreement.  On July 20, 2021, the parties entered into a Second Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”), which amended, restated and replaced in its entirety the Prior Restated Merger Agreement. Pursuant to, and on the terms and subject to the conditions of, the Restated Merger Agreement, Merger Sub will be merged with and into Mullen Automotive (the “Merger”), with Mullen Automotive continuing as the surviving corporation in the Merger (See Note 14 - Subsequent Events). The Restated Merger Agreement contains termination rights for each of the Company and Mullen Automotive, including, among others, (i) in the event that the Merger has not been consummated by August 31, 2021, (ii) in the event that the requisite approval of the Company’s stockholders is not obtained upon a vote thereon, (iii) in the event that any governmental authority shall have taken action to restrain, enjoin or prohibit the consummation of the Merger, which action shall have become final and non-appealable and (iv) in the event that there is a breach by the other party of any of its representations, warranties, covenants or agreements, which breach is sufficiently material and not timely cured or curable. In addition, Mullen Automotive may terminate the Restated Merger Agreement if, prior to receipt of the requisite approval of the Company’s stockholders, the Company’s board of directors shall have changed their recommendation in respect of the Merger. Further, the Company may terminate the Restated Merger Agreement prior to receipt of the requisite approval of the Company’s stockholders to enter into a definitive agreement with respect to a Superior Proposal (as such term is defined in the Restated Merger Agreement). The consummation of the Merger is subject to (i) the Merger and the shares of Company common stock to be issued in connection with the Merger and other transactions contemplated by the Restated Merger Agreement being approved and authorized for the listing on Nasdaq and (ii) the Company’s and its subsidiaries aggregate cash and cash equivalents plus amounts lent by the Company to Mullen Automotive pursuant to the Restated Merger Agreement less accounts payable and debt (exclusive of unfunded warrant proceeds) is $10,000,000 less legal fees as set forth in the Restated Merger Agreement, the Late Fees (as defined below), $500,000 previously lent by the Company to Mullen pursuant to the Mullen Note (as defined below) together with all accrued interested thereon (the “Net Cash Position”). The parties to the Restated Merger Agreement intend that the Company will effect a private placement of the Company common stock prior to the Merger Effective Time (the “Private Placement”) in order to raise sufficient capital for the Net Cash Position. The parties to the Restated Merger Agreement intend that the number of shares of the Company’s common stock outstanding immediately after the Merger effective time on a fully diluted and fully converted basis will not exceed 75,000,000, with 15% of such common stock outstanding immediately after the Merger effective time on a fully diluted and fully converted basis to be allocated to the persons that hold shares of the Company common stock immediately prior to the Merger effective time (subject to upward adjustment described below). The Company and Mullen Automotive may agree that the Company may raise additional capital beyond the Net Cash Position. In such event, Mullen Automotive and its pre-Merger shareholders shall solely absorb all of the dilution from such additional capital raise beyond the Net Cash Position for purposes of allocating ownership between the Company pre-Merger stockholders, on the one hand, and all other parties, on the other hand. The parties to the Restated Merger Agreement intend that, prior to the Merger effective time but, subject to and after the Company’s stockholders’ approval, the Company will divest itself of its existing business operations to another party, and will cause such party to assume all liabilities of the Company directly related to its operations of its existing business immediately prior to the closing of such divestiture (the “Divestiture”).   On July 20, 2021, the Company entered into a divestiture agreement (the “Divestiture Agreement”) with RBL relating to the contemplated Divestiture.  See Note 14 - Subsequent Events for additional information. As was contemplated by the Original Merger Agreement, on August 11, 2020, the Company as lender, entered into an unsecured Promissory Note, dated August 11, 2020 (the “Mullen Note”), with Mullen. Pursuant to the Mullen Note, Mullen borrowed from the Company $500,000. Prior to maturity of the loan, the principal amount of the loan will carry an interest rate of 14% per annum compounded monthly and payable upon demand. This loan will mature on the earlier of (i) the date that the merger agreement is terminated for any reason by any party thereto and (ii) the Merger effective time. In addition, pursuant to the Original Merger Agreement, the Company, Mullen and Merger Sub agreed that, if the registration statement on Form S-4 (with the merger proxy statement included as part of the prospectus) was not filed with the Commission on or prior to January 15, 2021, then Mullen would pay the Company an agreed sum of $13,333 per day (the “Late Fee”) until the such registration statement (with the merger proxy statement included as part of the prospectus) is filed with the Commission. All accumulated Late Fees will be due and payable by Mullen on the 5th day of each calendar month commencing February 5, 2021 and on the 5th day of each month thereafter until the above-refenced filing has occurred. An initial Form S-4 registration statement was filed on May 14, 2021. The parties to the Restated Merger Agreement agreed that Mullen Automotive will pay the Late Fee as set forth in the Original Merger Agreement. At June 30, 2021, the Company is owed approximately $1.5 million from Mullen in connection with Late Fees, which remains unpaid. Prior to the effective time of the Merger, (i) Mullen is contemplating to assign and transfer to Mullen Automotive all of its electric vehicle business related assets, business and operations, and Mullen Automotive is contemplating assuming certain debt and liabilities of Mullen and (ii) Mullen is contemplating a spin off, via share dividend, of all of the capital stock of Mullen Automotive to the stockholders of Mullen as of the effective date of such spin off. After such spin off and immediately prior to the effective time of the Merger, the capital structure (including its issued and outstanding common and preferred stock) of Mullen Automotive shall mirror the capital structure of Mullen. Consummation of the Merger, the Divestiture, the Private Placement and the other transactions contemplated in the Restated Merger Agreement, is subject to customary conditions including, among others, the approval of the Company’s stockholders. There is no guarantee that the Merger, the Divestiture, the Private Placement or the other transactions contemplated in the Restated Merger Agreement will be completed. These conditions raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary ifresult from the Company is unable to continue as a going concern.outcome of this uncertainty. NOTE 4.3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company’s significant accounting policies are described below. Basis of Presentation Push-Down Accounting The accompanyingcarve-out financial statements for the periods presented prior to March 5, 2021 reflect costs and expenses incurred by MTI on behalf of MAI, including interest costs. As a result, share-based compensation, and other equity transactions (such as issuances of warrants and stock conversion rights embedded in issuances of indebtedness) are reflected in these carve-out financial statements. Accordingly, the classification of debt and equity issuances by MTI have been pushed down and reflected with similar classification in these carve-out financial statements. In addition, certain right-of-use assets and related lease liabilities of MTI have been pushed down to MAI. Reverse Merger and Recapitalization The November 2021 Business Combination with Net Element was accounted for as a reverse merger and recapitalization, with Net Element treated as the “acquired” company for accounting purposes. The Business Combination was accounted as the equivalent of Mullen Automotive, Inc. issuing stock for the net assets of Net Element, accompanied by a recapitalization. Accordingly, these financial statements reflect the share capital and weighted average shares outstanding via a retrospective recapitalization as shares representing the exchange ratio established in the Business Combination. 8 Table of Contents ​ Use of Estimates The preparation of carve-out financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the carve-out financial statements and the reported amounts of total expenses in the reporting periods. Estimates are used for, but not limited to, fair value of long-lived assets, fair value of financial instruments, depreciable lives of property and equipment, income taxes, contingencies, and inputs used to value stock-based compensation, valuation of common and preferred stock issued by MTI. Additionally, the rates of interest on several debt agreements have been imputed where there was no stated interest rate within the original agreement. The imputed interest results in adjustments to the debt amounts reported in our condensed consolidated financial statements prepared under U.S. GAAP. Loan valuations issues can arise when trying to determine the debt attributes, such as discount rate, credit loss factors, liquidity discounts, and pricing. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for adjustments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. The actual results may differ materially from these estimates. Risks and Uncertainties We operate within an industry that is subject to rapid technological change, intense competition, and serves an industry that has significant government regulations. It is subject to significant risks and uncertainties, including competitive, financial, developmental, operational, technological, required knowledge of industry governmental regulations, and other risks associated with an emerging business. Any one or combination of these or other risks could have been prepareda substantial influence on our future operations and prospects for commercial success. Cash and Cash Equivalents Company management considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. There were 0 cash equivalents at March 31, 2022 or September 30, 2021. Restricted Cash Funds that are not available for immediate use and must use for a specific purpose. These funds are refundable deposits for individuals and businesses who have made $100 reservations for the Mullen FIVE SUV, which debuted at the Los Angeles Auto Show in November 2021. At March 31, 2022, the restricted cash balance was $131,793. Customer deposits are accounted for within other liabilities Deferred Advertising At March 31, 2022 and September 30, 2021, deferred advertising was $48,855 and $261,550, respectively. The cost were primarily upfront costs paid related to the Los Angeles auto show during November 2021. Prepaid Expenses and Other Current Assets Prepaid expenses consist of various advance payments made for goods or services to be received in the future. These prepaid expenses include insurance and other contracted services requiring up-front payments. Property, Equipment and Leasehold Improvements, Net Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated economic useful lives of the assets. Repairs and maintenance expenditures that do not extend the useful lives of related assets are expensed as incurred. 9 Table of Contents ​ Estimated Useful Lives ​ Description Life Buildings ​ 30 Years Furniture and Equipment ​ 5 Years Computer and Software ​ 1 – 3 years Machinery and Equipment ​ 5 Years Leasehold Improvements ​ Shorter of the estimated useful life or the underlying lease term Vehicles ​ 5 Years ​ Expenditures for major improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Company management continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with GAAPthe provisions of ASC 360, “Property, Plant, and pursuant to the reporting and disclosure rules and regulations of the Commission. Principles of Consolidation These consolidated financial statements include the accounts of Net Element, Inc. and our subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash We maintain our U.S. dollar-denominated cash in several non-interest bearing bank deposit accounts. All U.S. non-interest bearing transaction accounts are insured up to a maximum of $250,000 at FDIC insured institutions. The bank balances exceeded FDIC limits by approximately $2.9 million and $3.7 million at June 30, 2021 and December 31, 2020, respectively. We maintained approximately $10,000and $43,000 in uninsured bank accounts in Russia and the Cayman Islands at June 30, 2021 and December 31, 2020, respectively. Restricted Cash Restricted cash represents funds held-on-deposit with processing banks pursuant to agreements to cover potential merchant losses. It is presented as other long-term assets on the accompanying consolidated balance sheets since the related agreements extend beyond the next twelve months. Following the adoption of  Accounting Standards Update ("ASU") 2016-18,Statement of Cash Flows: Restricted CashEquipment.” (Topic 230), the Company includes restricted cash along with the cash balance for presentation in the consolidated statements of cash flows. The reconciliation between the consolidated balance sheet and the consolidated statement of cash flows is as follows:     June 30, 2021     December 31, 2020   Cash on consolidated balance sheet   $ 3,926,150     $ 4,541,013   Restricted cash     980,907       780,998   Total cash and restricted cash   $ 4,907,057     $ 5,322,011   Accounts Receivable and Credit Policies Accounts receivable consist primarily of uncollateralized credit card processing residual payments due from processing banks requiring payment within thirty days following the end of each month. Accounts receivable also include amounts due from the sales of our technology solutions to our customers. The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts, if necessary, which reflects management’s best estimate of the amounts that will not be collected. The allowance is estimated based on management’s knowledge of its customers, historical loss experience and existing economic conditions. Accounts receivable and the allowance are written-off when, in management’s opinion, all collection efforts have been exhausted. Other Current Assets Other current assets consist of point-of-sale equipment which we use to service both merchants and independent sales agents ("ISG"). Often, we will provide the equipment as an incentive for merchants and independent sales agents to enter into a merchant contracts with us. The term of these contracts have an average length of three years and the cost of the equipment plus any setup fees will be amortized over the contract period. If the merchants terminate their contract with us early, they are obligated to either return the equipment or pay for it. 7 Table of Contents Intangible Assets Intangible assets acquired, either individually or with a group of other assets (but not those acquired in a business combination), are initially recognized and measured based on fair value. Goodwill acquired in business combinations is initially computed as the amount paid in excess of the fair value of the net assets acquired. We did not acquire any businesses during the year ended December 31, 2020 or the six months ended June 30, 2021. The cost of internally developing, maintaining and restoring intangible assets (including goodwill) that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity are recognized as an expense when incurred. Intangible assets include acquired merchant relationships, recurring cash flow portfolios, referral agreements, trademarks, tradenames, website development costs and non-compete agreements. Merchant relationships represent the fair value of customer relationships purchased by us. Recurring cash flow portfolios give us the right to retain a greater share of the cash flow, in the form of paying less commissions to an independent sales agent, related to certain future transactions with the agent referred sales partners. Referral agreements represent the right to exclusively obtain referrals from a partner for their customers' credit card processing services. We amortize definite lived identifiable intangible assets using a method that reflects the pattern in which the economic benefits of the intangible asset are expected to be consumed or otherwise utilized. The estimated useful lives of our customer-related intangible assets approximate the expected distribution of cash flows on a straight- line basis from each asset. The useful lives of contract-based intangible assets are equal to the terms of the agreement. Management evaluates the remaining useful lives and carrying values of long-lived assets, including definite lived intangible assets, at least annually, or when events and circumstances warrantWhen such a review, to determine whether significant events or changes in circumstances indicate that a change inare present, we assess the useful life or impairment in value may have occurred. There were 0 impairment charges duringrecoverability of long-lived assets by determining whether the six months ended June 30, 2021 and 2020. Goodwill In accordance with ASC 350,Intangibles—Goodwill and Other, we test goodwill for impairment for each reporting unit on an annual basis, or when events or circumstances indicate the faircarrying value of a reporting unitsuch assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is below itsless than the carrying value. Our goodwill representsamount of those assets, we recognize an impairment loss based on the excess of the purchase pricecarrying amount over the fair value of the net identifiable assets acquired in business combinations. The goodwill generated from the business combinations is primarily relatedassets. Income Taxes Prior to the value placed on the employee workforceMullen’s capitalization and expected synergies. Judgment is involved in determining if an indicator or change in circumstances relating to impairment has occurred. Such changes may include, among others, a significant decline in expected future cash flows, a significant adverse changecorporate reorganization, our operations were included in the business climate,tax filings of MTI. The cash and unforeseen competition. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annuallydeferred tax positions between us and may vary by reporting unit. Factors we consider in the qualitative assessment include general macroeconomic conditions, industryMTI and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of its reporting units, sustained decrease in its share price, and other relevant entity specific events. If management determines on the basis of qualitative factors that the fair value of the reporting unit is more likely than not less than the carrying value, then we perform a quantitative test for that reporting unit. The fair value of each reporting unit is compared to the reporting unit’s carrying value, including goodwill. Subsequent to the adoption on January 1, 2017 of ASU 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, if the fair value of a reporting unit is less than its carrying value, we recognize an impairment equal to the excess carrying value, not to exceed the total amount of goodwill allocated to that reporting unit. We did not recognize any impairment charge to goodwill during the six months ended June 30, 2021 and 2020. For a discussion of the estimate methodology and the significance of various inputs, please see the subheading below titled “Use of Estimates.” Capitalized Customer Acquisition Costs, Net Capitalized customer acquisition costs consist of up-front cash payments made to ISG’s for the establishment of new merchant relationships. Capitalized customer acquisition costs represent incremental, direct customer acquisition costs that are recoverable through gross margins associated with merchant contracts. The up-front cash payment to the ISG is based on the estimated gross margin for the first year of the merchant contract. The deferred customer acquisition cost asset is recorded at the time amounts are receivable but not yet earned and the capitalized acquisition costs are amortized on a straight-line basis over a period of approximately four years. These capitalized costs, net of amortization expense, are included in intangible assets on the accompanying consolidated balance sheets (See Note 6 – item labeled “Client AcquisitionCosts”). 8 Table of Contents Accrued Residual Commissions We record commissions as a cost of revenues in the accompanying consolidated statement of operations and comprehensive loss. We pay agent commissions to ISGs and independent sales agents based on the processing volume of the merchants enrolled. The commission obligations are based on varying percentages of the volume processed by us on behalf of the merchants. Percentages vary based on the program type and transaction volume of each merchant. Fair Value Measurements Our financial instruments consist primarily of cash, accounts receivables, accounts payables, and a note payable. The carrying values of these financial instruments are considered to be representative of their fair values due to the short-term nature of these instruments. The carrying amount of notes payable of approximately $8.9 million and $9.9 million at June 30, 2021 and December 31, 2020, respectively, approximates fair value because current borrowing rates do not materially differ from market rates for similar bank borrowings. The notes payable are classified as a Level 2 item within the fair value hierarchy. We measure certain nonfinancial assets and liabilities at fair value on a nonrecurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use a three-level fair value hierarchy to prioritize the inputs used to measure fair value and maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1 — Quoted market prices in active markets for identical assets or liabilities as of the reporting date Level 2 — Observable market based inputs or unobservable inputs that are corroborated by market data Level 3 — Unobservable inputs that are not corroborated by market data These non-financial assets and liabilities include intangible assets and liabilities acquiredformalized in a business combination as well as impairment calculations, when necessary. The fair value of the assets acquired and liabilities assumed in connection with the PayOnline acquisition, were measured at fair value by us at the acquisition date. The fair values of our merchant portfolios are primarily based on Level 3 inputs and are generally estimated based upon independent appraisals that include discounted cash flow analyses based on our most recent cash flow projections, and, for years beyond the projection period, estimates based on assumed growth rates. Assumptions are also made regarding appropriate discount rates, perpetual growth rates, and capital expenditures, among others. In certain circumstances, the discounted cash flow analyses are corroborated by a market-based approach that utilizes comparable company public trading values, and, where available, values observed in private market transactions. The inputs used by management for the fair value measurements include significant unobservable inputs, and therefore, the fair value measurements employed are classified as Level 3. Goodwill impairment is primarily based on observable inputs using company specific information and is classified as Level 3. Leases Effective January 1, 2019, we adopted ASU 2016-02,Leases (Topic 842) which supersedes the lease accounting requirements in Accounting Standards Codification (ASC) 840,Leases (Topic 840). Please refer to Recent Accounting Pronouncements below for additional information on the adoption of Topic 842 and the impact upon adoption to the Company’s consolidated financial statements. Under Topic 842, we applied a dual approach to all leases whereby we are a lessee and classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the Company. Lease classification is evaluated at the inception of the leasetax sharing agreement. Regardless of classification, we record a right-of-use asset and a lease liability for all leases with a term greater than 12 months. Our lease, for the premises we occupy for the North American Transaction Solutions segment's U.S. headquarters, was classified as an operating lease as of January 1, 2019. Operating lease expense is recognized on a straight-line basis over the term of the lease. We identify leases in our contracts if the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. We do not allocate lease consideration between lease and non-lease components and record a lease liability equal to the present value of the remaining fixed consideration under the lease. Any interest rate implicit in our leases are generally not readily determinable. Accordingly, we use our estimated incremental borrowing rate at the commencement date of the lease to determine the present value discount of the lease liability. We estimate the incremental borrowing rate for each lease based on an evaluation of our expected credit rating and the prevailing market rates for collateralized debt in a similar economic environment with similar payment terms and maturity dates commensurate with the term of the lease. The right-of-use asset for each lease is equal to the lease liability, adjusted for unamortized initial direct costs and lease incentives. We exclude options to extend or terminate leases from the calculation of the lease liability unless it is reasonably certain the option will be exercised. 9 Table of Contents Revenue Recognition and Deferred Revenue We recognize revenue when all of the following criteria are met: (1) the parties to the contract have approved the contract and are committed to perform their respective obligations, (2) we can identify each party’s rights regarding the goods or services to be transferred, (3) we can identify the payment terms for the goods or services to be transferred, (4) the contract has commercial substance, and (5) it is probable that we will collect substantially all of the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer. We consider persuasive evidence of a sales arrangement to be the receipt of a billable transaction from aggregators, signed contract or the processing of a credit card transaction. Collectability is assessed based on a number of factors, including transaction history with the customer and the credit worthiness of the customer. If it is determined that the collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash. We record cash received in advance of revenue recognition as deferred revenue. Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services and is recognized as revenue during the period the transactions are processed or when the related services are performed. Our transactional processing fees are generated primarily from TOT Payments doing business as Unified Payments, which is our North American Transaction Solutions segment, PayOnline, which is our International Transaction Solutions segment, and Aptito, which is our point of sale solution for restaurants. We work directly with payment card networks and banks so that our merchants do not need to manage the complex systems, rules, and requirements of the payments industry. We satisfy our performance obligations and therefore recognize the transactional processing service fees as revenue upon authorization of a transaction by the merchant’s customer’s bank. The majority of our revenues is derived from volume-based payment processing fees ("discount fees”) and other related fixed transaction or service fees. Discount fees represent a percentage of the dollar amount of each credit or debit transaction processed. Discount fees are recognized at the time the merchants’ transactions are processed. Generally, where we have control over merchant pricing, merchant portability, credit risk and ultimate responsibility for the merchant relationship, revenues are reported at the time of sale on a gross basis equal to the full amount of the discount charged to the merchant. This amount includes interchange fees paid to card issuing banks and assessments paid to payment card networks pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants. Revenues generated from merchant portfolios where we do not have control over merchant pricing, liability for merchant losses or credit risk or rights of portability are reported net of interchange and other fees. Revenues are also derived from a variety of fixed transaction or service fees, including authorization fees, convenience fees, statement fees, annual fees, and fees for other miscellaneous services, such as handling chargebacks. Revenues derived from service fees are recognized at the time the services are performed and there are no further performance obligations. Revenue from the sale of equipment is recognized upon transfer of ownership and delivery to the customer, after which there are no further performance obligations. We primarily report revenues gross as a principal versus net as an agent. Although some of our processing agreements vary with respect to specific terms, the transactional processing service fees collected from merchants generally are recognized as revenue on a gross basis as we are the principal in the delivery of the managed payments solutions to the sellers. The gross fees we collect are intended to cover the interchange, assessments and other processing and non-processing fees which are included and are part of our gross margin. We have primary responsibility for providing end-to-end payment processing services for our clients. Our clients contract us for all credit card processing services, including transaction authorization, settlement, dispute resolution, data/transmission security, risk management, reporting, technical support and other value-added services. We have concluded that we are the principal because we control the services before delivery to the merchant, and are primarily responsible for the delivery of the services, have discretion in setting prices charged to merchants, and are responsible for losses. We also have pricing latitude and can provide services using several different network options. Net Income (Loss) per Share Basic net income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares issuable upon exercise of common stock options or warrants. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would have an anti-dilutive effect. 10 Table of Contents Income taxes are recorded in accordance with ASC 740, Income Taxes We account (“ASC 740”), which provides for incomedeferred taxes under theusing an asset and liability method, which requires the recognition ofapproach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferredstatements or tax returns. Deferred tax assets and liabilities are determined based on the basis of the differencesdifference between the consolidated financial statementsstatement and tax basisbases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. There are transactions that occur during the ordinary course of business for which the ultimate tax determination may be uncertain. At March 31, 2022 and September 30, 2021, there were no material changes to either the nature or the amounts of the uncertain tax positions. The effectCompany’s income tax provision consists of a changean estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in tax rates on deferred tax assets and liabilities, is recognized in incomeand changes in the period that includestax law. We maintain a full valuation allowance against the enactment date. We recognizevalue of our U.S. and state net deferred tax assets because management does not believe the recoverability of the tax assets meets the “more likely than not” likelihood at March 31, 2022 and September 30, 2021. 10 Table of Contents ​ Intangible Assets Intangible assets consist of acquired and developed intellectual property and website development costs. In accordance with ASC 350, “Intangibles—Goodwill and Others,” goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. Intangible assets with determinate lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortizable intangible assets generally are amortized on a straight-line basis over periods up to 36 months. The costs to periodically renew our intangible assets are expensed as incurred. Other Assets Other assets are comprised primarily of Coda electric vehicles, related parts and security deposits related to the extentCompany’s property leases related to the EV business. Extinguishment of Liabilities The Company derecognizes financial liabilities when the Company’s obligations are discharged, cancelled, or expired. Leases In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, “Leases” (ASU 2016-02). The core principle of ASU 2016-02 is that we believe theselessees should recognize on its balance sheet, assets are more likely than notand liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to be realized. In making suchmake lease payments (the lease liability) and a determination, we considerright-of-use asset representing its right to use the underlying leased asset for the lease term. Lessees shall classify all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assetsleases as finance or operating leases. The Company adopted ASU 2016-02, on October 1, 2019, which resulted in the recognition of the right-of-use assets and related obligations on its carve-out financial statements. Accrued Expenses Accrued expenses are expenses that have been incurred but not yet paid and are classified within current liabilities on the consolidated balance sheets. General and Administrative Expenses General and administrative (“G&A”) expenses include all non-production related 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, and licenses. Advertising costs are expensed as incurred and are included in G&A expenses. Other than trade show expenses which are deferred until occurrence of the future event, we expense advertising costs as incurred in excessaccordance with ASC 720-35, “Other Expenses – Advertising Cost.” Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses primarily consist of their net recorded amount, we would make an adjustment tocosts associated with the deferred tax asset valuation allowance, which would reduce the provision for income taxes.development of our Mullen Five show car. Share-Based Compensation We account for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognitionshare-based awards issued by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. We classify the liability for unrecognized tax benefits as current to the extent we anticipate payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. The open United States tax years subject to examination with respect to our operations are 2017,2018,2019 and 2020. Interchange, Network Fees and Other Cost of Services Interchange and network fees consist primarily of fees that are directly related to discount fee revenue. These include interchange fees paid to issuers and assessment fees payable to card associations, which are a percentage of the processing volume we generate from Visa and Mastercard, AMEX, and Discover, as well as fees charged by card-issuing banks. Other costs of services include costs directly attributable to processing and bank sponsorship costs, which may not be based on a percentage of volume. These costs also include related costs such as residual payments to sales groups, which are based on a percentage of the net revenues generated from merchant referrals. In certain merchant processing bank relationships we are liable for chargebacks against a merchant equal to the volume of the transaction. Losses resulting from chargebacks against a merchant are included in other cost of services or as a bad debt expense, determined on the timing and nature of the specific transaction, on the accompanying consolidated statement of operations. We evaluate the risk for such transactions and our potential loss from chargebacks based primarily on historical experience and other relevant factors. Equity-based Compensation We account for grants of equity awards to employeesMAI in accordance with ASC Subtopic 718-10, “Compensation – Share Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all common shares of MAI issued to employees, non-employees and directors. The fair value of non-marketable share-based awards has been estimated based on an independent valuation. The MAI common and preferred share valuations have been appraised by an independent financial valuation advisor, based on assumptions management believes to be 11 Table of Contents ​ reasonable. Key assumptions and approaches to value used in estimating fair value, includes economic and industry data; business valuation; prior transactions; option value method and other cost, income and market value approaches. Share-based compensation is included within general and administrative expenses. Beginning on July 1, 2021, share based compensation awards have been valued based on valuation of the trading price of Net Element common stock, as adjusted for the share exchange ratio in the merger. See Note 9, MAI Share-Based Compensation, for the amount of share-based compensation expense that is included within General and Administrative expenses for the three and six months ended March 31, 2022 and 2021. Related Party Transactions We have related party transactions with certain of our directors, officers, and principal shareholders. These transactions, which are primarily long-term in nature, include operational loans, convertible debt, and warrants for financial support associated with the borrowing of funds and are entered into in the ordinary course of business. Fair Value of Financial Instruments We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, Company management considers the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. Concentrations of Business and Credit Risk We maintain cash balances in several financial institutions that are insured by either the Federal Deposit Insurance Corporation or the National Credit Union Association up to certain federal limitations, generally $250,000. At times, our cash balance may exceed these federal limitations and maintains significant cash on hand at certain of its locations. However, we have not experienced any losses in such accounts and management believes we are not exposed to any significant credit risk on these accounts. Recently Issued and Adopted Accounting Standards In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) (Topic 350), “Intangibles - Goodwill and Others.” ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. We adopted ASU 2017-04, on October 1, 2020, which did not have a material impact on our consolidated balance sheets. In September 2018, the FASB issued Accounting Standards Update No. 2018-07 (ASU 2018-07) ASU No. 2018-07 (Topic 718), “Compensation—Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting.” 12 Table of Contents ​ ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. We adopted ASU 2018-07, on October 1, 2020, which did not have a material impact on our consolidated statements of operations. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and early adoption is permitted. Company management is evaluating the future impact this guidance on our consolidated financial statements. In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation— – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This standard requires compensationThe ASU will be effective for fiscal years beginning after December 15, 2021, (December 15, 2023 for smaller reporting companies). We have issued debt and equity instruments, the accounting for which could be impacted by this update. Company management is evaluating the impact this guidance on our financial condition and results of operations. NOTE 4 – INTANGIBLE ASSETS For the six months ended March 31, 2022 and 2021, we incurred website development and trademark costs of $246,132 and $41,250, respectively. These costs historically have been capitalized, as the website is in the development stage, resulting in improved functionality. Amortization of the website commenced when the website was placed in service for its intended use during the fourth quarter of 2021. Legal fees incurred for registration of trademarks account for all of the costs of trademark at March 31, 2022. Amortization of these costs will commence when the trademark application and registration process has been completed. The weighted average useful life of the intellectual property is 3.0 years. Identifiable intangible assets with definite lives are amortized over the period of estimated benefit using the straight-line method and the estimated useful lives of three years. The straight-line method of amortization represents management’s best estimate of the distribution of the economic value of the identifiable intangible assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31, 2022      September 30, 2021 ​   Gross   ​ ​   Net   Gross   ​ ​   Net ​   Carrying      Accumulated      Carrying ​ Carrying      Accumulated      Carrying Finite-Lived Intangible Assets   Amount ​ Amortization   Amount   Amount ​ Amortization   Amount Website design and development ​ $ 2,660,391 ​ $ (665,097) ​ $ 1,995,294 ​ $ 2,660,391 ​ $ (221,699) ​ $ 2,438,692 Intellectual property ​   71,182 ​   (71,182) ​   — ​   71,182 ​   (69,205) ​   1,977 Trademark ​   300,722 ​   — ​   300,722 ​   54,590 ​   — ​   54,590 Total Finite-Lived Intangible Assets ​ $ 3,032,295 ​ $ (736,279) ​ $ 2,296,016 ​ $ 2,786,163 ​ $ (290,904) ​ $ 2,495,259 ​ Total future amortization expense for finite-lived intellectual property is as follows: ​ ​ ​ ​ ​ Years Ended March 31,       Future Amortization 2022 (six months) ​ $ 443,398 2023 ​   886,797 2024 ​   665,099 Thereafter ​ ​ 300,722 Total Future Amortization Expense ​ $ 2,296,016 ​ For the three and six months ended March 31, 2022, amortization expense for the intangible assets was $221,699 and $445,376, and $5,932 and $11,864 for the three and six months ended March 31, 2021, respectively. 13 Table of Contents ​ NOTE 5 – DEBT Short-term debt comprises a significant component of the Company’s funding needs. Short-term debt is generally defined as debt with principal maturities of one-year or less. Long-term debt is defined as principal maturities of one year or more. Short and Long-Term Debt The following is a summary of our indebtedness at March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Carrying Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid Principal  ​ ​ ​ ​ ​ ​ ​ Contractual ​ Contractual  Type of Debt      Balance      Current      Long-Term       Interest Rate      Maturity Matured Notes ​ $ 3,051,085 ​ $ 3,051,085 ​ $ —   0.00% - 15.00 %   2016 - 2021 Promissory Notes ​   19,331,912 ​   14,331,912 ​   5,000,000   8.99% - 28.00 %   2021 – 2024 Real Estate Note ​   265,973 ​   37,185 ​   228,788   5.00 %   2023 Loan Advances ​   557,800 ​   557,800 ​   —   0.00% - 10.00 %   2019 – 2020 Less: Debt Discount ​   (1,118,902) ​   (1,118,902) ​   —   NA   NA Total Debt ​ $ 22,087,868 ​ $ 16,859,080 ​ $ 5,228,788   NA   NA ​ The following is a summary of our indebtedness at September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Carrying Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid Principal  ​ ​ ​ ​ ​ ​ ​ Contractual ​ Contractual  Type of Debt      Balance      Current      Long-Term       Interest Rate      Maturity Matured Notes ​ $ 5,838,591 ​ $ 5,838,591 ​ $ —   0.00% - 15.00 %   2016 - 2021 Promissory Notes ​   23,831,912 ​   23,831,912 ​   —   28.00 %   2021 – 2022 Demand Note ​   500,000 ​   500,000 ​   —   27.00 %   2020 Convertible Unsecured Notes ​   15,932,500 ​   15,932,500 ​   —   15.00%-20.00 %   2021 - 2022 Real Estate Note ​   283,881 ​   36,269 ​   247,612   5.00 %   2023 Loan Advances ​   1,122,253 ​   1,122,253 ​   —   0.00% - 10.00 %   2019 – 2020 Less: Debt Discount ​   (8,060,555) ​   (8,060,555) ​   —   NA   NA Total Debt ​ $ 39,448,582 ​ $ 39,200,970 ​ $ 247,612   NA   NA ​ Scheduled Debt Maturities The following scheduled debt maturities at March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​   Years Ended March 31,  ​      2022 (6 months)      2023      2024      Total Total Debt ​ $ 16,859,080 ​ $ 228,788 ​ $ 5,000,000 ​ $ 22,087,868 ​ Notes and Advances We enter into promissory notes with third parties and company officers to support our operations. Promissory notes typically are for less than three years maturity and carry interest rates from 0% to 28.0%. Company management is working with the creditors to remediate the $3,051,085 in promissory notes and $557,800 in loan advances that are in default. Promissory notes and loan advances that are in default still accrue interest after their scheduled maturity date. There are no financial covenants associated with the promissory notes and loan advances, and there are no compliance waivers that have been received from creditors. We record imputed interest on promissory notes and advances which are deemed to be below the market interest rate. For the three and six months ended March 31, 2022, we recorded interest expense of $2,120,515 and $24,559,459, and $4,092,759 and $6,499,089 for the three and six months ended March 31, 2021, respectively. 14 Table of Contents ​ In some instances, MTI issued shares of common stock or warrants along with the issuance of promissory notes, resulting in the recognition of a debt discount which is amortized to interest expense over the term of the promissory note. Debt discount amortization for the three and six months ended March 31, 2022 and 2021, was $188,307 and $19,400,483, and was $918,574 and $1,405,450 for the three and six months ended March 31, 2021, respectively. During 2021, MTI issued shares of stock to certain creditors in satisfaction of debt payments or in settlement of indebtedness. These agreements essentially exchanged a predetermined amount of stock to settle debt. For the six months ended March 31, 2022 and 2021, the carrying amount of indebtedness that was settled via issuance of MTI shares was $23,192,500 and 0, respectively. NuBridge Commercial Lending LLC Promissory Note On March 7, 2022, the Company’s wholly owned subsidiary, Mullen Investment Properties, LLC entered into a Promissory Note (the “Promissory Note”) with NuBridge Commercial Lending LLC for a principal amount of $5 million. The Promissory Note bears interest at a fixed rate of 8.99% per annum and the principal amount is due March 1, 2024. Collateral for the loan included the title to the Company’s property at 1 Greentech Drive, Tunica, MS Under the Promissory Note, prepaid interest and issuance costs were withheld from the principal and recorded as a discount on the note of $1.2 million, which will be amortized over the term of the note. As of March 31, 2022, the remaining unamortized discount was 1,118,902. Drawbridge Relationship During July 2020, Drawbridge-DBI and MTI entered into a settlement agreement (the “Agreement”) to restructure the aggregate obligations owed to Drawbridge-DBI and the other DBI-affiliated entities. In connection with the Agreement, (a) the Sale-Leaseback obligation in the amount of $49,500,000 was replaced by a new note with a face value of $23,831,554, (b) the other indebtedness and advances from DBI-affiliated entities with a net book value of $9,935,086 were extinguished, and (c) MTI issued 71,516,534 MAI – 5,567,319 Series B Preferred Shares to Drawbridge-DBI. The amounts owed to Drawbridge-DBI is $27,185,390 and $33,296,648 as of March 31, 2022 and September 30, 2021, respectively, and are in default. The amounts owed to other DBI-affiliated entities is 0 and $982,500, as of March 31, 2022 and September 30, 2021, respectively. The 2020 Drawbridge loan is currently recognized within the current portion of debt on the consolidated balance sheet. On July 16, 2021, the Company and Drawbridge entered into an agreement whereby Drawbridge acknowledged, waived, and consented to the contribution and spin-off of Mullen's EV assets into a new entity. As indicated in Note 1 to the financial statements, the spin-off occurred immediately prior to the consummation of the merger with Net Element. As part of the agreement, Drawbridge was paid $10,000,000, to be applied towards the outstanding principal balance and includes a waiver of default. The principal pay down to Drawbridge occurred on November 15, 2021. Release of Liability, Debt Paydowns and Payoffs ​ On March 7, 2022, the Company repaid the $100,000 loan from Chris Langley, which matured on April 27, 2016 On March 11, 2022, the Company repaid the $250,000 loan from Wittels Consulting LLC, which matured on January 19, 2021. On February 28, 2022, the Company repaid the $200,000 loan from Lee Tran, which matured on January 28, 2022 On March 3, 2022, the Company repaid the $1,000,000 loan from Mark Betor, and $150,000 interest, with a maturity date of April 10, 2022. On December 27, 2021, the Par Funding/CBSG debt of $74,509 has been deemed satisfied by the authorized agent for the trustee of the creditor.As result of the trustee’s actions, the Company recorded an extinguishment of $74,509. 15 Table of Contents ​ On November 29, 2021, the Company repaid $140,000, and on March 11, 2022 repaid $110,000, on the loan from the NY Group, which had matured on January 24, 2021. On November 29, 2021, the Company repaid the $25,000 loan from MABM Holdings loan, which matured on January 13, 2021. On November 19, 2021, the Company repaid $250,000, and on February 1, 2022 repaid $207,500, on the loan from the Royal Business Group LLC, which had matured on July 17, 2020. On November 11, 2021, the Company executed a release of liability for the EXIM relationship. MAI (through MTI) paid $1,750,000 to EXIM USA to dismiss or release any and all claims, causes of action, lawsuits or other demands upon MTI. The loan matured on October 31, 2019, and the then current balance on the loan was $700,000 plus interest. On November 9, 2021, the Company executed a release of liability for the Elegant Funding relationship. The lending relationship covered two transactions: 1. $458,000 loan dated May 23, 2018, which had matured on November 23, 2018. The current principal balance was $438,000, and the payoff amount was $604,770. 2. $185,000 dated September 29, 2018, which had matured on March 29, 2019. The current principal balance is $185,000, and the payoff amount is $222,426. On November 9, 2021, MAI (through MTI) repaid a loan from John Gordon, which had matured on May 7, 2019. In consideration for the settlement, MAI (through MTI) received the title to one (1) Qiantu Dragonfly K50 EV car. Convertible Notes Between August 2020 and November 2021, MTI issued unsecured convertible notes totaling $23,192,500. The unsecured convertible notes bore interest at 15% and included warrants to acquire shares of common stock based on a specified formula. Interest was accrued in arrears until the last business day of each calendar year quarter. The default rate on the note would increase to 20% if quarterly interest payments are not timely made by MTI. Because the market price for MTI common stock on the date of the notes exceeded the notes’ conversion price of $0.6877 per share, a beneficial conversion feature in the amount of $10,613,630 was recorded as a discount on the notes. The discount is being amortized as additional interest over the life of the notes. At March 31, 2021, the discount was fully amortized. Company management evaluated the conversion features embedded in the convertible notes for classification and accounting under the provisions of ASC 815-40 and determined the conversion features met treatment as equity. ​ NOTE 6 – FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis Non-financial assets, such as property, equipment and leasehold improvements is required to be measured basedat fair value only when acquired or when an impairment loss is recognized. See “Note 12 - Property, Equipment and Leasehold Improvements, Net” for further information on impairment of fixed assets. Financial instruments for which carrying value approximates fair value Certain financial instruments that are not carried at fair value on the condensed consolidated balance sheets are carried at amounts that approximate fair value, due to their short-term nature and credit risk. These instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. We believe that the carrying value of term debt approximates fair value due to the variable rates associated with these obligations. Accounts payable are short-term in nature and generally terms are due upon receipt or within 30 to 90 days. 16 Table of Contents ​ NOTE 7 – STOCKHOLDERS’ EQUITY The accompanying financial statements include a retrospective recapitalization to reflect the composition of stockholder’s equity, as if they had existed for the periods presented. Preferred Stock On November 5, 2021, we filed an Amended and Restated Articles of Incorporation which included the rights and privileges of Preferred Stock Series A, Series B, and Series C. Under the terms of our Articles of Incorporation, the Board of Directors may determine the rights, preferences and terms of our authorized but unissued shares of preferred stock. Dividends The holders of Preferred Stock are entitled to non-cumulative dividends if declared by the Board of Directors. The holders of the Preferred Stock Series A and Series B shall participate on a pro rata basis (on an “as converted” basis to common stock) in any cash dividend paid on common stock. NaN dividends have been declared or paid during the three and six months ended March 31, 2022 and 2021. The Series C Preferred Stock bears a cumulative 15.0% per annum fixed dividend payable no later than the 5th day after the end of each month on the Series C Original Issue Price plus unpaid accrued and accumulated dividends. Dividends on the Series C Preferred Stock are prior to any dividends on any other series of Preferred Stock or the Common Stock. The Company may elect to pay dividends for any month with a paid-in-kind election (“PIK”) if (i) the shares issuable further to the PIK are subject to an effective registration statement, (ii) the Company is then in compliance with all listing requirements of NASDAQ and (iii) the average daily trading dollar volume of the Company’s Common Stock for 10 trading days in any period of 20 consecutive trading days on the NASDAQ is equal to or greater than $2.0 million. There is no mandatory redemption date, but, subject to the conditions set forth below, all, but not less than all, of the shares are redeemable by the Company at any time, provided that if the Company issues notice to redeem, holders of Series C Preferred shall have 15 days to convert such shares to Common Stock prior to the date of redemption. In addition to the above, the shares are also redeemable by the Company in accordance with the following schedule provided the issuance of shares of Common Stock underlying the shares has been registered and the registration statement remains effective: Year 1: NaN Redemption Year 2: Redemption at 120% of the Series C Redemption Price Year 3: Redemption at 115% of the Series C Redemption Price Year 4: Redemption at 110% of the Series C Redemption Price Year 5: Redemption at 105% of the Series C Redemption Price Year 6 and thereafter: Redemption at 100% of the Series C Redemption Price 17 Table of Contents ​ Liquidation Based on a reverse ratio of one share of the Company for 12.9485 shares of Mullen Technologies (the “Reverse Ratio”):, (i) the liquidation preference for the Series A Preferred to $1.29 per share from $0.10 per share as set forth in Section 2(c) of Article III(B) of the Certificate, and (ii) the “Series B Original Issue Price” of the Series B Preferred and the “Series C Original Issue Price” of the Series C Preferred to $8.84 per share from $0.6877 per share as set forth in Section 2(a) and Section 2(b), respectively, of Article III(B) of the Certificate. Subject to applicable law, in the event of any Liquidation Event, the holders of the Series B Preferred will be entitled to receive, prior and in preference to any distribution of the proceeds to the holders of the other series of Preferred Stock or the Common Stock by reason of their ownership thereof, an amount per share equal to the Series B Original Issue Price plus declared but unpaid dividends. The holders of the Series C Preferred will then be entitled to receive, prior and in preference to any distribution of the proceeds to the holders of the Series A Preferred or the Common Stock by reason of their ownership thereof, an amount per share equal to the Series C Original Issue Price plus declared but unpaid dividends. Thereafter, any remaining proceeds will be distributed to holders of the Series A Preferred and Common Stock ratably in proportion to the number of shares of the Series A Preferred and Common Stock held by them, on a fully converted basis. Conversion Preferred Stock Series A is convertible at any time at the option of the holder into Common Stock at a conversion rate of one for one hundred basis with common shares of at any time after the date of issuance of such shares into such number of fully paid and non-accessible shares of Common Stock. Preferred Stock Series B and Preferred Stock Series C are convertible at any time at the option of the holder into Common Stock at a conversion rate of 1 for one basis with common shares at any time after the date of issuance of such shares into such number of fully paid and non-accessible shares of Common Stock. Additionally, all outstanding shares of the Preferred Stock shall automatically convert into shares of the underlying Common Stock upon the Company’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act, the public offering price of which results in aggregate cash proceeds to the Company of not less than $50 million, net of underwriting discounts and commissions (a “Qualified IPO”). Voting Rights The holders of shares of Common Stock and Preferred Stock shall at all times vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders; provided, however, that, any proposal which adversely affects the rights, preferences and privileges of the Series A Preferred, Series B Preferred, or Series C Preferred, as applicable, must be approved by a majority in interest of the affected Series of Preferred Stock, as the case may be. Each holder of Common Stock, Series B Preferred and Series C Preferred to have the right to one vote per share (on a fully converted basis) held of record by such holder and each holder of Series A Preferred have the right to 1,000 votes per share (on a fully converted basis) held of record by such holder. Common Stock We have 500,000,000 shares of common stock authorized with $0.001 par value per share. There were 289,784,112 and 7,048,387 shares of common stock issued and outstanding at March 31, 2022 and September 30, 2021. 18 Table of Contents ​ The holders of Common Stock are entitled to 1 vote for each share of Common Stock held at all meetings of shareholders. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the common shareholders are entitled to receive the remaining assets following distribution of liquidation preferences, if any, to the holders of our preferred stock. The holders of common stock are not entitled to receive dividends unless declared by our Board of Directors. To date, 0 dividends were declared or paid to the holders of common stock. Warrants The Warrants were issued at an initial exercise price of $0.6877 per share, were immediately exercisable upon issuance and have a term of five years from the date of issuance. The exercise price was adjusted as provided in the warrants and further in accordance with the Merger Agreement such that the exercise price is now $8.84 per share. The Warrants were exercisable for an aggregate of 196,005,353 shares of Common Stock as of March 31, 2022. The Warrants provide that if the Company issues or sells, enters into a definitive, binding agreement pursuant to which he Company is required to issue or sell or is deemed, pursuant to the provisions of the Warrants, to have issued or sold, any shares of Common Stock for a price per share lower than the exercise price then in effect (a “Dilutive Issuance”), subject to certain limited exceptions, then the exercise price of the Warrants shall be reduced to such lower price per share. In addition, the exercise price and the number of shares of Common Stock issuable upon exercise of the Warrants are subject to adjustment in connection with stock splits, dividends or distributions or other similar transactions. The following table summarizes warrant activity for the six months ended March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​      ​      Weighted Average  ​ ​ MAI shares ​ Exercise Price Warrants outstanding at September 30, 2021   4,924,447 ​ $ 8.84 Warrants exercised   (14,119,525) ​ $ 8.84 Warrants granted   25,073,927 ​ $ 8.84 Warrants expired   — ​ $ — Warrants outstanding at March 31, 2022   15,878,849 ​ $ 8.84 ​ 2020-2021 Warrants The warrants are exercisable for a five-year period commencing upon issuance. The estimated fair value of the share-based awardsMAI warrants was valued using the Black-Scholes option valuation model. The assumptions used that represent management’s best estimates of the fair value of the Company’s warrants issued and outstanding were as follows: ​ ​ ​ ​ ​ ​ ​      March 31, 2022   Expected term (in years)   ​ 5.0 ​ Volatility   ​ 135 % Dividend yield   ​ 0.00 % Risk-free interest rate   ​ 0.98 % - 1.17 % Common stock price   $ 4.16 ​ ​ The allocation of the fair value of these warrants was included as a debt discount on the consolidated balance sheet and amortized to interest expense over the scheduled maturity dates of the various promissory notes. All unamortized debt discount was charged to interest at the time of merger on November 5, 2021. Registration Rights and Registration Statement Form S-3 At the effective time of the Merger, various agreements that Mullen Technologies entered into were assumed by the Company, including the Exchange Agreement, the $20 Million SPA and the Registration Rights Agreement. These agreements caused the Company to be obligated to file one or more registration statements to register the resale of our Common Stock. 19 Table of Contents ​ On April 15, 2022, the SEC deemed the Registration Statement Form S-3 (File No. 333-263880) effective.  The Company registered the resale of Conversion Shares and the Warrant Shares as required by that certain Registration Rights Agreement, entered into among Mullen Technologies, Inc (“Mullen Technologies”) and certain of the Selling Stockholders (the “Registration Rights Agreement”) and that certain Exchange Agreement, entered into among Mullen Technologies and certain of the Selling Stockholders (the “Exchange Agreement”).  The Offered Shares consisted solely of 51,622,489 shares of our Common Stock, 4,969,357 shares of our Common Stock (the “Conversion Shares”) issuable upon conversion of our preferred stock, and up to 196,517,186 shares of our Common Stock (the “Warrant Shares”) issuable upon exercise of outstanding warrants to purchase shares of our Common Stock (the “Warrants”). Equity Transactions $30 Million Esousa Equity Line of Credit On September 1, 2021, Mullen Technologies and Esousa Holdings LLC (“Esousa”) entered into a Securities Purchase Agreement (the “Equity Line of Credit”) whereby the Esousa Holdings, LLC committed to purchase up to an aggregate of up to $30,000,000. At the effective time of the Merger, the obligations under the Equity Line of Credit were assumed by the Company. As a condition to the obligation of the investor to fund the Equity Line of Credit, the Company must file an SEC registration statement covering the sale of the Common Stock issued under the Equity Line of Credit and such registration statement must be declared effective. The SEC Registration Statement was filed on February 1, 2022 and was declared effective on February 3, 2022. As of March 31, 2022 MAI has received net proceeds of $29.6 million from the equity line of credit and Esousa has received 54,811,504 common shares. ​ ​ NOTE 8 – LOSS PER SHARE Earnings per common share (“EPS”) is computed by dividing net income allocated to common shareholders by the weighted-average common shares outstanding, excluding unvested common shares subject to repurchase or cancellation. Diluted EPS is computed by dividing income allocated to common shareholders plus dividends on dilutive convertible preferred stock and preferred stock that can be tendered to exercise warrants, by the weighted-average common shares outstanding plus amounts representing the dilutive effect of outstanding warrants and the dilution resulting from the conversion of convertible preferred stock, if applicable. For the three and six months ended March 31, 2022 and 2021, the shares of Preferred Stock were excluded from the diluted share count because the result would have been antidilutive under the “if-converted method.” The warrants to purchases common shares of stock also were excluded from the computation because the result would have been antidilutive. NOTE 9 – MAI SHARE- BASED COMPENSATION MAI has a share incentive plan as part of its annual discretionary share-based compensation programs. The plan includes consultants and employees, including directors and officers. For employees, they are notified of company share incentives during the onboarding process. The employee’s offer letter briefly describes the plan. Subject to the approval of MAI’s Board of Directors or its Compensation Committee and following the adoption of an equity incentive plan, employees are issued a specified number of shares of the MAI Common Shares. Employees are vested in 100% of the MAI shares after 12 months of continuous service. Additional MTI shares may be issued to employees over the next two years at anniversary date. Any disruption or separation of service results in the forfeiture of common shares. The total expense recognized for share awards represents the grant date fair value of grant andsuch awards, which is generally recognized as a charge to income ratably over the vesting period. Since we are public company, the employee shares are valued each month, using the MULN closing stock price on the NASDAQ CM. 20 Table of Contents ​ Consulting agreements or MAI shares for services are determined by the number of MAI shares granted within the individual contracts, as well as the services provided by the consultant. The MAI shares specified within the individual agreements are negotiated and approved by our Chief Executive Officer. The consultant earns the MAI shares over the service period. The MAI shares are accounted for as professional fees within G&A expenses. Employee share issuances are part of Salaries expense. The expense recognized for share awards represents the grant date fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31,  ​ For the six months ended March 31,  ​ Composition of Stock-Based Compensation Expense      2022      2021      2022      2021 ​ Employee MAI share issuance ​ $ 1,688,694 ​ $ 366,693 ​ $ 3,292,987 ​ $ 932,872 ​ MAI shares for services ​   21,546,573 ​   1,264,967 ​   24,042,060 ​   1,291,129 ​ MAI Share-Based compensation expense ​ $ 23,235,267 ​ $ 1,631,660 ​ $ 27,335,047 ​ $ 2,224,001 ​ ​ ​ NOTE 10 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31, 2022      September 30, 2021 Accrued Expenses and Other Liabilities   ​      ​    Accrued expense - other ​ $ 3,281,186 ​ $ 2,051,696 Accrued payroll ​   4,004,893 ​   4,586,057 Accrued interest ​   14,310,221 ​   12,489,012 Total ​ $ 21,596,300 ​ $ 19,126,765 ​ Accrued payroll represents salaries and benefits that are owed to employees, including payroll tax liabilities. Delinquent IRS and state tax liabilities as of March 31, 2022 and September 30, 2021 are $2,865,292 and $3,904,720, respectively. These tax liabilities have priority liens over MTI assets due to nonpayment of tax debt. The lien protects the government’s interest in all MTI property, including real estate, personal property and financial assets. See Note 17, Contingencies and Claims. Accrued interestrelates to finance charges on debt financing and represents interest on loans, and convertible notes payable throughout 2021. See Note 5, Debt. NOTE 11 – NOTE RECEIVABLE ​ On October 8, 2021, MAI (through MTI) and CEOcast, Inc. entered into an agreement, whereby CEOcast, Inc. irrevocably committed to purchase, and MAI irrevocably committed to sell $15 million in warrants to acquire shares of common stock. The aggregate purchase price will be paid to MTI at closing by means of a full recourse promissory note. MAI will issue pre-funded warrants that are registered in the name of CEOcast, Inc. The investor is committed to pay to MAI (through MTI) in the principal amount of $15 million. The note receivable bears no interest. ​ NOTE 12 – LIABILITY TO ISSUE STOCK ​ Liability represents stock payable that is accrued for and issuable at a future date for certain consultants and employees and was 0 and $7,027,500 as of March 31, 2022 and September 30, 2021, respectively. ​ ​ 21 Table of Contents ​ NOTE 13 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET Property, equipment, and leasehold improvements, net consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31,       September 30,  ​ ​ 2022 ​ 2021 Building ​ $ 8,078,757 ​ $ 804,654 Furniture and Equipment ​   485,534 ​   111,102 Vehicles ​   45,887 ​   45,887 Computer Hardware and Software ​   201,834 ​   139,742 Machinery and Equipment ​   6,946,018 ​   2,597,654 Leasehold Improvements ​   40,368 ​   66,379 Subtotal ​   15,798,398 ​   3,765,418 Less: Accumulated Depreciation ​   (2,744,463) ​   (2,583,941) Property, Equipment and Leasehold Improvements, Net ​ $ 13,053,935 ​ $ 1,181,477 ​ Depreciation expense related to property, equipment and leasehold improvements for the three-and-six months ended March 31, 2022 was $81,160 and $165,182, and was $108,972 and $211,467 for the three and six months ended March 31, 2021, respectively. On November 12, 2021, Mullen Investment Properties, LLC, MAI real estate wholly owned subsidiary, completed the $12,000,000 purchase of the Tunica County, MS property ("Advanced Manufacturing and Engineering Center" or "AMEC"). The property is approximately 127,400 square feet EV manufacturing facility and a small shed for storage. The property is located at 1 Greentech Drive, in the City of Robinsonville, MS. AMEC will be used to class 1 and class 2 EV cargo vans and the Mullen FIVE Crossover. The facility currently occupies 124,000 square feet of manufacturing space. The total available land on the property is over 100 acres. On the expanded site, Mullen plans to build a body shop, fully automated paint shop and a general assembly shop. NOTE 14 – OTHER ASSETS Other assets consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31, 2022      September 30, 2021 Other Assets   ​      ​    Coda Materials ​ $ 76,588 ​ $ 76,587 Show Room Cars ​   3,716,106 ​   2,739,995 Security Deposits ​   186,640 ​   186,640 Deposit on Property (See Note 16) ​   — ​   1,240,000 Total Other Assets ​ $ 3,979,334 ​ $ 4,243,222 ​ ​ 22 Table of Contents ​ NOTE 15 – OPERATING EXPENSES General and Administrative Expenses consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31,  ​ Six months ended March 31,  ​ ​ ​ 2022 ​ 2021      2022      2021 ​ Professional fees      $ 21,725,222      $ 2,457,846 ​ $ 26,864,554 ​ $ 3,399,575 ​ Salaries ​   4,217,073 ​   1,082,480 ​   7,378,993 ​   2,234,148 ​ Depreciation and amortization ​   302,859 ​   114,903 ​   610,558 ​   223,331 ​ Lease ​   559,583 ​   379,234 ​   1,019,118 ​   735,404 ​ Settlements and penalties ​   589,846 ​   24,910 ​   884,832 ​   79,498 ​ Employee benefits ​   545,108 ​   88,516 ​   913,160 ​   171,546 ​ Utilities and office expense ​   111,419 ​   72,351 ​   225,913 ​   140,234 ​ Advertising and promotions ​   472,803 ​   223,675 ​   2,925,593 ​   253,216 ​ Taxes and licenses ​   210,697 ​   4,811 ​   279,488 ​   11,505 ​ Repairs and maintenance ​   60,482 ​   56,529 ​   79,702 ​   100,335 ​ Other ​   474,341 ​   171,485 ​   988,605 ​   280,626 ​ Total ​ $ 29,269,433 ​ $ 4,676,740 ​ $ 42,170,516 ​ $ 7,629,418 ​ ​ Research and development consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31,  ​ Six months ended March 31,    ​      2022      2021      2022      2021   Research & Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Professional fees ​ $ 1,183,437 ​ $ 538,271 ​ $ 2,340,761 ​ $ 1,056,294 ​ Total ​ $ 1,183,437 ​ $ 538,271 ​ $ 2,340,761 ​ $ 1,056,294 ​ ​ Research and development costs are expensed as incurred. Research and development expenses primarily consist of Mullen Five EV development and are primarily comprised of personnel-related costs for employees and consultants. ​ ​ 23 Table of Contents ​ NOTE 16 – LEASES MTI (now assumed by MAI due to the merger) has entered into various operating lease agreements for certain of its offices, manufacturing and warehouse facilities, and corporate jet. We have implemented the provisions of ASC 842, on October 1, 2019. Operating leases are included in right-of-use assets, and current and noncurrent portion of lease liabilities, as appropriate. These right-of-use assets also includes any lease payments made and initial direct costs incurred at lease commencement and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the requisite servicelease term. We have lease agreements which require payments for both lease and non-lease components and has elected to account for these as a single lease component. Certain leases provide for annual increases to lease payment based on an index or rate. We calculate the present value of future lease payments based on the index or at the lease commencement date for new leases. The table below presents information regarding our lease assets and liabilities. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      March 31, 2022      September 30, 2021   Assets:   ​      ​    ​ Operating lease right-of-use assets ​ $ 2,066,049 ​ $ 2,350,929 ​ Liabilities: ​      ​      ​ Operating lease liabilities, current ​   (651,494) ​   (599,898) ​ Operating lease liabilities, non-current ​   (1,523,158) ​   (1,857,894) ​ Total lease liabilities ​ $ (2,174,652) ​ $ (2,457,792) ​ Weighted average remaining lease terms: ​      ​      ​ Operating leases ​   2.94 years ​   3.34 years ​ Weighted average discount rate: ​      ​      ​ Operating leases ​   28 %     28 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease costs: ​ For the three months ended March 31,  ​ For the six months ended March 31,    ​      2022      2021      2022      2021   Fixed lease cost ​ $ 452,789 ​ $ 140,171 ​ $ 739,271 ​ $ 485,241 ​ Variable lease cost ​   130,752 ​   232,283 ​   260,357 ​   236,599 ​ Short-term lease cost ​   29,185 ​   27,795 ​   125,777 ​   55,591 ​ Sublease income ​   (53,144) ​   (21,013) ​   (106,287) ​   (42,026) ​ Total operating lease costs ​ $ 559,582 ​ $ 379,236 ​ $ 1,019,118 ​ $ 735,405 ​ ​ Operating Lease Commitments Our leases primarily consist of land, land and building, or equipment leases. Our lease obligations are based upon contractual minimum rates. Most leases provide that we pay taxes, maintenance, insurance and operating expenses applicable to the premises. The initial term for most real property leases is typically 1 to 3 years, with renewal options of 1 to 5 years, and may include rent escalation clauses. For financing obligations, a portion of the periodic lease payments is recognized as interest expense and the remainder reduces the obligations. For operating leases, rent is recognized on a straight-line basis over the lease term, including scheduled rent increases and rent holidays. 24 Table of Contents ​ The following table reflects maturities of operating lease liabilities at March 31, 2022: ​ ​ ​ ​ ​ Years ending      ​      March 31,       ​ ​ 2022 (6 months) ​ $ 602,568 2023 ​   1,157,693 2024 ​   824,287 2025 ​   436,156 2026 ​   222,787 Thereafter ​   — Total lease payments ​ $ 3,243,491 Less: Imputed interest ​   (1,068,839) Present value of lease liabilities ​ $ 2,174,652 ​ ​ ​ ​ NOTE 17 – CONTINGENCIES AND CLAIMS ASC 450 governs the disclosure and recognition of loss contingencies, including potential losses from litigation, regulatory, tax and other matters. The accounting standard defines a “loss contingency” as “an existing condition, situation, or set of circumstances involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events occur or fail to occur.” ASC 450 requires accrual for a loss contingency when it is “probable that one or more future events will occur confirming the fact of loss” and “the amount of the loss can be reasonably estimated.” From time to time, we are subject to asserted and actual claims and lawsuits arising in the ordinary course of business. Company management reviews any such legal proceedings and claims on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our consolidated financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, management evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood is probable, but the amount cannot be reasonably estimated. Preferred Management Partners, Inc. – Consulting Agreement On September 23, 2021, MAI entered into a consulting arrangement with Preferred Management Partners, Inc. The Company hereby engages Preferred Management, Inc. to resume negotiations between MAI and Qiantu Motor Cars to enable the Company to procure the intellectual property ownership rights related to the K-50 automobile. As compensation for entering into this agreement and providing services to MAI, the consultant will receive 750,000 unrestricted publicly traded shares of the Company’s common stock registered on Form S-8 registration statement. If the consultant is successful, the Company will pay the consultant an additional 750,000 unrestricted shares of common stock registered on Form S-8 registration statement. On January 25, 2022, MAI Board of Directors terminated the consulting arrangement and approved the issuance of stock consideration under the S-3 Registration Statement, dated February 3, 2022 and deemed effective on February 4, 2022.  The Board approved the issuance of 1,000,000 shares for the termination of Preston Smart obligations and consulting arrangements.  The shares were issued in February 2022. International Business Machines (“IBM”) We previously recorded a $4.5 million liability associated with a lawsuit with IBM, in which IBM contended that we had not fulfilled our obligations pursuant to a contract entered into during 2017. On April 28, 2020, the Supreme Court of the State of New York granted summary judgment in favor of IBM’s claim for breach of contract. The Court, however, found that a trial (inquest) was required to determine the damages to which IBM is entitled. We proposed an offer in settlement 25 Table of Contents ​ to resolve the matter, with the parties proceeding under the Joint Development and Technology License Agreement and all rights restored to us under the Trademark License Agreement. On December 1, 2021, the Supreme Court of the State of New York entered a judgment of $5.6 million to IBM. On December 2, 2021, we filed a Notice of Appeal. As a result, we recorded an additional charge, increasing the liability to the adjudicated amount. Federal and State Tax Liabilities We have recorded a $2.8 million liability at March 31, 2022 associated with past due amounts owed to the Internal Revenue Service (“IRS”) and the Employment Development Department of California (“EDD”) for failing to remit payroll taxes associated with MTI and the Company’s employees. The IRS has filed a lien on substantially all of our assets. On April 14, 2022, the Company entered into an instalment with the IRS to pay $45,000 per month related to unpaid federal payroll liabilities plus accrued interest and penalties. On April 28, 2021, MTI entered into an installment agreement with the EDD to pay $10,000 per month related to unpaid state payroll tax liabilities of $346,575 plus accrued interest. Monthly payments of $10,000 are being made and will continue until paid in full. Raymond James and Associates (“RJA”) – Investment Banking Services Agreement On May 5, 2020, MTI entered into an agreement with Raymond James & Associates for public offering and placement agent services. The agreement called for payment of a cash retainer of $50,000, which remains unpaid. Upon the closing of any public offering, regardless of whether RJA procured the agreement regarding the offering, we are obligated to pay a financing fee of equal to the greater of a) 6.0% of aggregate gross proceeds and b) $3,000,000. Linghang Guochang Holding Group Co. (a/k/a “Linghang Boao Group, LTD”) In November 2019, we entered into a three-year Strategic Cooperation Agreement (“SCA”) with Linghang Boao Group LTD to co-develop a Solid- State Battery Management system with a 480 - 720-mile Driving Range. The Company’s total financial commitment under the SCA is $2,196,000. On December 3, 2019, we paid the first installment of $390,000. The remaining installments are payable upon the earlier of certain dates or the achievement of defined milestones. The contractual target dates and milestones have been severely disrupted due to the occurrence COVID-19. As a result, our management believes the COVID-19 pandemic represents a Force Majeure event (that is, the pandemic has impacted our and Linghang Boao Group LTD’s ability to meet their respective contractual obligations due to restriction in movement, stoppage of production, increase in costs due to scarcity of raw materials components, labor shortages, shortage of funds, disruption in the supply chains, U.S. governmental closures of ports/borders and travel restrictions). Based on the foregoing, we believe there is no breach of contract due to our failure of performance. We sustained a loss of $390,000 at September 30, 2020 due to contract nonperformance and force majeure. There are 0 accrued liabilities recorded for any remaining milestone payments at March 31, 2022. Our management notified Linghang Boao Group of the decision to invoke the force majeure provision of the Strategic Cooperation Agreement due to the inability of the parties to perform caused by the global Pandemic (Refer to Note 19, Subsequent Events, for updated details). ASC GEM Equity Line Financing This claim arises out an alleged breached Securities Purchase Agreement dated November 13, 2020. On November 9, 2021, the parties appointed an arbitrator. On January 7, 2022, GEM filed a letter brief with the arbitrator requesting leave to file a dispositive motion addressing a threshold legal issue regarding a defined term within a contract executed by the parties. Mullen filed a response to the letter brief on January 12, 2022. On January 21, 2022, the arbitrator issued a procedural order granting GEM’s request to file a dispositive motion. GEM filed its dispositive motion is on February 14, 2022. Mullen’s filed its opposition to the dispositive motion on March 3, 26 Table of Contents ​ 2022. On April 4, 2022, the court denied GEM’s dispositive motion. The parties exchanged discovery requests on May 10, 2022. Responses are due served on or before June 8, 2022. Odyssey Group Settlement On August 13, 2021, MTI and Odyssey Group reached a settlement concerning disputes and differences that arose from collections on invoices and liens pending pursuant to Odyssey’s Client Account and the Odyssey Group Consulting Agreement. Odyssey alleged that the MTI owed $503,637 at March 31, 2021. The parties agreed that Odyssey would receive $50,000 and 500,000 shares of MTI common stock (pre-merger). Additionally, Odyssey will receive an equivalent of $10,000 in cash or common stock from MAI. The obligation to pay Odyssey may be terminated by either party upon 30-days’ notice by either party. A release of liability for the amounts owed on the Consulting arrangement was signed and executed on the settlement date. The Company has issued Odyssey the 500,000 common shares worth $1.25 million and paid $50,000 in cash and common stock. The $10,000 in cash or common stock provision has not been terminated by either party.Odyssey/Adam Grill’s contract was terminated on March 31st and the last effective date of the Consulting Contract was April 30th, 2022. Net Element Shareholder Litigation On May 28, 2021, a Net Element shareholder filed a complaint against Net Element and Mullen Acquisition, Inc., and certain named individuals regarding the proposed merger transaction. The complaint alleges, among other things, a potential dilution of the value of Net Elements stock and a failure to act in with a fiduciary duty to its stakeholders. On September 3, 2021, a Net Element shareholder filed a lawsuit against Net Element, Mullen Technologies, Inc. and Mullen Acquisition, Inc., and certain individuals regarding the proposed merger agreement. The lawsuit alleges material omissions regarding the merger transaction and seeks to prevent the consummation of the merger agreement, as well as certain other equitable relief. Based upon information presently known to management, the Company believes that the potential liability from the May 2021 complaint and September 2021 lawsuit, if any, will not have a material adverse effect on its financial condition, cash flows or results of operations. Therefore, 0 liability has been reflected on the financial statements. ​ NOTE 18 – RELATED PARTY TRANSACTIONS At March 31, 2022 and September 30, 2021, respectively, the Drawbridge Investments, LLC relationship comprised various loans and advances, common shares, and preferred shares. The Drawbridge loans are currently in default. The Common and Preferred Shares presented are shares in MAI, since issued MTI shares were exchanged due to the merger. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Drawbridge Related Transactions ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Cumulative) ​ March 31, 2022 ​ September 30, 2021 Description      Loan Principal      # of Shares      FV of Shares      Loan Principal      # of Shares      FV of Shares Various Notes ​ $ 13,831,554   — ​ $ — ​ $ 23,831,554   — ​ $ — Common Shares ​   —   11,147,443 ​   91,604,926 ​   —   8,130,384 ​   66,994,364 Preferred Shares - Series A ​   —   — ​   — ​   —   2,335 ​   3,012 Preferred Shares - Series B ​   —   2,783,660 ​   49,215,100 ​   —   5,567,319 ​   49,215,100 Total Related Party Transactions ​ $ 13,831,554   13,931,103 ​ $ 116,212,476 ​ $ 23,831,554   13,700,038 ​ $ 116,212,476 *    Shares are MAI common and preferred shares. The default interest rate on the Drawbridge loans is 28% per annum, and accrued interest is $13,353,836 at March 31, 2022. 27 Table of Contents ​ Chief Executive Officer Loans to MAI From time to time, the Company’s CEO provides loans to the Company. The outstanding balances for these loans were 0 and $479,914 at March 31, 2022 and September 30, 2021. During the three and six months ended March 31, 2022, the Company repaid the outstanding loan balances in full. ​ William Miltner William Miltner is a litigation attorney who provides legal services to Mullen Technologies and its subsidiaries. Mr. Miltner also is an elected Director for MAI, beginning his term in August 2021. For the three and six months ended March 31, 2022, Mr. Miltner received $393,997 and $625,480, respectively, for legal services rendered to us. Mr. Miltner has been providing legal services to the Company since 2020. Mary Winters On October 26, 2021, MAI entered into a 1-year consulting agreement with Mary Winters, Corporate Secretary and Director, to compensate for Corporate Secretary Services and director responsibilities for the period from October 1, 2021 to September 30, 2022, in the amount of $60,000 annually or $5,000 per month. As of March 31, 2022, Ms. Winter has received $15,000 in consulting payments. Short-Term Financing On January 14, 2022, MAI executed a Letter of Intent (“LOI”) with Mark Betor, MAI Director, for a 90-day $1,000,000 loan. The loan was be evidenced by a Promissory Note with a maturity date for full repayment of loan no later than April 11, 2022. Total agreed repayment amount was $1,150,000, which included an interest charge of $150,000. Collateral included a first lien position 1 Greentech Drive, Tunica, MS. MAI Board of Directors approved transaction on January 18, 2022. Mr. Betor abstained from voting. As of March 31, 2022 this loan was repaid in full. ​ NOTE 19 – SUBSEQUENT EVENTS Company management has evaluated subsequent events through May 16, 2022, which is the date these financial statements were available to be issued. Except as discussed below, management has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the carve-out financial statements: ATVM Loan Application of Mullen ONE EV Cargo Van Program ​ The ATVM Loan Program was authorized by the Energy Independence and Security Act of 2007 to support the manufacturing of eligible light-duty vehicles and qualifying components in the United States. On April 29, 2022, MAI filed its ATVM loan application for the Mullen ONE EV Cargo Van Program. Funds will be used to accelerate high volume EV Cargo Van production at Mullen’s manufacturing (AMEC) facility outside Tunica, Mississippi. The Department of Energy invited the Company to formally submit its loan application. The Mullen ONE EV is a Class 1 light commercial cargo van rated under 6,000 pounds GVRW and will be one of the first electric commercial vehicle offerings in this category.  ​ Mullen ONE Van Test Program ​ The Mullen ONE Project represents Mullen Automotive’s (“Mullen Automotive”, the “Company” or the “Applicant”) entry into the Battery Electric Vehicle (BEV), Commercial Transit Market by leveraging existing technology with accredited partners to ensure speed to market, low-risk product development, and proven manufacturing capabilities. Mullen Automotive, together with its project partners, will execute engineering development for Mullen ONE and establish a scalable manufacturing facility in the United States to assemble up to 5,000 vehicles per year (the “Project”). As a result of the Project, Mullen Automotive anticipates that it will create 101 direct manufacturing jobs in the U. S. - 28 Table of Contents ​ which would enhance the local economy of the manufacturing site and offer a new generation of electric vehicles to further foster and promote the use of electric vehicles. ​ ​ Gardner Consulting Contract ​ As of April 27, 2022, the MAI Compensation Committee entered into a consulting agreement with Kathryn Gardner, a Series A Preferred shareholder, regarding investor relations services to the Company. The services required are as follows: ​ ● Monitor, aggregate, and record the general sentiment on popular message boards; ● Identify other mediums in which the retail investment community consumes content related to equity trading. ● Package and format the general sentiment of the retail community and various other mediums into an executive summary. ​ The terms of the agreement will remain in effect for 60 days. The stock-based compensation is 600,000 unrestricted common shares registered on Form S-8. ​ Shareholder Lawsuit ​ On May 5, 2022 a purported class action lawsuit was filed by Margaret Schaub, individually and on behalf of all others similarly situation, in the U.S. District Court of Central California.   As of the date of this filing, we have not been served with any such complaint.   It is our understanding that the lawsuit alleges that during the period between June 15, 2020 and April 6, 2022 the Company made materially false and misleading statements regarding the Company's business, operations, and compliance policies in violation of federal securities laws.  If we are served with any such complaint, we will assess it at that time. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. ​ Performance Stock Award Agreement ​ On May 5, 2022, the MAI Compensation Committee and Board of Directors has granted to David Michery (the “Participant”) a Performance Stock Award for shares of Common Stock on the terms and subject to the conditions of this Performance Stock Award Agreement (the “Agreement”). The performance criteria is based on a series and/or categories of milestones (each, a “Milestone”) and within each Milestone are, multiple performance tranches (each a “Tranche”), with each Tranche representing a portion of shares of Common Stock that may be issued to Participant upon achievement of a Tranche. ​ Upon the achievement of each Tranche of one of the Milestones and subject to Participant continuing as the Chief Executive Officer as of the date of satisfaction of such Tranche and through the date the Administrator determines, approves and certifies that the requisite conditions for the applicable Tranche have been satisfied (a “Certification”), the Company shall issue shares of Common Stock as specified in the Tranche. The Performance Stock Award Agreement does not become effective until approval by MAI shareholders at the 2022 Annual General Meeting later this year. ​ Mullen FIVE RS Vehicle Development ​ In May 2022, MAI signed a proposal with Thurner Design of the vehicle development of the Mullen FIVE RS, a high-performance EV sport crossover vehicle featuring close to 1,100 HP, 0-60 mph in just 1.95 seconds, and close to 200 mph top speed. The proposal includes two phases: 1) design, surfacing and design support and 2) visualization and high imaging. Payments will be made based upon project milestones. The Thurner Design team is responsible for shaping and directing designs and brands like Rolls-Royce Motorcars, Bentley Motors, Bugatti, Porsche, Lamborghini, Aston Martin and Mullen Automotive. ​ Linghang Guochang Holding Group Co. (a/k/a “Linghang Boao Group LTD”) ​ 29 Table of Contents ​ On May 12, 2022, the Company received official notification that the 2019 contractual arrangement will officially resume under the original contractual terms. They acknowledge that the COVID-19 pandemic had delayed the original plan, and Linghang Boao Group LTD looks forward to resuming the battery partnership with Mullen Automotive. ​ Farley vs. Net Element, Inc., et al. ​ On May 10, 2022, in connection with the previous voluntary dismissal of a shareholder lawsuit filed before the reverse merger against Net Element and its then CEO and directors, MAI agreed to pay to the plaintiff a mootness fee of $38,500 filed . A formal release covering all named defendants will be executed between plaintiff and the defendant’s successor, Mullen Automotive Inc. ​ Warrant Exercises and Preferred C Share Conversions to Common Stock ​ Below are the warrant exercise activity since March 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ Exercised ​ Common Share Date of Exercise      Warrants (#)      Issuance Various (Apr-May)   3,961,160 ​ 40,020,024 Various (Apr-May)   750,000 ​ 10,050,000 Various (Apr-May)   750,000 ​ 10,050,000 Various (Apr-May)   37,356 ​ 234,038 Various (Apr-May)   136,914 ​ 1,848,509 Various (Apr-May)   141,333 ​ 1,908,166 Various (Apr-May)   167,568 ​ 2,262,379 Various (Apr-May)   124,801 ​ 1,048,945 Various (Apr-May)   33,959 ​ 258,422 Various (Apr-May)   16,979 ​ 142,708 Various (Apr-May)   71,315 ​ 599,396 Various (Apr-May)   124,801 ​ 1,048,945 Various (Apr-May)   25,469 ​ 214,065 Various (Apr-May)   28,016 ​ 235,473 Various (Apr-May)   25,469 ​ 214,065 Total   6,395,140   70,135,135 ​ Below are the Preferred C Share conversion activity since March 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ Exercised Preferred ​ Common Share Date of Exercise      C Shares (#)      Issuance 4/26/2022   498,073   498,073 4/26/2022   996,164   996,164 5/6/2022   12,452   12,452 4/19/2022   105,190   105,190 4/20/2022   115,184   115,184 4/20/2022   148,964   148,964 5/7/2022   41,600   41,600 5/7/2022   33,959   33,959 5/7/2022   5,660   5,660 5/7/2022   23,771   23,771 5/7/2022   41,600   41,600 5/7/2022   8,489   8,489 5/7/2022   9,338   9,338 5/7/2022   8,489   8,489 Total   2,048,933   2,048,933 ​ 30 Table of Contents ​ CEOcast, Inc. Drawdowns and Stock Issuance ​ In late April and early May 2022, MAI received $15M in 3, $5M cash increments from CEOcast, Inc. In return, CEOcast, inc. received warrants to acquire shares of common stock. As of this writing, CEOcast, Inc. has exercised its warrants for 12,703,540 MAI common shares. The transaction is reflected within the balance sheet as a $15M note receivable as of March 31, 2022. ​ As of this writing, below are the common share issuances to CEOcast, Inc.(balance is subject to change). ​ ​ ​ ​ ​ ​ ​ ​      Drawdown      Common Share Date of Exercise      Amount      Issuance 4/18/2022 ​ $ 5,000,000   2,893,518 4/20/2022 ​ $ 5,000,000   5,075,174 5/2/2022 ​ $ 5,000,000   4,734,848 ​ ​ ​ ​ ​ 1,640,010 Total ​ $ 15,000,000   14,343,550 ​ ​ ​ ​ 31 Table of Contents Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with the financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and with our audited financial statements and other information presented in our Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2021.This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward- looking statements as a result of many factors, including but not limited to those under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2021. 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 March 31 to September 30, effective for our fiscal year ended September 30, 2021. As a result, and unless otherwise indicated, references to our fiscal year 2021 and prior years mean the fiscal year ended on September 30 of such year. Basis of Presentation As a pre-revenue company with no commercial operations, our activities to date have been limited and were conducted primarily in the United States and our historical results are reported under accounting principles generally accepted in the vesting period.United States ("GAAP" or "U.S. GAAP") and in United States ("U.S.") dollars. Upon commencement of commercial operations, we expect to expand our operations substantially into the European Union ("E.U.") and, as a result, we expect our future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in our historical financial statements. As a result, we expect that the financial results our reports for periods after we begin commercial operations will not be comparable to the financial results included in this Quarterly Report. Foreign Currency Transactions Components of Results of Operations We are subjectan early-stage company, and our historical results may not be indicative of our future results for reasons that may be difficult to exchange rate riskanticipate. 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. Revenues We have not begun commercial operations and do not currently generate any revenue. Once we commence production and commercialization of our vehicles, we expect that the significant majority of our revenue will be initially derived from direct sales of Sport Utility Vehicles ("SUVs") and, subsequently, from flexible leases of our electric vehicles ("EVs"). Cost of Goods Sold To date, we have not recorded cost of goods sold, as we have not recorded commercial revenue. Once we commence the commercial production and sale of our EVs, we expect cost of goods sold to include mainly vehicle components and parts, including batteries, direct labor costs, amortized tooling costs, and reserves for estimated warranty expenses. General and Administrative Expense 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. Advertising costs are expensed as incurred and are included in G&A expenses. We expense advertising costs as incurred in accordance with ASC 720-35, “Other Expenses – Advertising Cost.” 32 Table of Contents Research and Development Expense To date, our foreignresearch and development expenses have consisted primarily of external engineering services in connection with the design of our initial EV and development of the first prototype. As we ramp up for commercial operations, we anticipate that research and development expenses will increase for the foreseeable future as we expand our hiring of engineers and designers and continues to invest in Russia,new vehicle model design and development of technology. Income Tax Expense / Benefit Our income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the functional currencytax law. We maintain a valuation allowance against the full value of our U.S. and state net deferred tax assets because we believe the recoverability of the tax assets is not more likely than not. Results of Operations Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021 The following table sets forth our historical operating results for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ ​   ​ ​ March 31,  ​ ​ ​ ​ ​ ​ ​      2022     2021 ​      $ Change      % Change   ​      (dollar amounts, except percentages)   Operating costs and expenses: ​    ​ ​    ​ ​    ​ ​      General and administrative ​ $ 29,269,433 ​ $ 4,676,740 ​ $ 24,592,693   526 % Research & development ​   1,183,437 ​   538,271 ​   645,166   120 % Total operating costs and expenses ​   30,452,870 ​   5,215,011 ​   25,237,859   484 % Loss from operations ​ $ (30,452,870) ​   (5,215,011) ​   (25,237,859)   484 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​      ​      ​           ​ Interest expense ​   (2,120,515) ​   (4,092,759) ​   1,972,244   (48) % Loss on debt settlement ​ ​ — ​ ​ — ​ ​ — ​ 0 % Gain on extinguishment of indebtedness, net ​   — ​   10,000 ​   (10,000)   (100) % Total other income (expense) ​   (2,120,515) ​   (4,082,759) ​   1,962,244   (48) % Net loss ​ $ (32,573,385) ​ $ (9,297,770) ​ $ (23,275,615)   250 % ​ General and Administrative General and administrative expenses increased by $24.6 million or 526% to $29.3 million in the three months ended March 31, 2022 from $4.7 million in the three months ended March 31, 2021, primarily due to increases in professional services, marketing, and compensation related expenses associated with the growth of personnel and resources. Research and Development Research and development expenses increased by $0.6 million or 120% to $1.2 million in the three months ended March 31, 2022 from $0.5 million in the three months ended March 31, 2021. During the quarter ended March 31, 2022, the Engineering Team has been working on battery development and initial stages of program car development. Research and development costs are expensed as incurred. Research and development expenses primarily consist of the Mullen FIVE EV car development and are primarily comprised of personnel-related costs for employees and consultants. These costs are expected to rise in the future with continuing development of the Mullen FIVE car program. 33 Table of Contents Interest Expense Interest expense decreased by $1.97 million or -48% to $2.1 million in the three months ended March 31, 2022 from $4.1 million in the three months ended March 31, 2021, primarily due to the decrease in the convertible debt portfolio, as well as the paydown of debt principal during the current fiscal year. Net Loss Net loss was $32.6 million for the three months ended March 31, 2022, an increase of $23.3 million or 250% from $9.3 million in the three months ended March 31, 2021, mainly for the reasons discussed above. Comparison of the Six Months Ended March 31, 2022 to the Six Months Ended March 31, 2021 The following table sets forth our historical operating results for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ ​ ​ ​   ​ ​ March 31,  ​ ​ ​ ​ ​ ​ ​      2022      2021      $ Change      % Change   ​      (dollar amounts, except percentages)   Operating costs and expenses: ​    ​ ​    ​ ​    ​ ​      General and administrative ​ $ 42,170,516 ​ $ 7,629,418 ​ $ 34,541,098   453 % Research & development ​   2,340,761 ​   1,056,294 ​   1,284,467   122 % Total operating costs and expenses ​   44,511,277 ​   8,685,712 ​   35,825,565   412 % Loss from operations ​   (44,511,277) ​   (8,685,712) ​   (35,825,565)   412 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​      ​      ​           ​ Interest expense ​   (24,559,459) ​   (6,499,089) ​   (18,060,370)   278 % Gain on extinguishment of debt ​   (41,096) ​   - ​   (41,096)   (100) % Other income (expense), net ​   74,509 ​   890,581 ​   (816,072)   (92) % Total other income (expense) ​   (24,526,046) ​   (5,608,508) ​   (18,917,538)   337 % Net loss ​ $ (69,037,323) ​ $ (14,294,220) ​ $ (54,743,103)   383 % ​ General and Administrative General and administrative expenses increased by $34.5 million or 453% from $7.6 million in the six months ended March 31, 2021 to $42.2 million in the six months ended March 31, 2022, primarily due to increases in professional services, marketing, and compensation related expenses associated with the growth of personnel and resources. Research and Development Research and development expenses increased by $1.3 million or 122% from $1.1 million through the six months ended March 31, 2021 to $2.3 million through the six months ended March 31, 2022. During the six month period ended March 31, 2022, the development of the Mullen FIVE show cars was completed in November 2021, and the Engineering Team has been working on battery development and initial stages of program car development. Research and development costs are expensed as incurred. Research and development expenses primarily consist of the Mullen FIVE EV show car development and are primarily comprised of personnel-related costs for employees and consultants. These costs are expected to rise in the future with continuing development of the Mullen FIVE car program. Interest Expense Interest expense increased by $18.1 million or 278% from $6.5 million through the six months ended March 31, 2021 to $24.6 million through the six months ended March 31, 2022, primarily due to the significant increase in the convertible 34 Table of Contents debt portfolio, coupled with the conversion of these financial instruments to equity due to merger with Net Element. The conversion to preferred C stock increased the amortization expense. Gain on extinguishment of debt During November 2020, the U.S. Small Business Administration (“SBA”) approved the CARES Act loan forgiveness amount of $875,426 in principal and accrued interest on November 20, 2020. Net Loss Net loss was $69.0 million for the six months ended March 31, 2022, an increase of $54.7 million or 383% from $14.3 million in the six months ended March 31, 2021, mainly for the reasons discussed above. Liquidity and Capital Resources As of the date of this Quarterly Report, we have yet to generate any revenue from our business operations. To date, we have funded our capital expenditure and working capital requirements through equity and debt capital, as further discussed below. Our ability to successfully commence commercial operations and 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. As of March 31, 2022, our cash and cash equivalents amounted to $65.2 million primarily due to $43.9 million from the issuance of 4,974,214 Series C Preferred Stock and 14,922,667 in associated warrants to the selling stockholders that were listed within the S-3 Registration Statement, deemed effective on April 15, 2022.  Additionally, the Company received $29.6 million in net proceeds under the $30 million Esousa Equity Line, dated September 1, 2021. Total debt of $22.1 million continues its downward trend. Debt has decreased significantly from September 30, 2021 due to principal paydowns, debt payoffs, and conversion of convertible debt to equity. Tax liabilities slightly decreased to $2.8 million from $4.2 million, which is comprised of IRS and other tax jurisdictions related to payroll taxes and sales and use taxes. On April 14, 2022, the Russian ruble, whereCompany signed an IRS installment agreement to pay the remaining balance for federal payroll related liabilities via monthly payments of $45,000. We expect our capital expenditures and working capital requirements to increase substantially in the near term, as we generate service fee revenues, interest incomeseek to produce our initial EVs, develop our customer support and marketing infrastructure and expand our research and development efforts. We may need additional cash resources due to changed business conditions or expense, incurother developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, disruptions due to COVID-19, competitive pressures, and regulatory developments, among other developments. To the extent that our current resources are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in product development engineering, websiteor scale back our operations, which could have an adverse impact on our business and financial prospects. See Note 1 to the consolidated financial statements included elsewhere in this Quarterly Report. Debt To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness and selling,Common Stock. Short-term debt comprises a significant component of our funding needs. Short-term debt is generally defined as debt with principal maturities of one-year or less. Long-term debt is defined as principal maturities of one year of more. Short and Long-Term Debt 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 35 Table of Contents 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 loans are secured by substantially all the Company’s assets. Several principal shareholders have provided loans to and hold convertible debt of the Company and are related parties. The following is a summary of our debt as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Carrying Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Unpaid Principal       ​ ​      ​ ​      ​      Contractual  Type of Debt      Balance      Current      Long-Term      Interest Rate      Maturity Matured Notes ​ $ 3,051,085 ​ $ 3,051,085 ​ $ — ​ 0.00% - 15.00 % 2016 - 2021 Promissory Notes ​   19,331,912 ​ ​ 14,331,912 ​ ​ 5,000,000 ​ 8.99% - 28.00 % 2021 – 2024 Real Estate Note ​   265,973 ​ ​ 37,185 ​ ​ 228,788 ​ 5.00 % 2023 Loan Advances ​   557,800 ​ ​ 557,800 ​ ​ — ​ 0.00% - 10.00 % 2019 – 2020 Less: Debt Discount ​   (1,118,902) ​ ​ (1,118,902) ​ ​ — ​ NA ​ NA Total Debt ​ $ 22,087,868 ​ $ 16,859,080 ​ $ 5,228,788   NA   NA ​ The following is a summary of our debt as of September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Carrying Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Unpaid Principal       ​ ​      ​ ​      Contractual       Contractual  Type of Debt      Balance      Current      Long-Term      Interest Rate      Maturity Matured Notes ​ $ 5,838,591 ​ $ 5,838,591 ​ $ —   0.00% - 15.00 %   2016 - 2021 Promissory Notes ​   23,831,912 ​   23,831,912 ​   —   28.00 %   2021 – 2022 Demand Note ​   500,000 ​   500,000 ​   —   27.00 %   2020 Convertible Unsecured Notes ​   15,932,500 ​   15,932,500 ​   —   15.00%-20.00 %   2021 - 2022 Real Estate Note ​   283,881 ​   36,269 ​   247,612   5.00 %   2023 Loan Advances ​   1,122,253 ​   1,122,253 ​   —   0.00% - 10.00 %   2019 – 2020 Less: Debt Discount ​   (8,060,555) ​   (8,060,555) ​   —   NA   NA Total Debt ​ $ 39,448,582 ​ $ 39,200,970 ​ $ 247,612   NA   NA ​ Cash Flows The following table provides a summary of Mullen’s cash flow data for the six months ended March 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended March 31,  ​ ​      2022      2021 ​ ​ ​ ​ ​ Net cash used in operating activities ​ $ 24,871,780 ​ $ 5,619,717 ​ Net cash used in investing activities ​   10,737,679 ​   102,068 ​ Net cash provided by financing activities ​   100,849,172 ​   6,540,725 ​ ​ 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 $24.9 million in the six months ended March 31, 2022, an increase from $5.6 million net cash used in activities in the six months ended March 31, 2021. 36 Table of Contents Cash Flows used in Investing Activities Our cash flows used in investing activities increased due to the purchase of the Tunica, MS manufacturing plant in November 2021 by our wholly owned subsidiary, Mullen Investment Properties, LLC. We expect these costs to increase substantially in the near future as we ramp up activity ahead of commencing commercial operations and expenses. Our Russian subsidiaries paybuild out the manufacturing facility. Net cash used in investing activities was $10.7 million in the six months ended March 31, 2022, an increase from $0.1 million used in investing activities in the six months ended March 31, 2021. Cash Flows provided by Financing Activities Through March 31, 2022, we have financed our operations primarily through the issuance of convertible notes equity securities, and warrants registered under the S-3 Registration Statements deemed effective February 3, 2022 and April 15, 2021, respectively. Net cash provided by financing activities was $100.9 million for the six months ended March 31, 2022 primarily due to issuance of equity, as compared to $6.5 million net cash provided by financing activities for the six months ended March 31, 2021, which included (i) $12.1 million net proceeds from issuance of notes payable, which was partially offset by $15.1 million of payments of notes payable; (ii) $40.1 million in net proceeds from issuance of Common Stock; and (iii) $63.9 million in proceeds to issue preferred C shares. Contractual Obligations and Commitments The following tables summarizes our contractual obligations and other commitments for cash expenditures as of March 31, 2022, and the years in which these obligations are due: Operating Lease Commitments ​ ​ ​ ​ ​      Scheduled  Years Ended March 31,  ​ Payments 2022 (6 months) ​ $ 602,568 2023 ​   1,157,693 2024 ​   824,287 2025 ​   436,156 2026 ​   222,787 2027 and Thereafter ​   — Total Future Minimum Lease Payments ​ $ 3,243,491 ​ We currently lease our headquarters space in the Los Angeles area under a majoritysingle lease classified as an operating lease expiring in March 2026. We have not executed any binding agreement for leases beyond 2026. Scheduled Debt Maturities The following are scheduled debt maturities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended March 31,  ​      2022 (6 months)      2023      2024      2025      2026      2027      Thereafter      Total Total Debt ​ $ 16,859,080 ​ $ 228,788 ​ $ 5,000,000 ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 22,087,868 ​ Off-Balance Sheet Arrangements We are not a party to any off-balance sheet arrangements, as defined under SEC rules. 37 Table of their operating expenses in their local currencies, exposing us to exchange rate risk.Contents Use ofCritical Accounting Policies and Estimates TheOur financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these consolidated financial statements, requires usour management is required to makeuse judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresthe disclosure of contingent assets and liabilities atas of the date of the consolidated financial statements, and the reported amounts of revenues and expenses for the reporting period. Such estimates include, but are not limited to, the value of purchase consideration paid and identifiable assets acquired and assumed in acquisitions, amortization of intangible assets, goodwill and asset impairment review, valuation reserves for accounts receivable, valuation of acquired or current merchant portfolios, incurred but not reported claims, revenue recognition for multiple element arrangements, loss reserves, assumptions used in the calculation of equity-based compensation and in the calculation of income taxes, and certain tax assets and liabilities, as well as the related valuation allowances. Actual results could differ from those estimates. Belowreported 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 summaryhigh degree of judgment and (2) the Company’s critical accounting estimates for which the natureuse of management’s assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and for which the impact of thedifferent judgments, estimates and assumptions could have a material impact on the consolidated financial conditionstatements. Our significant accounting policies are described in Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report. Because we are a pre-revenue company without commercial operations, management believes it does not currently have any critical accounting policies or operating performance is material.estimates. Management believes that the accounting policies most likely to become critical in the near future are those described below. Stock-Based Compensation Goodwill The Company tests goodwill for impairment using aWe recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value approach at least annually, absent some triggering eventof the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. Our management reverses previously recognized costs for unvested options in the period that would require an interim impairment assessment. Significant estimates and assumptions are used in our goodwill impairment review and include the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determiningforfeitures occur. Mullen determines the fair value of each reporting unit. Our assessment of qualitative factors involves significant judgments about expected future business performance, general market conditions, and regulatory changes. In a quantitative assessment,stock options using the fair value of each reporting unitBlack-Scholes option pricing model, which is determined based largely onimpacted by the present value of projected future cash flows, growth assumptions regarding discount rates, estimated growth rates and our future long-term business plans. Changes in any of these estimates or assumptions could materially affect the determination of fair value and the associated goodwill impairment charge for each reporting unit.following assumptions: ● Expected Term—We use the simplified method when calculating the expected term due to insufficient historical exercise data. ● Expected Volatility—As our shares were not actively traded during the periods presented, the volatility is based on a benchmark of comparable companies within the automotive and energy storage industries. ● Expected Dividend Yield—The dividend rate used is zero as we have never paid any cash dividends on Common Stock and does not anticipate doing so in the foreseeable future. ● Risk-Free Interest Rate—The interest rates used are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. 11 Table of Contents Recent Accounting Pronouncements Adoption of ASU 2016-02, Leases In February 2016, May 2021, the Financial Accounting Standards Board ("FASB")FASB issued ASU 2016-02, “LeasesNo. 2021-04, Earnings Per Share (Topic 842)” which, for operating leases, requires a lessee to recognize a right-of-use asset260), Debt – Modifications and a lease liability, initially measured at the present value of the lease payments,Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718) and Derivatives and Hedging – Contracts in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis.Entity’s Own Equity (Subtopic 815-40). The ASU iswill be effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Effective January 1, 2019, we adopted Topic 842 using2021, (December 15, 2023 for smaller reporting companies). We have issued debt and equity instruments, the modified retrospective transition method. Underaccounting for which could be impacted by this method, we applied Topic 842 toupdate. Company management is evaluating the lease for the premises we occupy for our North American Transaction Solutions segment's U.S. headquarters. There was no cumulative impact adjustment necessary with the adoption to our accumulated deficit on January 1, 2019. Our consolidated financial statements for periods ending after January 1, 2019 are presented in accordance with the requirements of Topic 842, while comparative prior period amounts have not been adjusted and continue to be reported in accordance with Topic 840. Please refer to "Leases" above for a description of our lease accounting policies upon the adoption on Topic 842. Adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments in this update changed how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are within the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The guidance was effective for us on January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements. 12 Table of Contents NOTE 5. DUE FROM MULLEN  As contemplated by the Original Merger Agreement referred to in Note 3, on August 11, 2020, our Company as lender, borrowed an additional $500,000 from RBL and entered into an unsecured Promissory Note, dated August 11, 2020 (the “Mullen Note”), with Mullen. Pursuant to the Mullen Note, Mullen borrowed $500,000 from the Company. Prior to maturity of the loan, the principal amount of the loan will carry an interest rate of 14% per annum compounded monthly and payable upon demand. This loan will mature on the earlier of (i) the date that the merger agreement is terminated for any reason by any party thereto and (ii) the Merger effective time. At June 30, 2021, the Company is also owed approximately $1.5 million from Mullen in connection with Late Fees, pursuant to the Original Merger Agreement with Mullen. NOTE 6. INTANGIBLE ASSETS The Company had approximately $2.8 million and $3.6 million in intangible assets, net of amortization, at June 30, 2021 and December 31, 2020, respectively. Shown below are the details of the components that represent these balances. Intangible assets consisted of the following as of June 30, 2021     Cost     Accumulated Amortization     Carrying Value   Amortization Life and Method                             IP Software   $ 2,378,248     $ (2,367,723 )   $ 14,406   3 years - straight-line Portfolios and Client Lists     7,739,665       (7,151,144 )     588,521   4 years - straight-line Client Acquisition Costs     9,149,668       (6,950,968 )     2,198,699   4 years - straight-line PCI Certification     449,000       (449,000 )     0   3 years - straight-line Trademarks     703,586       (703,586 )     0   3 years - straight-line Domain Names     437,810       (437,810 )     0   3 years - straight-line Total   $ 20,857,976     $ (18,060,231 )   $ 2,801,626     Intangible assets consisted of the following as of December 31, 2020     Cost     Accumulated Amortization     Carrying Value   Amortization Life and Method                             IP Software   $ 2,378,248     $ (2,321,843 )   $ 40,185   3 years - straight-line Portfolios and Client Lists     7,714,665       (6,776,317 )     938,348   4 years - straight-line Client Acquisition Costs     8,841,617       (6,224,824 )     2,616,794   4 years - straight-line PCI Certification     449,000       (449,000 )     0   3 years - straight-line Trademarks     703,586       (703,586 )     0   3 years - straight-line Domain Names     437,810       (437,810 )     0   3 years - straight-line Total   $ 20,524,925     $ (16,913,379 )   $ 3,595,326     Amortization expense for the intangible assets was approximately $452,000 and $679,000 for the three months ended June 30, 2021 and 2020, respectively.  Amortization expense for the six months ended June 30, 2021 and 2020 was approximately $1.1 million and $1.4 million, respectively. The following table presents the estimated aggregate future amortization expense of intangible assets: 2021 (remainder of year)   $ 336,867   2022     673,735   2023     673,735   2024     671,334   2025     445,955   Balance June 30, 2021   $ 2,801,626   13 Table of Contents NOTE 7. ACCRUED EXPENSES At June 30, 2021 and December 31, 2020, accrued expenses amounted to approximately $3.1 million and $4.6 million, respectively. Accrued expenses represent expenses that are owed at the end of the period or are estimates of services provided that have not been billed by the provider or vendor. The following table reflects the balances outstanding as of June 30, 2021 and December 31, 2020.     June 30, 2021     December 31, 2020   Accrued professional fees   $ 220,140     $ 268,435   PayOnline accrual     0       61,719   Accrued interest     759,945       409,525   Accrued bonus     1,864,304       1,690,556   Accrued foreign taxes     (11,475 )     (12,336 ) Other accrued expenses     249,783       2,186,197   Total accrued expenses   $ 3,082,697     $ 4,604,097   Included in accrued bonus are non-discretionary compensation due to our Chairman and CEO, which was approximately $1.5 million and $1.3 million at June 30, 2021 and December 31, 2020, respectively, and approximately $410,000 and $386,000 at June 30, 2021 and December 31, 2020, respectively, for discretionary performance bonuses due to certain employees. Included in other accrued expenses at December 31, 2020 is approximately $2.0 million which was due to ESOUSA for the sixth tranche received on December 30, 2020, which was subsequently paid by the issuance of 200,000 shares of common stock in January of 2021 pursuant to the ESOUSA Agreement. NOTE 8. NOTES PAYABLE  Notes payable consist of the following at June 30, 2021 and December 31, 2020:     June 30, 2021     December 31, 2020   RBL Capital Group, LLC   $ 8,949,199     $ 9,431,157   SBA Loan - EIDL     159,899       159,899   SBA Loan - PPP     0       491,493   Subtotal     9,109,098       10,082,549   Less: deferred loan costs     (160,469 )     (138,944 ) Subtotal     8,948,629       9,943,605   Less: current portion     (520,397 )     (1,330,018 ) Long term debt   $ 8,428,232     $ 8,613,587   RBL Capital Group, LLC Effective June 30, 2014, TOT Group, Inc. and its subsidiaries as co-borrowers, TOT Payments, LLC, TOT BPS, LLC, TOT FBS, LLC, Process Pink, LLC, TOT HPS, LLC and TOT New Edge, LLC (collectively, the “co-borrowers”), entered into a Loan and Security Agreement (“Credit Facility”) with RBL Capital Group, LLC (“RBL”), as lender (the “RBL Loan Agreement”). The original terms provided us with an 18-month, $10 million credit facility with interest at the higher of 13.90% per annum or the prime rate plus 10.65%. On May 2, 2016, we renewed our Credit Facility with RBL, increasing the facility from $10 million to $15 million and extending the term through February 2019. The co-borrowers’ obligations to RBL pursuant to the RBL Loan Agreement are secured by a first priority security interest in all of the co-borrowers’ tangible and intangible assets, including but not limited to their merchants, merchant contracts and proceeds thereof, and all right title and interest in co-borrowers’ processing contracts, contract rights, and portfolio cash flows with all processors of the co-borrowers. On December 19, 2019, in connection with an addendum to those certain term notes made by TOT Group, Inc.in favor of RBL, the Credit Facility referred to above, we received funding of $1,000,000 and new terms were negotiated for the total outstanding notes payable amount of $9,431,157. This total loan amount bears interest at 14.19%. On January 20, 2020, we were required to make one (1) payment of interest only for $117,329, followed by five (5) payments of interest only in the amount of $111,523. Effective July 20, 2020, we were required to make forty-eight (48) monthly payments, which includes principal and interest for $258,620, until March 20, 2024 the date this term note was to mature.  On June 20, 2020, in connection with those certain term notes made by TOT Group, Inc.in favor of RBL, the Credit Facility referred to above, the Company executed two (2) promissory term notes, totaling $9,431,157, which replaces all previous outstanding term notes with RBL.The first term note is for $4,431,157 and bears interest at 14.19%. On December 20, 2021, we are required to make one (1) payment of interest only for $67,746, followed by eight (8) payments of interest only for the same amount, followed by a balloon payment for any outstanding principal and accrued interest of approximately $5,540,128. The second  term note is for $5,000,000 and bears interest at 14.19%. On June 20, 2020, we are required to make one (1) payment of interest only for $59,125 followed by six (6) payments of interest only for the same amount. Starting on January 20,2021, the Company shall make twenty (20) equal monthly payments of principal and interest of $137,109, followed by one (1) payment of principal and interest for approximately $3,290,475. In connection with these term notes, the Company agreed to pay a financing fee of $894,311. Such financing fee will be due and payable as follows; $25,000 on February 20, 2021; $25,000 on June 20, 2021; $94,311 on August 20, 2022; and $750,000 on September 20, 2022. The Company waives demand, presentment for payment, protest, notice of protest and notice of nonpayment or dishonor of the notes. The Company shall not have any right to prepay this loan except as expressly provided in the RBL Loan Agreement. The Company waives demand, presentment for payment, protest, notice of protest and notice of nonpayment or dishonor of the notes. The Company shall not have any right to prepay this loan except as expressly provided in the RBL Loan Agreement.  On March 27, 2020, our Company entered into a Master Exchange Agreement (the “ESOUSA Agreement”) with ESOUSA Holdings, LLC ("ESOUSA"), a related party. Prior to entering into the ESOUSA Agreement, ESOUSA agreed to acquire an existing promissory note that had been previously issued by the Company, of up to $2,000,000 in principal amount outstanding plus interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the ESOUSA Agreement, the Company had the right, at any time prior to March 27, 2021, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange this promissory note in tranches on the dates when the Company instructs ESOUSA, for such number of shares of the Company’s common stock (“Common Stock”) as determined under the ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL Capital Group, LLC. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such Exchange Amount from RBL Capital Group, LLC. Each such tranche to be $148,000 unless otherwise agreed to by the Company and ESOUSA.  On April 23, 2020 and August 3, 2020, the Company entered into certain amendments to the ESOUSA Agreement, which together increased from $2,000,000 to $15,000,000 the principal amount and unpaid interest of one or more promissory notes of the Company or its direct or indirect subsidiaries that ESOUSA either purchased in whole or has an irrevocable right to purchase in tranches from RBL in connection with the ESOUSA Agreement. On March 27, 2020, the Company received its first tranche of RBL promissory notes in the aggregate amount of $148,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  Included in other accrued expenses at June 30, 2021 is approximately $145,000 in connection with this first tranche for which shares of Common Stock have not yet been issued.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $148,000 from RBL under the Credit Facility.  On April 28, 2020, the Company received its second tranche of RBL promissory notes in the aggregate amount of $143,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 65,862 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $143,000 from RBL under the Credit Facility. On August 11, 2020, the Company received its third tranche of RBL promissory notes in the aggregate amount of $707,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 66,190 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $707,000 from RBL under the Credit Facility.  On August 21, 2020, the Company received its fourth tranche of RBL promissory notes in the aggregate amount of $401,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 45,654 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $401,000 from RBL under the Credit Facility.  On September 25, 2020, the Company received its fifth tranche of RBL promissory notes in the aggregate amount of $426,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 50,000 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $426,000 from RBL under the Credit Facility.     On December 30, 2020, the Company received its sixth tranche of RBL promissory notes in the aggregate amount of $1,960,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. The Company issued 200,000 shares of Common Stock to ESOUSA in connection with this exchange. Concurrently with this transaction, the Company received an equivalent aggregate amount of $1,960,000 from RBL under the Credit Facility. On July 9, 2021, the Company entered into a new Master Exchange Agreement with ESOUSA.  See Note 14 - Subsequent Events for additional information. SBA Loans On May 7, 2020, the Company entered into a promissory note (the “PPP Note”) evidencing an unsecured loan (the “Loan”) in the amount of $491,493 made to the Company under the Paycheck Protection Program (the “PPP”). The PPP Note was to mature on May 7, 2022 and bore interest at a rate of 1% per annum. Beginning December 7, 2020, the Company was required to make 17 monthly payments of principal and interest, with the principal component of each such payment based upon the level amortization of principal over a two-year period from May 7, 2020. Pursuant to the terms of the CARES Act and the PPP, the Company could apply to the Lender for forgiveness for the amount due on the Loan. The amount eligible for forgiveness was based on the amount of Loan proceeds used by the Company (during the eight-week period after the Lender makes the first disbursement of Loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), interest on mortgage obligations, rent and utilities, subject to certain limitations and reductions in accordance with the CARES Act and the PPP. On May 9, 2021, our Company was informed by the Small Business Administration that the loan forgiveness application was approved. The Company reversed the amount due and reflected it as a gain on extinguishment of debt during the three months ended June 30, 2021. On May 18, 2020, the Company entered into a promissory note (the "EIDL Note") in the amount of $159,899 made to the Company by the U.S. Small Business Administration under the Economic Injury Disaster Loan program. Monthly installment payments on the EIDL Note will begin twelve months from the date of the EIDL Note, with the balance of any accrued principal and interest at 3.75% annually, payable thirty years from the date of the EIDL Note. Scheduled notes payable principal repayment at June 30, 2021 is as follows: 2021 (remainder of year)   $ 520,397   2022     8,437,531   2023     5,514   2024     5,514   thereafter     140,142             Balance June 30, 2021   $ 9,109,098   14 Table of Contents NOTE 9. CONCENTRATIONS Our credit card processing revenues are from merchant customer transactions, which were processed primarily by twothird-party processors (greater than 5%) and our own dedicated bank identification number ("BIN")/Interbank Card Association ("ICA") number during the three and six months ended June 30, 2021 and 2020. During the six months ended June 30, 2021, we processed 18% of our total revenue with Priority Payment Systems, 71% from our own dedicated BIN/ICA with Esquire Bank, and 7% with First Data Corp. During the six months ended June 30, 2020, we processed 33% of our total revenue with Priority Payment Systems, 46% from our own dedicated BIN/ICA with Esquire Bank, and 10% from First Data Corp. During the three months ended June 30, 2021, we processed 16% of our total revenue with Priority Payment Systems, 73% from our own dedicated BIN/ICA with Esquire Bank, and 6% with First Data Corp. During the three months ended June 30, 2020, we processed 27% of our total revenue with Priority Payment Systems, 50% from our own dedicated BIN/ICA with Esquire Bank, and 10% from First Data Corp. NOTE 10. COMMITMENTS AND CONTINGENCIES Employment Agreement On February 25, 2020, as per approval of the Compensation Committee (the “Committee”) of the board of directors of the Company, the Company entered into an employment agreement (the “Agreement”) with Steven Wolberg, the Company's Chief Legal Officer and Corporate Secretary. The Agreement provides for continuation of the current base salary of $250,000. The term of the Agreement is 5 years, with subsequent 1-year renewals. The Agreement provides for a sign-on bonus of 10,000 shares of Company’s common stock, to be granted to Mr. Wolberg pursuant to the Company’s equity incentive plan, the severance in the amount of two times annual base salary of Mr. Wolberg if Mr. Wolberg’s employment is terminated by the Company without “cause” (as defined in the Agreement) or Mr. Wolberg terminates the employment for “good reason” (as defined in the Agreement). For each fiscal year during the term of the Agreement, the Agreement provides for a bonus arrangement equal to 50% of Mr. Wolberg’s base salary, payable in the Company’s shares of common stock or, at the Company’s discretion, in cash. Further, for each fiscal year during the term of the Agreement, Mr. Wolberg will be eligible to receive long-term equity incentive awards, as determined by the Committee at the time of grant, pursuant to the Company’s equity incentive plan. Minimum Billing Processing Fees Commitment We have non-exclusive agreements with two of our processors to provide services related to processing. The agreements require us to submit a minimum number of  billable processing fees. If we submit an amount that is lower than the minimum, we are required to pay to each processor the fees it would have received if we had submitted the required minimum number of billable processing fees. As of June 30, 2021, the aggregate minimum monthly processing fees for these processors amounts to approximately $150,000 per month. Leases North American Transaction Solutions During May 2013, we entered into a lease agreement, for approximately 4,101 square feet of office space located at 3363 N.E. 163rd Street, Suites 705 through 707, North Miami Beach, Florida 33160. The term of the lease agreement was from May 1, 2013 through December 31, 2016, with monthly rent increasing from $16,800 per month at inception to $19,448 per month (or $233,377 per year) for the period from January 1, 2016 through December 31, 2016. The lease was extended for a period of five years commencing August 1, 2017 and expiring July 31, 2022 with equal monthly base rent installments of $14,354 ($172,248 per year) plus sales tax. In September 2020, we entered into an agreement with the Landlord modifying this existing lease. In consideration of payment to Landlord of the sum of $65,600, the Company surrendered all existing premises occupied by it and entered into a new 4 year lease for a smaller premises at Unit #707 in the same building for a monthly rent of $2,954. There was a $65,600 payment made as follows: (1) $22,700 due upon the execution of the Modification of Lease Agreement; (2) $20,100 due on or before December 31, 2020; and (3) $22,800 due on or before March 31, 2021. Except as previously mentioned, all other terms and conditions of the initial lease agreement continues to remain in effect.  On September 26, 2019, we entered into a lease for additional office space in the building that our current office space is located for our North American Transactions Solutions. The space is for 5,875 square feet and the term is for 5 years commencing on September 23, 2019 and expiring on September 30, 2024. The monthly base rent is $16,156 ($193,875 per year) plus sales tax. In consideration of our Company foregoing its rights to credits from the landlord towards the cubicle installation and foregoing its rights to one (1) of the (2) month rent deposits prepaid to the landlord, the lease was amended. The amended lease requires the Company to begin paying $11,500 effective July 7, 2020, with the original monthly rent payment of $16,156 commencing on January 1, 2021. In addition, commencing on March 1, 2021, our Company will begin making up the difference between the original monthly lease payment of $16,156 and the amended monthly lease payment of $11,500, the deferred monthly rent, by paying the landlord an additional $2,000 per month until the deferred portion of the rent is fully repaid. All outstanding amounts of deferred rent shall be subject to interest at an annual the rate of 4%. The Company occupied the space in July of 2020. Net Element Software, our subsidiary, currently leases approximately 1,654 square feet of office space in Yekaterinburg, Russia, where we develop value added services, mobile applications, smart terminals applications, sales central ERP system development and marketing activities, at an annual rent of approximately $21,000.The lease term expired on June 1, 2019 and was renewed with indefinite terms. 15 Table of Contents International Transaction Solutions The Company occupies an office in Moscow, Russia with approximately 1600 square feet at an annual rent of $50,900, which lease expired on February 10, 2021. This lease was renewed for one year. We believe that our current facilities are suitable and adequate for our present purposes, and we anticipate that we will be able to extend our existing leases on terms satisfactory to us or move to new facilities on acceptable terms. The following table presents a reconciliation of the undiscounted future minimum lease payments, under the lease for the premises we occupy for our North American Transaction Solutions segment's U.S. headquarters, to the amounts reported as operating lease liabilities on the consolidated balance sheet as of June 30, 2021:     Total   Undiscounted future minimum lease payments:         2021 (remainder of year)   $ 114,928   2022     230,660   2023     231,764   2024     222,926   2025     129,250   Total   $ 929,528   Amount representing imputed interest     (196,187 ) Total operating lease liability     733,341   Current portion of operating lease liability     (72,720 ) Operating Lease Liability, non-current   $ 660,621   As of June 30, 2021 Remaining term on Leases 3.75 Incremental borrowing rate 12 % As of June 30, 2021, the future minimum lease payments under other operating leases, not subject to Topic 842, are approximately $58,000for the remainder of the year. 16 Table of Contents Litigation, Claims, and Assessments With respect to all legal, regulatory and governmental proceedings, and in accordance with ASC 450-20,Contingencies—LossContingencies, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome with respect to any such matter is probable and the amount of the loss can be reasonably estimated, we record an accrual for the estimated amount of loss for the expected outcome of the matter. If the likelihood of a negative outcome with respect to material matters is reasonably possible and we are able to determine an estimate of the amount of possible loss or a range of loss, whether in excess of a related accrued liability or where there is no accrued liability, we disclose the estimate of the amount of possible loss or range of loss. However, management in some instances may be unable to estimate an amount of possible loss or range of loss based on the significant uncertainties involved in, or the preliminary nature of, the matter, and in these instances we will disclose the nature of the contingency and describe why we are unable to determine an estimate of possible loss or range of loss. In addition, we are involved in ordinary course legal proceedings, which include all claims, lawsuits, investigations and proceedings, including unasserted claims, which are probable of being asserted, arising in the ordinary course of business and otherwise not described below. We have considered all such ordinary course legal proceedings in formulating our disclosures and assessments, which are not expected to have a material adverse effect on our consolidated financial statements. Aptito.com, Inc. On August 6, 2014, our subsidiary (Aptito, LLC) filed a lawsuit against Aptito.com, Inc. and the shareholders of Aptito.com, Inc., in state court in the 11th Judicial Circuit in and for Miami-Dade County. This is an interpleader action in regards to 125,000 shares of our stock. Aptito, LLC acquired Aptito.com, Inc. in exchange for, among other things, 125,000 shares (prior to adjustment for two one-for-ten reverse stock splits) of our stock. There has been disagreements among the Aptito.com, Inc. shareholders as to proper distribution of the 125,000 shares (prior to adjustment for two one-for-ten reverse stock splits). To avoid any liability in regards to improper distribution, Aptito, LLC filed the interpleader action so as to allow the Defendants to litigate amongst themselves as to how the shares (prior to adjustment for two one- for-ten reverse stock splits) should be distributed. Aptito.com, Inc. opposed the motion to interplead and filed counterclaims relative to Aptito, LLC for non-delivery of the 125,000 shares (prior to adjustment for two one-for-ten reverse stock splits). On July 18, 2017, the Court granted Aptito LLC’s motion to interplead and also indicated that Aptito, LLC could not be held liable for any alleged damages relative to the purported non- delivery of the 125,000 shares after the interpleader action was filed on August 6, 2014. In March 2018, a new Judge in the case ruled that Aptito.com, Inc. was entitled to receive 125,000 newly issued shares of our common stock, but indicated that he was not ruling that we were required to issue such shares. We plan to appeal this ruling, and our legal counsel is addressing the counterclaims filed by Aptito.com, Inc. in this matter. In July 2018, our counsel was disqualified due to a conflict of interest. We engaged a new law firm to represent our ongoing interests in this case. Since that time, there have been multiple Motions and claims brought by Aptito.com, Inc., including the request for rescission of the asset purchase agreement that gave rise to the share issuance obligation. All of these Motions and claims are being vigorously defended. A court ordered mediation conference was held on April 24, 2019 but the parties were unable to reach a settlement. On May 1, 2019 the Court denied Aptito.com, Inc.’s Motion for Summary Judgement and further hearings on a variety of Motions were scheduled in this matter. On August 14, 2019, the court granted final Summary Judgment in favor of the Company, removing Net Element as a party to the lawsuit and denying Aptito.com, Inc’s Motion for rehearing and reconsideration of this matter. Aptito, LLC, in which the Company has a majority ownership interest, remains a Defendant in this litigation. On September 17, 2019, the court granted the Company’s Motion for sanctions against the attorney representing Aptito.com, Inc. in this matter. The Company is pursuing collection of legal fees incurred from the Plaintiff and their attorney. This matter was pending a special set hearing to be held on March 23, 2020. That hearing was postponed and rescheduled for hearing in July 2020. On July 23, 2020, the Court entered a judgement against the attorney representing Aptito.com and awarded attorney fees to the Company. The attorney stated on the record he will be filing for bankruptcy. In August 2020, Plaintiffs attorney, filed an appeal against the Judgement. This matter is still proceeding. The Company intends pursuing recovery from the attorney. Gene Zell In June 2014, we, as plaintiff, commenced an action in the Miami-Dade Circuit Court, Florida against Gene Zell ("Zell") for defamation of our Company and CEO and tortious interference with our business relationships. In October 2014, the court granted a temporary injunction against Zell enjoining him from posting any information about our Company and/or CEO on any website and enjoining him from contacting our business partners or investors. Zell violated the Court Order and the Court granted a Motion imposing sanctions against Zell. We continue to seek enforcement of the Court Order. In April 2015, Zell filed a Motion to set aside the Court Order alleging he was unaware of the Court Proceedings. The Court, on August 26, 2015, dismissed Zell’s Motion to dissolve the injunction. In March 2017 the Court dismissed another Motion brought by Zell to dissolve the injunction. Accordingly, the injunction order prohibiting Zell from making further defamatory posts remains in place. In 2018, we filed a motion to enforce the injunction and contempt orders against Zell. The court upheld the injunction and we continue to vigorously protect its interests. We are pursuing an action for damages sustained as a result of the defamation. On September 20, 2019, the Court granted a Permanent Injunction against Zell. The Company is evaluating pursuing actions against Zell for collection of legal fees and damages. A trial was scheduled for April 2020 on the issue of Net Element’s damages. However, Zell recently filed bankruptcy, so that trial and all further legal proceedings involving Zell will be stayed as a result of the automatic bankruptcy stay. Georgia Notes 18, LLC On March 22, 2021, the Company was notified that one of its shareholder, Georgia Notes 18, LLC, filed an action in the Delaware Chancery Court to compel inspection of the Company’s books and records pertaining to a 2014 transaction in which the shareholder had an interest. The Company has engaged counsel to protect its interests in this matter. A hearing on this matter is scheduled for August 31, 2021. At this time, the Company cannot predict the eventual outcome of this matter. Litigation relating to the proposed merger with Mullen Technologies. A. The following lawsuits have been filed against Net Element and current and former members of its board of directors in connection with the proposed Merger with Mullen: ·Raquel Ruby v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on June 11, 2021 in the United States District Court for the Southern District of New York;  ·Thomas Farley v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on June 8, 2021 in the United States District Court for the Eastern District of New York;  ·Michael Gatto v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, Mullen Automotive, Inc., Mullen Technologies, Inc., and Mullen Acquisition, Inc., filed on June 3, 2021 in the United States District Court of Delaware; and ·Atish Shinde v. Net Element, Inc., Oleg Firer, Howard Ash, Jon Najarian, Todd Raarup, Mullen Technologies, Inc. and Mullen Acquisition, Inc., filed on May 28, 2021 in the United States District Court for the Southern District of New York;                  Each of the above complaints allege that the initial Form S-4 registration statement filed on May 14, 2021 (the "Form S-4"), which was subject to completion, contained materially false and misleading statements or material misrepresentations or omissions regarding the Merger, the process for entering into the                             Merger Agreement and the associated transactions. Ruby seeks to enjoin the defendants from proceeding with the Merger, direct the defendants to amend the Form S- 4 to correct the alleged deficiencies, direct the defendants to account for all damages sustained, and reasonable fees and expenses. Farley seeks to                           enjoin the Merger, or, in the event it’s consummated, rescind the Merger and set it aside or award rescissory damages, a declaration that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9, and fees and expenses. Gatto seeks to enjoin the Merger, or, if the Merger is consummated,                       rescind the Merger and set it aside or award rescissory damages, a direction to the defendants to amend the Form S-4 to correct any alleged deficiencies, a declaration that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act and Rule 14a-9, and costs and expenses. Finally, Shinde seeks to enjoin                     the Merger, or, in the event the Merger is consummated, rescind the Merger and set it aside or award rescissory damages, declare that the Merger Agreement was entered into in breach of the fiduciary duties of the board of directors of Net Element, direct the board of directors for Net Element to exercise their                               fiduciary duties to commence a sales process, direct the board of directors for Net Element to account for damages, an amendment to the Form S-4 and fees and expenses.       These suits were filed prior to the Company’s filing of Amendment No.1 to Form S-4 on July 22, 2021 and prior to the Form S-4 being declared effective by the Commission as of July 26, 2021.  The Company has engaged outside counsel to represent its interests in these cases B.  -Shawn Strickland v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on August 10, 2021 in the United States District Court for Delaware.  -Matthew Whitfield v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, filed on August 13, 2021 in the United States District Court for the Eastern District of Pennsylvania, and -Robert Wilhelm v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, filed on August 13, 2021 in the United States District Court for the Southern District of New York.                   Each of the above complaints allege that the proxy statement and/or prospectus filed on July 27, 2021 omits or misrepresents material information essential to the vote on the Merger. The complaints seek to enjoin the Merger unless, in the Strickland and Wilhelm cases, the alleged missing material information is                          distributed to shareholders or, in the event the Merger is consummated, rescind the Merger and set it aside or award rescissory damages, a declaration that the defendants violated Sections 14(a) and/or 20(a) of the Exchange Act, as well as SEC Rule 14a-9, and fees and expenses. Whitfield also seeks an order for the                      defendants to disseminate a 424B3 that does not contain any untrue statements of material facts and that states all material facts required in it or necessary to make the statements contained therein not misleading. The Company has engaged outside counsel to represent its interests in these cases. C.   On June 8, 2021 the Company received a demand from Attorneys representing a shareholder, Len Gordon, requesting to inspect certain of the Company's books and records pursuant to 8Del. C.8220. The Company has engaged outside counsel to represent its interests in this matter. 17 Table of Contents NOTE 11. RELATED PARTY TRANSACTIONS  During each of the six months ended June 30, 2021 and 2020, agent commissions resulting from merchant processing of approximately $18,000were paid to Prime Portfolios, LLC, an entity owned by Oleg Firer, our Chairman and CEO, and Steven Wolberg, our Chief Legal Officer. In addition, key members of management owned companies received similar commissions and/or reimbursement for equipment purchased on the Company’s behalf, which amounted to approximately $782,000and $186,000 for the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021 and December 31, 2020, we had accrued expenses of approximately $209,000and $122,000, respectively, which consisted primarily of various travel, professional fees, and other expenses paid and charged for by our CEO on his personal credit cards. This is reflected as due to related party on the accompanying consolidated balance sheets.  On March 27, 2020, our Company entered into a Master Exchange Agreement, (the “ESOUSA Agreement”) with ESOUSA Holdings, LLC ("ESOUSA"), a related party. Prior to entering into the ESOUSA Agreement, ESOUSA agreed to acquire an existing promissory note that had been previously issued by the Company, of up to $2,000,000 in principal amount outstanding plus interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the ESOUSA Agreement, the Company had the right, at any time prior to March 27, 2021, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange this promissory note in tranches on the dates when the Company instructs ESOUSA, for such number of shares of the Company’s common stock (“Common Stock”) as determined under the ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL Capital Group, LLC. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such Exchange Amount from RBL Capital Group, LLC. Each such tranche to be $148,000 unless otherwise agreed to by the Company and ESOUSA.  On March 27, 2020, the Company received its first tranche of RBL promissory notes in the aggregate amount of $148,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  Included in other accrued expenses at June 30, 2021 is approximately $145,000 in connection with this first tranche for which shares of Common Stock have not yet been issued.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $148,000 from RBL under the Credit Facility.  On April 28, 2020, the Company received its second tranche of RBL promissory notes in the aggregate amount of $143,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 65,862 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $143,000 from RBL under the Credit Facility. On August 11, 2020, the Company received its third tranche of RBL promissory notes in the aggregate amount of $707,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 66,190 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $707,000 from RBL under the Credit Facility.  On August 21, 2020, the Company received its fourth tranche of RBL promissory notes in the aggregate amount of $401,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 45,654 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $401,000 from RBL under the Credit Facility.  On September 25, 2020, the Company received its fifth tranche of RBL promissory notes in the aggregate amount of $426,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 50,000 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $426,000 from RBL under the Credit Facility.  On December 30, 2020, the Company received its sixth tranche of RBL promissory notes in the aggregate amount of $1,960,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. The Company issued 200,000 shares of Common Stock to ESOUSA in connection with this exchange. Concurrently with this transaction, the Company received an equivalent aggregate amount of $1,960,000 from RBL under the Credit Facility. On July 9, 2021, the Company entered into a new Master Exchange Agreement with ESOUSA. See Note 14 - Subsequent Events for additional information. 18 Table of Contents NOTE 12. STOCKHOLDERS’ EQUITY  On October 5, 2017, we effected a one-for-ten reverse stock split of our common stock. Our condensed consolidated financial statements and disclosures reflect these changes in capital structure for all periods presented. On June 12, 2015 and June 13,2016, our shareholders approved 100,000,000 increases in our authorized common stock to 300,000,000 and 400,000,000, respectively. On October 2, 2017, our shareholders approved a 300,000,000 decrease in our authorized common stock to 100,000,000. The following table represents the change in our stockholders' equity for the three and six months ended June 30, 2021 and 2020:     Three and Six Months Ended June 30, 2020       Common Stock     Paid in     Accumulated Other     Non-controlling     Accumulated     Total       Shares     Amount     Capital     Comprehensive Loss     interest     Deficit     Stockholder's Equity   Balance December 31, 2019     4,111,082     $ 410.66     $ 185,297,069     $ (2,274,187 )   $ (231,999 )   $ (178,750,634 )   $ 4,040,660   Share based compensation     14,672       1.47       45,896       0       0       0       45,897   Expenses paid in connection with ESOUSA transaction     -       0       (5,000 )     0       0       0       (5,000 ) Net income (loss)     -       0       0       0       (11,228 )     (1,366,798 )     (1,378,026 ) Comprehensive income - foreign currency translation     -       0       0       130,813       0       0       130,813   Balance March 31, 2020     4,125,754     $ 412.13     $ 185,337,965     $ (2,143,374 )   $ (243,227 )   $ (180,117,432 )   $ 2,834,345   Share based compensation     4,054       0.41       7,500       0       0       0       7,500   ESOUSA transaction     65,862       6.59       151,475       0       0       0       151,482   Net loss     -       0       0       0       (13,724 )     (324,690 )     (338,414 ) Comprehensive income - foreign currency translation     -       0       0       (65,990 )     0       0       (65,990 ) Balance June 30, 2020     4,195,670     $ 419.13     $ 185,496,940     $ (2,209,364 )   $ (256,951 )   $ (180,442,122 )   $ 2,588,923       Three and Six Months Ended June 30, 2021       Common Stock     Paid in     Accumulated Other     Non-controlling     Accumulated     Total       Shares     Amount     Capital     Comprehensive Loss     interest     Deficit     Stockholder's Equity   Balance December 31, 2020     4,997,349     $ 499.28     $ 189,700,103     $ (2,259,410 )   $ (267,053 )   $ (184,692,067 )   $ 2,482,072   Share based compensation     807       0.08       11,258       0       0       0       11,258   ESOUSA transaction     200,000       20.00       1,999,980       0       0       0       2,000,000   Net income (loss)     -       0       0       0       (14,140 )     304,562       290,422   Comprehensive loss - foreign currency translation     -       0       0       18,583       0       0       18,583   Balance March 31, 2021     5,198,156     $ 519.37     $ 191,711,341     $ (2,240,827 )   $ (281,193 )   $ (184,387,504 )   $ 4,802,335   Share based compensation     1,029       0.10       11,237       0       0       0       11,237   Net loss             0       0       0       (12,764 )     1,263,876       1,251,111   Comprehensive loss - foreign currency translation             0       0       93,601       0       0       93,601   Balance June 30, 2021     5,199,185     $ 519.47     $ 191,722,577     $ (2,147,227 )   $ (293,957 )   $ (183,123,628 )   $ 6,158,284   Equity Incentive Plan Activity On December 5, 2013, our shareholders approved the Net Element International, Inc. 2013 Equity Incentive Plan (as amended to date, the “2013 Plan”). Awards under the 2013 Plan may be granted in any one or all of the following forms: (i) incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended; (ii) non-qualified stock options (unless otherwise indicated, references to “Options” include both Incentive Stock Options and Non-Qualified Stock Options); (iii) stock appreciation rights, which may be awarded either in tandem with Options or on a stand-alone basis; (iv) shares of common stock that are restricted; (v) units representing shares of common stock; (vi) units that do not represent shares of common stock but which may be paid in the form of common stock; and (vii) shares of common stock that are not subject to any conditions to vesting. On December 1, 2020, our shareholders approved an amendment to the 2013 Plan to increase the number of shares of the Company’s common stock available for issuance by 219,500 shares resulting in the aggregate of 1,160,500 shares authorized for issuance under the 2013 Plan. The maximum aggregate number of shares of common stock available for award under the 2013 Plan at June 30, 2021 and December 31, 2020 was208,664 and 210,500, respectively. The 2013 Plan is administered by the compensation committee. 19 Table of Contents 2013 Equity Incentive Plan - Shares and Stock Options During the three months ended June 30, 2021 and 2020, we issued common stock pursuant to the 2013 Plan to the members of our Board of Directors and recorded a compensation charge of $11,237 and $7,500, respectively. During the six months ended June 30, 2021 and 2020, we issued common stock pursuant to the 2013 Plan to the members of our Board of Directors and recorded a compensation charge of approximately $22,494 and $15,000, respectively.  At June 30, 2021 and December 31, 2020 we had 200,648 incentive stock options outstanding, with a weighted average exercise price of  $10.73 at June 30, 2021 and December 31, 2020 and a weighted average remaining contract term of 6.58 years at June 30, 2021 and 7.07 years at December 31, 2020. All of the stock options were anti-dilutive at December 31, 2020. NOTE 13. WARRANTS AND OPTIONS Options At June 30, 2021 and December 31, 2020, we had fully vested options outstanding to purchase 200,648, respectively, of shares of common stock at exercise prices ranging from $6.29to $134.00per share. Due to the high level of volatility in the stock price of our common stock, our management determined the grant date fair value of the options using the then quoted stock price at the grant date. Warrants At June 30, 2021 and December 31, 2020, we had warrants outstanding to purchase 404,676 shares of common stock. At June 30, 2021 the warrants had a weighted average exercise price of $11.12 per share purchased and a weighted average remaining contractual term of 1.50 years. At December 31, 2020, the warrants had a weighted average exercise price of $6.18 per share purchased and a weighted average remaining contractual term of 3.00 years. Non-Incentive Plan Options At June 30, 2021 and December 31, 2020, we had 46,643 non-incentive options outstanding with a weighted-average exercise price of $21.46. These non-incentive options contract terms expired as of  June 30, 2021. These options were out of the money at  December 31, 2020 and had 0 intrinsic value. NOTE 14. SUBSEQUENT EVENTS ESOUSA Master Exchange Agreement On July 9, 2021, the Company entered into a new Master Exchange Agreement, (the “New ESOUSA Agreement”) with ESOUSA. Prior to entering into the New ESOUSA Agreement, ESOUSA agreed to acquire the existing promissory notes that had been previously issued by the Company, of up to $15,000,000 in principal amount outstanding plus interest due to RBL. Pursuant to the New ESOUSA Agreement, the Company has the right, at any time prior to July 8, 2022, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange such promissory notes in tranches on the dates when the Company instructs ESOUSA, for such number of shares of Common Stock as determined under the New ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such exchange amount from RBL. Each such tranche to be $100,000 unless otherwise agreed to in writing by the Company and ESOUSA. Mullen Second Amended and Restated Agreement and Plan of Merger On July 20, 2021, the Company entered into a Second Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”) with Mullen, Merger Sub and Mullen Automotive, which amended, restated and replaced in its entirety the Prior Restated Merger Agreement. The Restated Merger Agreement, among other things, (i) clarified that Mullen is contemplating to assign and transfer to Mullen Automotive all of its electric vehicle business related assets, business and operations, and Mullen Automotive is contemplating assuming certain debt and liabilities of Mullen, prior to the effective time of the Merger and (ii) updated certain schedules contained in the Restated Merger Agreement. RBL Divestiture Agreement On July 20, 2021, the Company entered into the Divestiture Agreement with RBL. Pursuant to the Divestiture Agreement, the Company agreed, subject to the satisfaction of the conditions precedent set forth in the Divestiture Agreement, including the Company’s stockholders’ requisite approval of and the consummation of the Merger and a release of any and all claims and liabilities of the Company and its affiliates with respect to the RBL Loan Agreement, to divest itself of its existing business operations to RBL by a transfer by the Company to RBL of 100% of shares of capital stock of TOT Group, Inc. (“TOT”), a whole-owned subsidiary of the Company, causing RBL to assume TOT’s and the Company’s liabilities directly related to operations of its existing business immediately prior to the closing of such divestiture, in full satisfaction of the outstanding loan balance owed to RBL by the Company and its subsidiaries.  As a part of the Divestiture, RBL has agreed not to accelerate payment under the RBL Loan Agreement and, upon closing of the Divestiture, to release the Company and its affiliates from all of the obligations under the RBL Loan Agreement. The Divestiture is contingent upon and subject to the Company’s stockholders’ requisite approval of the Divestiture. If the Company’s stockholders’ requisite approval of the Divestiture is obtained and if the Merger is consummated, the Divestiture will occur immediately prior to the consummation of the Merger. 20 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read and evaluated in conjunction with the condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q (this "Report") and the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "Annual Report") and in Part II, Item 1A of this Report. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS As used in this Report, unless the context otherwise indicates, the references to “we”, “us,” “our” or the “Company” refers to Net Element, Inc. and its consolidated subsidiaries, unless the context suggests otherwise. This Report and other written or oral statements made from time to time by us may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You can sometimes identify forward looking-statements by our use of the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “forecast,” “guidance” and similar expressions. Some of the statements we use in this report contain forward-looking statements concerning our business operations, economic performance and financial condition including in particular: our business strategy and means to implement the strategy; measures of future results of operations, such as revenue, expenses, operating margins, and earnings per share; other operating metrics such as shares outstanding and capital expenditures; our success and timing in developing and introducing new products or services and expanding our business, including with respect to joint ventures; the successful integration of future acquisitions; our future responses to and any future impact of novel coronavirus COVID-19 ("COVID-19"); the new Delta variant; and the potential Merger between the Company and Mullen Automotive and the related transactions, including the Divestiture.operations. Although we believe that the plans and expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, many of which are beyond our control, cannot be foreseen and reflect future business decisions that are subject to change. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Our actual results, including actual revenues, revenue growth rates and margins, other results of operations and shareholder values, could differ materially from those anticipated in our forward-looking statements as a result of known and unknown factors, many of which are beyond our ability to predict or control. These factors include, but are not limited to, those set forth in Part II, Item 1A - Risk Factors of this Report and in our Annual Report, those set forth elsewhere in this report and those set forth in our press releases, reports and other filings made with the SEC, including under “Cautionary Note Regarding Forward-looking Statements” in the Company’s Current Report on Form 8-K filed on July 21, 2021, as amended.  In particular, these statements also depend on the duration, severity, and evolution of the COVID-19 pandemic and related risks, the surge in the new Delta variant, and its effect on our business, financial condition, results of operations and cash flows. These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements. Company Overview Net Element is a global technology and value-added solutions group that supports electronic payments acceptance in a multi-channel environment including point-of- sale (POS), ecommerce and mobile devices. The Company operates two business segments as a provider of North American Transaction Solutions and International Transaction Solutions. We offer a broad range of payment acceptance and transaction processing services that enable merchants of all sizes to accept and process over 100 different payment options in more than 120 currencies, including credit, debit, prepaid and alternative payments. We also provide merchants with value-added services and technologies including integrated payment technologies, POS solutions, fraud management, information solutions and analytical tools. We are differentiated by our technology-centered value-added service offerings built around our payments ecosystem and our diversified business model, which enables us to provide our varied customer base with a broad range of transaction-processing services from a single source across numerous channels and geographic markets. We believe these capabilities provide several competitive advantages that will enable us to continue to penetrate our existing customer base with complementary new services, win new customers, develop new sales channels and enter new markets. We believe these competitive advantages include: ● Our ability to provide competitive products through use of proprietary technologies; ● Our ability to provide in one package a range of services that traditionally had to be sourced from different vendors; ● Our ability to provide a single agnostic on-boarding and merchant management platform to our indirect non-bank sales force ("Sales Partners"); ● Our ability to provide management and optimization tools to our Sales Partners amongst multiple networks and platforms; ● Our ability to serve customers with disparate operations in several geographies with technology solutions that enable them to manage their business as one enterprise; and ● Our ability to capture and analyze data across the transaction processing value chain and use that data to provide value-added services that are differentiated from those offered by pure-play vendors that serve only one portion of the transaction processing value chain (such as only merchant acquiring or POS). We have operations and offices located within the United States (“U.S.”) (domestic) and outside of the U.S. (international) where sales, customer service and/or administrative personnel are based. Through U.S. based subsidiaries, we generate revenues from transactional services, valued-added payment services and technologies that we provide to SMBs. Through wholly owned subsidiaries, we focus on transactional services, mobile payment transactions, online payment transactions, value-added payment services and technologies in selected international markets. Our business is characterized by transaction related fees, multi-year contracts, and a diverse client base, which allows us to grow alongside our clients. Our multi-year contracts allow us to achieve a high level of recurring revenues with the same clients. While the contracts typically do not specify fixed revenues to be realized thereunder, they do provide a framework for revenues to be generated based on volume of services provided during such contracts’ term. 21 Table of Contents Products and Services Information Our broad suite of services spans the entire transaction processing value chain of commerce enabling services and technologies and includes a range of front-end customer-facing solutions, as well as back-end support services and account reconciliation. We deliver our value-added solutions from a suite of proprietary technology products, software, cloud-based applications, processing services, fraud management offerings, and customer support programs that we configure to meet our client’s individual needs. Many of our payment solutions are technology-enabled in that they incorporate or are incorporated into innovative, technology-driven solutions, including enterprise software solutions, designed to enable merchants to better manage their businesses. Integrated and Vertical Markets. Our integrated and vertical market solutions provide advanced payments technology that is deeply integrated into business enterprise software solutions either owned by us or by our partners. We grow our business when new merchants implement our enterprise software solutions and when new or existing merchants enable payments services through enterprise software solutions sold by us or by our partners. Our primary technology-enabled solutions include integrated and vertical markets, ecommerce and multi-channel solutions, each as described below: ● Unified Payments – doing business as Unified Payments, we provide businesses of all sizes and types throughout the United States with a wide range of fully- integrated payment acceptance solutions, value-added POS and business process management services; ● PayOnline – through our subsidiary, PayOnline Systems (“PayOnline”), we provide a wide range of value-added online solutions in the selected international markets utilizing our fully-integrated, agnostic electronic commerce platform that simplifies complex enterprise online transaction processing challenges from payment acceptance and processing through risk prevention and payment security via point-to-point encryption and tokenization solutions; ● Pay-Travel – integrated payment processing solutions to the travel industry, which includes integrations with various Global Distribution Systems (“GDS”) such as Amadeus®, Galileo®, Sabre®, additional geo filters and passenger name record (PNR) through Pay-Travel service offered by PayOnline; ● Aptito POS Platform – an integrated POS platform developed on Apple’s® iOS and Android® mobile operating systems for the hospitality, retail, service and on the go industries. Our goal with Aptito is to create an easy to use POS and business management solution, which incorporates everything a small business needs to help streamline every-day management, operations and payment acceptance; ● Restoactive – utilizing Aptito POS Platform architecture, we have developed and launched Restoactive, which seamlessly plugs into a current restaurant environment through integrations with some of the biggest POS and restaurant management platforms available on the market today; ● Unifiedm-POS– mobile POS application makes accepting payments on the go easy and secure. Mobile application is EMV-compliant, accepts traditional and contactless transactions such as Apple Pay®. Unified m-POS application is available for download in Apple’s App Store and Google Play; ● Zero Pay – zero-fee payment acceptance program for SMB merchants in the United States. Zero Pay program saves merchants costs involved in accepting credit and debit cards using mobile POS; ● Netevia – our internally developed future-ready multi-channel payments and merchant management platform. Connecting and simplifying payments across sales channels through a single integration point, Netevia delivers end-to-end payment processing through easy-to-use APIs. The Netevia platform is the core of the company’s technology stack; ● Blade-our internally developed, proprietary, fully automated, artificial intelligence powered underwriting solution with predictive scoring. Built for underwriting and on-boarding of new merchants, reducing potential risks and decision-making time while improving the customer experience; ● NeteviaMastercardforSMB- The Netevia Mastercard®, powered by Aliaswire’s patented technology, is part of a unique platform that combines efficient and low-cost payment processing with the ability to save money on credit and debit card payment acceptance fees. Recent Developments The COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, promotion of social distancing measures, “shelter-in-place,” “stay-at-home,” total lock-down orders, business limitations or shutdowns and similar orders.  More recently, many news agencies have reported the spread of new variants of COVID-19, such as the Delta variant, that are significantly more contagious than previous strains. The spread of these new strains are causing some government authorities to reimplement the aforementioned measures, and some businesses to implement their own restrictions, to try to reduce the spread of COVID-19 that had become less prevalent.  The COVID-19 pandemic and these measures have significantly impacted, and may continue to impact, the restaurant and hospitality industries. As a result, the Company’s revenues, which are largely tied to processing volumes in these verticals, were materially impacted during 2020. Since the quarter ended December 31, 2020, the Company has seen a significant recovery in its end-to-end payment volumes as some merchants began resuming their normal operations. However, while end-to-end volumes for the three and six months ended June 30, 2021 have exceeded those for the respective three and six months ended June 30, 2020, the ultimate impact that the COVID-19 pandemic and, in particular, the highly contagious Delta variant, will have on the Company’s consolidated results of operations in future periods remains uncertain and will depend on future developments, which are continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic and the Delta variant, its severity, the emergence and severity of other variants, the availability and the efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them, other protective actions taken to contain the virus or treat its impact, such as restrictions on indoor dining, travel and transportation, and how quickly and to what extent normal economic and operating conditions will continue. The Company will continue to evaluate the nature and extent of these potential impacts to its business, consolidated results of operations, and liquidity.  Accordingly, the Company’s current results and financial condition discussed herein may not be indicative of future operating results and trends. During March 2020, our Company evaluated its liquidity position, future operating plans, and its labor force, which included a reduction in the labor force and compensation to executives and other employees, in order to maintain current payment processing functions, capabilities, and continued customer service to its merchants. We are also seeking sources of capital to pay our contractual obligations as they come due, in light of these uncertain times. Management believes that its operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing. At this time, due to the unprecedented and rapid spread of COVID-19 and its variants, we cannot predict the impact of these conditions on our ability to obtain financing necessary for the Company to fund its future working capital requirements.  Our Company has also decided to explore strategic alternatives and potential options for its business, including sale of the Company or certain assets, licensing of technology, spin-offs, or a business combination. Accordingly, the Company has entered into a merger agreement in connection with the contemplated merger with Mullen Automotive and certain related transactions, including a divestiture of the Company’s existing business operations. See “—Recent Developments—Mullen Merger and Related Transactions” for additional information. There can be no assurance, at this time, regarding the eventual outcome of our planned strategic alternatives, including the Merger and the related transactions. Over the past year, we have taken initiatives to help minimize the risks to our business and protect our shareholders. Our management team’s experience during the 2008 financial crisis is proving to be very valuable in dealing with the current crisis. Our entire staff is fully committed and working diligently to support our merchants through these difficult times. Most of our merchants have contactless payment acceptance capabilities through their POS solutions, as well as, e-commerce and mobile contactless payment acceptance capabilities to eliminate the need for physical payments to help reduce the spread of the virus. The following initiatives, including an extensive business continuity plan, have been implemented: Risk Management: ● Enhanced risk controls and safeguards have been put in place for merchants that sell products with an extended delivery time frame, products paid in advance, catering, ticketing, transportation and travel related merchants ● For those employees that will be working from home, we have implemented a “remote work” policy and provided employees with the technology necessary to do so ● For those employees that require office attendance, we are taking significant steps to ensure seamless service delivery while safeguarding employees health Contactless Payments: ● Most of our merchants have contactless payment acceptance capabilities through their POS devices from equipment manufacturers such as PAX, Poynt and Verifone which are fully integrated into Netevia and Aptito platforms ● We launched an initiative to deploy contactless payment acceptance equipment to merchants that don’t currently have it ● Mobile contactless payment acceptance is available through our Unified mPOS App which can be downloaded from Apple’s App Store and Google’s Google Play Apps ● Online ecommerce payments through shopping carts allow our merchants to sell their products and services to customers that prefer to shop from the convenience of their homes As part of our Company's plan to obtain capital to fund future operations, on March 27, 2020, our Company entered into a Master Exchange Agreement, (the “ESOUSA Agreement”) with ESOUSA Holdings, LLC ("ESOUSA"), a related party. Prior to entering into the ESOUSA Agreement, ESOUSA agreed to acquire an existing promissory note that had been previously issued by the Company, of up to $2,000,000 in principal amount outstanding and unpaid interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the ESOUSA Agreement, the Company had the right, at any time prior to March 27, 2021, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange this promissory note in tranches on the dates when the Company instructs ESOUSA, for such number of shares of the Company’s common stock (“Common Stock”) as determined under the ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL.  ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such exchange amount from RBL. Each such tranche shall be $148,000 unless otherwise agreed to by the Company and ESOUSA.  On April 23, 2020 and August 3, 2020, the Company entered into certain amendments to the ESOUSA Agreement, which together increased from $2,000,000 to $15,000,000 the principal amount and unpaid interest of one or more promissory notes of the Company or its direct or indirect subsidiaries that ESOUSA either purchased in whole or has an irrevocable right to purchase in tranches from RBL in connection with the ESOUSA Agreement. On July 9, 2021, the Company entered into a new Master Exchange Agreement with ESOUSA.  See Note 14 - Subsequent Events in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report for additional information. On May 7, 2020, the Company entered into a promissory note (the “PPP Note”) evidencing an unsecured loan (the “Loan”) in the amount of $491,493 made to the Company under the Paycheck Protection Program (the “PPP”). The PPP Note was to mature on May 7, 2022 and bore interest at a rate of 1% per annum. Beginning December 7, 2020, the Company was required to make 17 monthly payments of principal and interest, with the principal component of each such payment based upon the level amortization of principal over a two-year period from May 7, 2020. Pursuant to the terms of the CARES Act and the PPP, the Company could apply to the Lender for forgiveness for the amount due on the Loan. The amount eligible for forgiveness was based on the amount of Loan proceeds used by the Company (during the eight-week period after the Lender makes the first disbursement of Loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), interest on mortgage obligations, rent and utilities, subject to certain limitations and reductions in accordance with the CARES Act and the PPP. On May 9, 2021, our Company was informed by the Small Business Administration that the loan forgiveness application was approved. The Company reversed the amount due and reflected it as a gain on extinguishment of debt during the three months ended June 30, 2021. Mullen Merger and Related Transactions On August 4, 2020, the Company entered into an Agreement and Plan of Merger with Mullen Technologies, Inc., a California corporation (“Mullen”), and Mullen Acquisition, Inc., a California corporation and wholly owned subsidiary of the Company (“Merger Sub”), which was amended on December 29, 2020, March 30, 2021 and April 30, 2021 (as amended, the “Original Merger Agreement”). Pursuant to, and on the terms and subject to the conditions of, the Original Merger Agreement, Merger Sub was to be merged with and into Mullen, with Mullen continuing as the surviving corporation in such merger. On May 14, 2021, the Company entered into an Amended and Restated Agreement and Plan of Merger (the “Prior Restated Merger Agreement”) with Mullen, Merger Sub and Mullen Automotive, Inc. (“Mullen Automotive”), a California corporation and a wholly-owned subsidiary of Mullen, which amended, restated and replaced in its entirety the Original Merger Agreement.  On July 20, 2021, the parties entered into a Second Amended and Restated Agreement and Plan of Merger (the “Restated Merger Agreement”), which amended, restated and replaced in its entirety the Prior Restated Merger Agreement. Pursuant to, and on the terms and subject to the conditions of, the Restated Merger Agreement, Merger Sub will be merged with and into Mullen Automotive (the “Merger”), with Mullen Automotive continuing as the surviving corporation in the Merger (See Note 14 - Subsequent Events in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report). The Restated Merger Agreement contains termination rights for each of the Company and Mullen Automotive, including, among others, (i) in the event that the Merger has not been consummated by August 31, 2021, (ii) in the event that the requisite approval of the Company’s stockholders is not obtained upon a vote thereon, (iii) in the event that any governmental authority shall have taken action to restrain, enjoin or prohibit the consummation of the Merger, which action shall have become final and non-appealable and (iv) in the event that there is a breach by the other party of any of its representations, warranties, covenants or agreements, which breach is sufficiently material and not timely cured or curable. In addition, Mullen Automotive may terminate the Restated Merger Agreement if, prior to receipt of the requisite approval of the Company’s stockholders, the Company’s board of directors shall have changed their recommendation in respect of the Merger. Further, the Company may terminate the Restated Merger Agreement prior to receipt of the requisite approval of the Company’s stockholders to enter into a definitive agreement with respect to a Superior Proposal (as such term is defined in the Restated Merger Agreement). The consummation of the Merger is subject to (i) the Merger and the shares of Company common stock to be issued in connection with the Merger and other transactions contemplated by the Restated Merger Agreement being approved and authorized for the listing on Nasdaq and (ii) the Company’s and its subsidiaries aggregate cash and cash equivalents plus amounts lent by the Company to Mullen Automotive pursuant to the Restated Merger Agreement less accounts payable and debt (exclusive of unfunded warrant proceeds) is $10,000,000 less legal fees as set forth in the Restated Merger Agreement, the Late Fees (as defined below), $500,000 previously lent by the Company to Mullen pursuant to the Mullen Note (as defined below) together with all accrued interested thereon (the “Net Cash Position”). The parties to the Restated Merger Agreement intend that the Company will effect a private placement of the Company common stock prior to the Merger Effective Time (the “Private Placement”) in order to raise sufficient capital for the Net Cash Position. The parties to the Restated Merger Agreement intend that the number of shares of the Company’s common stock outstanding immediately after the Merger effective time on a fully diluted and fully converted basis will not exceed 75,000,000, with 15% of such common stock outstanding immediately after the Merger effective time on a fully diluted and fully converted basis to be allocated to the persons that hold shares of the Company common stock immediately prior to the Merger effective time (subject to upward adjustment described below). The Company and Mullen Automotive may agree that the Company may raise additional capital beyond the Net Cash Position. In such event, Mullen Automotive and its pre-Merger shareholders shall solely absorb all of the dilution from such additional capital raise beyond the Net Cash Position for purposes of allocating ownership between the Company pre-Merger stockholders, on the one hand, and all other parties, on the other hand. The parties to the Restated Merger Agreement intend that, prior to the Merger effective time but, subject to and after the Company’s stockholders’ approval, the Company will divest itself of its existing business operations to another party, and will cause such party to assume all liabilities of the Company directly related to its operations of its existing business immediately prior to the closing of such divestiture (the “Divestiture”).   On July 20, 2021, the Company entered into a divestiture agreement (the “Divestiture Agreement”) with RBL relating to the contemplated Divestiture.  See Note 14 - Subsequent Events in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report for additional information. As was contemplated by the Original Merger Agreement, on August 11, 2020, the Company as lender, entered into an unsecured Promissory Note, dated August 11, 2020 (the “Mullen Note”), with Mullen. Pursuant to the Mullen Note, Mullen borrowed from the Company $500,000. Prior to maturity of the loan, the principal amount of the loan will carry an interest rate of 14% per annum compounded monthly and payable upon demand. This loan will mature on the earlier of (i) the date that the merger agreement is terminated for any reason by any party thereto and (ii) the Merger effective time. In addition, pursuant to the Original Merger Agreement, the Company, Mullen and Merger Sub agreed that, if the registration statement on Form S-4 (with the merger proxy statement included as part of the prospectus) was not filed with the Commission on or prior to January 15, 2021, then Mullen would pay the Company an agreed sum of $13,333 per day (the “Late Fee”) until the such registration statement (with the merger proxy statement included as part of the prospectus) is filed with the Commission. All accumulated Late Fees will be due and payable by Mullen on the 5th day of each calendar month commencing February 5, 2021 and on the 5th day of each month thereafter until the above-refenced filing has occurred. An initial Form S-4 registration statement was filed on May 14, 2021. The parties to the Restated Merger Agreement agreed that Mullen Automotive will pay the Late Fee as set forth in the Original Merger Agreement. At June 30, 2021, the Company is owed approximately $1.5 million from Mullen in connection with Late Fees, which remains unpaid. Prior to the effective time of the Merger, (i) Mullen is contemplating to assign and transfer to Mullen Automotive all of its electric vehicle business related assets, business and operations, and Mullen Automotive is contemplating assuming certain debt and liabilities of Mullen and (ii) Mullen is contemplating a spin off, via share dividend, of all of the capital stock of Mullen Automotive to the stockholders of Mullen as of the effective date of such spin off. After such spin off and immediately prior to the effective time of the Merger, the capital structure (including its issued and outstanding common and preferred stock) of Mullen Automotive shall mirror the capital structure of Mullen. Consummation of the Merger, the Divestiture, the Private Placement and the other transactions contemplated in the Restated Merger Agreement, is subject to customary conditions including, among others, the approval of the Company’s stockholders. There is no guarantee that the Merger, the Divestiture, the Private Placement or the other transactions contemplated in the Restated Merger Agreement will be completed. For additional information, see the Company’s Current Report on Form 8-K filed on July 21, 2021. 22 Table of Contents Our Mission and Vision Our mission is to power global commerce and allow our clients to conduct business globally through a centralized solution. We believe that understanding consumer behavior and the needs of our merchants is the most effective and, ultimately, the most profitable means to accomplish our mission and create long-term value for all stakeholders. We drive client growth through our in-depth knowledge of global transactional services and related value-added service offerings which separate us from the competition. Our vision is to set the standard for multi-channel payments acceptance and value-added service offerings with focus on the creation of a unified global transaction acceptance ecosystem. We believe in disruptive emerging technologies and, as such, we have developed Netevia, our future-ready multi-channel payments platform to support development of value-added solutions designed for everyday commerce. Moving forward, we believe exciting projects and disruptive technologies like biometric payments and artificial intelligence will provide us the opportunity to continue developing innovative payments solutions, which will provide value to our clients. In order to achieve this vision, we seek to further develop single on-boarding, global transaction acceptance ecosystem. Manifesting this vision requires scaling our direct and indirect connectivity to multiple payment and mobile networks internationally. By implementing this vision, we believe that we will be able to provide centralized, global multi-channel transactional platform to our clients internationally. 23 Table of Contents Our Strategy Subject to the potential Merger between the Company and Mullen Automotive and the related transactions, including the Divestiture, our strategy is to capitalize on consumer appetite for digital payment methods, the perceived movement towards a cashless society. To continue to grow our business, our strategy is to focus on providing merchants with the ability to process a variety of electronic transactions across multiple channels. We seek to leverage the adoption of and transition to card, electronic and digital-based payments by expanding our market share through our distribution channels and services innovations. We also seek growth through strategic acquisitions to improve our offerings, scale and geography. We intend to continue to invest in and leverage our technology infrastructure and our people to increase our penetration in existing markets. Key elements of our business strategy include: ● Continued investment in our core technology and new technology offerings; ● Allocation of resources and expertise to grow in commerce and payments segments; ● Grow and control distribution by adding new merchants and partners; ● Leverage technology and operational advantages throughout our global footprint; ● Expansion of our cardholder and subscriber customer base; ● Continue to develop seamless multinational solutions for our clients; ● Increase monetization while creating value for our clients; ● Focus on continued improvement and operation excellence; and ● Pursue potential domestic and international acquisitions of, investments in, and alliances with companies that have high growth potential, significant market presence or key technological capabilities. With our existing infrastructure and supplier relationships, we believe that we can accommodate expected revenue growth. We believe that our available capacity and infrastructure will allow us to take advantage of operational efficiencies and increased margin as we grow our processing volume and expand to other geographical territories. Market Overview The financial technology and transaction processing industry is an integral part of today’s worldwide financial structure. The industry is continually evolving, driven in large part by technological advances. The benefits of card-based payments allow merchants to access a broader universe of consumers, enjoy faster settlement times and reduce transaction errors. By using credit or debit cards, consumers are able to make purchases more conveniently, whether in person, over the Internet, or by mail, fax or telephone, while gaining the benefit of loyalty programs, such as frequent flyer miles or cash back, which are increasingly being offered by credit or debit card issuers. In addition, consumers are also beginning to use card-based and other electronic payment methods for purchases at an earlier age in life, and increasingly for small dollar amount purchases. Given these advantages of card-based payment systems to merchants and consumers, favorable demographic trends, and the resulting proliferation of credit and debit card usage, we believe businesses will increasingly seek to accept card-based payment systems in order to remain competitive. We believe that cash transactions are becoming progressively obsolete. The proliferation of bankcards has made the acceptance of bankcard payments a virtual necessity for many businesses, regardless of size, in order to remain competitive. In addition, the advent and growth of e-commerce and crypto-currencies have marked a significant new trend in the way business is being conducted. E-commerce is dependent upon credit and debit cards, as well as other cashless payment processing methods. The payment processing industry continues to evolve rapidly, based on the application of new technology and changing customer needs. We intend to continue to evolve with the market to provide the necessary technological advances to meet the ever-changing needs of our market place. Traditional players in the industry must quickly adapt to the changing environment or be left behind in the competitive landscape. In most respects, the uncertainty surrounding the COVID-19 pandemic and the surge in the new Delta variant makes it difficult to be able to quantify or qualify the longer-term ramifications on our business and our merchants.  See “—Recent Developments” for additional information relating to the impact of the COVID-19 pandemic and the Delta variant. 24 Table of Contents Business Segments We operate two reportable business operating segments: (i) North American Transaction Solutions and (ii) International Transaction Solutions. Our segments are designed to establish lines of businesses that support our client base and further globalize our solutions. Management determines the reportable segments based on the internal reporting used by our Chief Operating Decision Maker to evaluate performance and to assess where to allocate resources. The principal revenue stream for all segments comes from service and transaction related fees. North American Transaction Solutions North American Transaction Solutions is currently our largest segment, where through our subsidiary TOT Payments, LLC, doing business as Unified Payments, we provide businesses of all sizes and types with a wide range of fully-integrated payment acceptance solutions at the point of sale, including Merchant Acquiring, e-commerce, mobile commerce, POS and other business solutions. Our largest service in this segment is Merchant Acquiring, which facilitates the acceptance of cashless transactions at the POS, whether a retail transaction at a physical business location, a mobile commerce transaction through a mobile or tablet device, which includes m-POS acceptance, Android Pay™, Apple Pay™ and Samsung Pay or an electronic commerce transaction over the web. Geographical presence for this segment is North America. International Transaction Solutions Through our subsidiary, PayOnline, we provide a wide range of value-added online and mobile solutions utilizing our fully-integrated, platform agnostic electronic commerce offering that simplifies complex enterprise online transaction processing challenges from payment acceptance and processing through risk prevention and payment security via point-to-point encryption and tokenization solutions. Our proprietary SaaS suite of solutions for electronic and mobile commerce gateway and payment processing platform is compliant at Level 1 of PCI DSS, streamlines the order-to-cash process, improves electronic payment acceptance and reduces the scope of burden of PCI DSS compliance. PayOnline holds a potential leadership position in the Russian Federation as one of the largest independent Internet Payment Services Providers (“IPSP”). Segment Summary Information The following tables present financial information of the Company’s reportable segments at and for the three months ended June 30, 2021 and 2020. The “corporate and eliminations” column includes corporate expenses and intercompany eliminations for consolidated purposes. Three months ended June 30, 2021   North American Transaction Solutions     International Transaction Solutions     Corp Exp & Eliminations     Total   Net revenues   $ 32,015,097     $ 1,276,838     $ -     $ 33,291,935   Cost of revenues     28,561,909       1,020,689       -       29,582,598   Gross Margin     3,453,188       256,149       -       3,709,337   Gross margin %     11 %     20 %     -       11 % Selling, general and administrative     886,240       248,924       915,697       2,050,861   Non-cash compensation     -       -       11,237       11,237   Provision for bad debt     514,145       236       -       514,381   Depreciation and amortization     527,587       1,297       -       528,884   Interest expense     363,312       -       -       363,312   Gain on debt forgiveness     -       -       (441,492 )     (441,492 ) Late fees due from Mullen     -       -       (559,986 )     (559,986 ) Other (income) expense     (13,500 )     4,529       -       (8,971 ) Net income (loss) for segment   $ 1,175,404     $ 1,163     $ 74,544     $ 1,251,111   Goodwill     6,671,750       1,009,436       -       7,681,186   Other segment assets     22,561,469       520,328       -       23,081,797   Total segment assets   $ 29,233,219     $ 1,529,765     $ -     $ 30,762,984   Three months ended June 30, 2020   North American Transaction Solutions     International Transaction Solutions     Corp Exp & Eliminations     Total   Net revenues   $ 12,977,536     $ 741,073     $ -     $ 13,718,609   Cost of revenues     11,016,028       520,759       -       11,536,787   Gross Margin     1,961,508       220,314       -       2,181,822   Gross margin %     15 %     30 %     -       16 % Selling, general and administrative     720,538       125,785       539,006       1,385,329   Non-cash compensation     -       -       7,500       7,500   Provision for bad debt     31,755       1,555       -       33,310   Depreciation and amortization     765,823       6,579       -       772,402   Interest expense     341,020       -       -       341,020   Other income     (17,846 )     9,289       (10,768 )     (19,325 ) Net income (loss) for segment   $ 120,218     $ 77,106     $ (535,738 )   $ (338,414 ) Goodwill     6,671,750       1,009,436       -       7,681,186   Other segment assets     13,545,980       455,704       -       14,001,684   Total segment assets   $ 20,217,730     $ 1,465,140     $ -     $ 21,682,870   25 Table of Contents Six months ended June 30, 2021   North American Transaction Solutions     International Transaction Solutions     Corp Exp & Eliminations     Total   Net revenues   $ 54,906,407     $ 2,170,875     $ -     $ 57,077,282   Cost of revenues     48,685,056       1,683,987       -       50,369,043   Gross Margin     6,221,351       486,888       -       6,708,239   Gross margin %     11 %     22 %     -       12 % Selling, general and administrative     1,695,502       513,531       1,753,677       3,962,710   Non-cash compensation     -       -       22,494       22,494   Provision for bad debt     1,208,204       854       -       1,209,058   Depreciation and amortization     1,261,557       3,005       -       1,264,562   Interest expense     719,592       -       -       719,592   Gain on debt forgiveness     -       -       (441,492 )     (441,492 ) Late fees due from Mullen     -       -       (1,559,961 )     (1,559,961 ) Other (income) expense     (16,347 )     2,536       3,550       (10,261 ) Net loss for segment   $ 1,352,843     $ (33,038 )   $ 221,732     $ 1,541,537   Goodwill     6,671,750       1,009,436       -       7,681,186   Other segment assets     22,561,469       520,328       -       23,081,797   Total segment assets   $ 29,233,219     $ 1,529,765     $ -     $ 30,762,984   Six months ended June 30, 2020   North American Transaction Solutions     International Transaction Solutions     Corp Exp & Eliminations     Total   Net revenues   $ 28,131,616     $ 1,424,559     $ -     $ 29,556,175   Cost of revenues     23,840,300       996,895       -       24,837,195   Gross Margin     4,291,316       427,664       -       4,718,980   Gross margin %     15 %     30 %     -       16 % Selling, general and administrative     1,590,103       536,760       1,574,358       3,701,221   Non-cash compensation     -       -       45,900       45,900   Provision for bad debt     475,018       1,070       -       476,088   Depreciation and amortization     1,537,065       14,779       -       1,551,844   Interest expense (income), net     689,433       -       -       689,433   Other expense (income)     (17,846 )     (451 )     (10,768 )     (29,065 ) Net income (loss) for segment   $ 17,543     $ (124,494 )   $ (1,609,490 )   $ (1,716,441 ) Goodwill     6,671,750       1,009,436       -       7,681,186   Other segment assets     13,545,980       455,704       -       14,001,684   Total segment assets   $ 20,217,730     $ 1,465,140     $ -     $ 21,682,870   26 Table of Contents Results of Operations for the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020 We reported a net income attributable to common stockholders of approximately $1.6 million or $0.26 per share income for the six months ended June 30, 2021 as compared to a net loss of approximately $1.7 million or $0.41 per share loss for the six months ended June 30, 2020. The decrease in net loss attributable to stockholders of approximately $3.3 million was primarily due to a significant increase in net revenues and approximately $1.5 million in late fees owed by Mullen, which remains unpaid. The following tables set forth our sources of revenues, cost of revenues and the respective gross margins for the six months ended June 30, 2021 and 2020.     Six             Six                       Months Ended             Months Ended             Increase /   Source of Revenues   June 30, 2021     Mix     June 30, 2020     Mix     (Decrease)   North American Transaction Solutions   $ 54,906,407       96.2 %   $ 28,131,616       95.2 %   $ 26,774,791   International Transaction Solutions     2,170,875       3.8 %     1,424,559       4.8 %     746,316   Total   $ 57,077,282       100.0 %   $ 29,556,175       100.0 %   $ 27,521,107       Six             Six                       Months Ended     % of     Months Ended     % of     Increase /   Cost of Revenues   June 30, 2021     revenues     June 30, 2020     revenues     (Decrease)   North American Transaction Solutions   $ 48,685,056       88.7 %   $ 23,840,300       84.7 %   $ 24,844,756   International Transaction Solutions     1,683,987       77.6 %     996,895       70.0 %     687,092   Total   $ 50,369,043       88.2 %   $ 24,837,195       84.0 %   $ 25,531,848       Six             Six                       Months Ended     % of     Months Ended     % of     Increase /   Gross Margin   June 30, 2021     revenues     June 30, 2020     revenues     (Decrease)   North American Transaction Solutions   $ 6,221,351       11.3 %   $ 4,291,316       15.3 %   $ 1,930,035   International Transaction Solutions     486,888       22.4 %     427,664       30.0 %     59,224   Total   $ 6,708,239       11.8 %   $ 4,718,980       16.0 %   $ 1,989,259   Net revenues consist primarily of service fees from transaction processing. Net revenues were approximately $57.1 million and $29.6 million for the six months ended June 30, 2021 and 2020, respectively. The Company’s revenues, which are largely tied to processing volumes were materially impacted beginning in the final two weeks of March 2020. Since the quarter ended December 31, 2020, the Company has seen a significant recovery in its end-to-end payment volumes as some merchants began resuming their normal operations.  Cost of revenues represents direct costs of generating revenues, including commissions, mobile operator fees, interchange expense, processing, and non-processing fees. Cost of revenues for the six months ended June 30, 2021 were approximately $50.4 million as compared to approximately $24.8 million for the six months ended June 30, 2020. The increase in cost of revenues was primarily due to a significant increase in net revenues. The gross margin for the six months ended June 30, 2021 was approximately $6.7 million, or 11.8% of net revenues, as compared to approximately $4.7 million, or 16.0% of net revenues, for the six months ended June 30, 2020. The decrease in the overall gross margin percentage was primarily the result of the competitive pressure in our industry and a large wholesale client converting their merchant processing relationship to our platform. Our wholesale platform generally provides for lower margins compared to our other products and services. 27 Table of Contents Operating Expenses Analysis: Operating expenses were approximately $6.5 million for the six months ended June 30, 2021, as compared to approximately $5.8 million for six months ended June 30, 2020. Operating expenses for the six months ended June 30, 2021 primarily consisted of selling, general and administrative expenses of approximately $4.0 million, bad debt expense of approximately $1.2 million and depreciation and amortization expense of approximately $1.3 million. Operating expenses for the six months ended June 30, 2020 primarily consisted of selling, general and administrative expenses of approximately $3.7 million, bad debt expense of approximately $476,000, and depreciation and amortization expense of approximately $1.6 million. The net increase was primarily due to additional personnel retained to meet the demand of growth, the increase in bad debt expense due to the increase in net revenues, fees in connection with the Form S-4 filing, which were partially offset by the reduction of compensation of certain employees, consultants, and executives of the Company. The components of our selling, general and administrative expenses are reflected in the tables below. Selling, general and administrative expenses for the six months ended June 30, 2021 and 2020 consisted of operating expenses not otherwise delineated in our Condensed Consolidated Statements of Operations and Comprehensive Loss, as follows: Six months ended June 30, 2021                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ 912,201     $ 299,609     $ 645,363     $ 1,857,173   Professional fees     368,954       64,137       612,976       1,046,067   Rent     152,933       33,142       9,765       195,840   Business development     84,601       13,335       38,055       135,991   Travel expense     7,734       62,375       94,216       164,325   Filing fees     -       -       46,502       46,502   Transaction gains     -       (41,986 )     -       (41,986 ) Office expenses     104,598       11,403       45,648       161,649   Communications expenses     63,739       57,552       76,588       197,879   Insurance expense     -       -       83,832       83,832   Other expenses     742       13,964       100,732       115,438   Total   $ 1,695,502     $ 513,531     $ 1,753,677     $ 3,962,710   Six months ended June 30, 2020                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ 1,085,541     $ 204,967     $ 669,295     $ 1,959,803   Professional fees     161,578       88,428       496,948       746,954   Rent     17,643       30,158       91,508       139,309   Business development     111,349       17       5,907       117,273   Travel expense     5,309       34,496       95,526       135,331   Filing fees     -       -       37,338       37,338   Transaction losses     -       76,499       -       76,499   Office expenses     119,485       10,728       44,975       175,188   Communications expenses     88,770       89,364       35,871       214,005   Insurance expense     -       -       80,685       80,685   Other expenses     428       2,103       16,305       18,836   Total   $ 1,590,103     $ 536,760     $ 1,574,358     $ 3,701,221   Variance                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ (173,340 )   $ 94,642     $ (23,932 )   $ (102,630 ) Professional fees     207,376       (24,291 )     116,028       299,113   Rent     135,290       2,984       (81,743 )     56,531   Business development     (26,748 )     13,318       32,148       18,718   Travel expense     2,425       27,879       (1,310 )     28,994   Filing fees     -       -       9,164       9,164   Transaction gains     -       (118,485 )     -       (118,485 ) Office expenses     (14,887 )     675       673       (13,539 ) Communications expenses     (25,031 )     (31,812 )     40,717       (16,126 ) Insurance expense     -       -       3,147       3,147   Other (income) expenses     314       11,861       84,427       96,602   Total   $ 105,399     $ (23,229 )   $ 179,319     $ 261,489   28 Table of Contents Salaries, benefits, taxes and contractor payments decreased by approximately $100,000 on a consolidated basis for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. This was primarily due to the reduction of  compensation of certain employees, consultants, and executives of the Company. Segment   Salaries and benefits for the six months ended June 30, 2021     Salaries and benefits for the six months ended June 30, 2020     Increase / (Decrease)   North American Transaction Solutions   $ 912,201     $ 1,085,541     $ (173,340 ) International Transaction Solutions     299,609       204,967       94,642   Corporate Expenses & Eliminations     645,363       669,295       (23,932 ) Total   $ 1,857,173     $ 1,959,803     $ (102,630 ) Six months ended June 30, 2021                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   General Legal   $ 41,104     $ 1,645     $ 28,395     $ 71,144   SEC Compliance Legal Fees     -       -       375,035       375,035   Accounting and Auditing     -       -       1,465       1,465   Tax Compliance and Planning     -       -       4,800       4,800   Consulting     327,850       62,492       203,281       593,623   Total   $ 368,954     $ 64,137     $ 612,976     $ 1,046,067   Six months ended June 30, 2020                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   General Legal   $ 2,600     $ 64     $ 19,708     $ 22,372   SEC Compliance Legal Fees     -       -       80,776       80,776   Accounting and Auditing     -       -       196,621       196,621   Consulting     158,978       88,364       199,843       447,185   Total   $ 161,578     $ 88,428     $ 496,948     $ 746,954   Variance                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Increase / (Decrease)   General Legal   $ 38,504     $ 1,581     $ 8,687     $ 48,772   SEC Compliance Legal Fees     -       -       294,259       294,259   Accounting and Auditing     -       -       (195,156 )     (195,156 ) Consulting     168,872       (25,872 )     3,438       146,438   Total   $ 207,376     $ (24,291 )   $ 116,028     $ 299,113   All other operating expenses were relatively in line with the previous comparable period, with the exception of filing fees paid in connection with the Form S-4 registration statement relating to the contemplated merger. Total Other Income and Expenses Delineated in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):  Bad Debt Expense Analysis: We reflected a bad debt expense on the accompanying consolidated statements of operations, which represents uncollected fees of approximately $1.2 million for the six months ended June 30, 2021, compared to bad debt expense, representing uncollected fees of approximately $0.5 million for the six months ended June 30, 2020. The increase in bad debt expense was primarily due to billing adjustments relating to chargebacks made by our processors due to the effects of the COVID-19 pandemic on our merchants, and a corresponding significant increase in our net revenues. Depreciation and Amortization Expense: Depreciation and amortization expense consists primarily of the amortization of merchant portfolios in connection with residual buyout arrangements and client acquisition costs.  Depreciation and amortization expense was approximately $1.3 for the six months ended June 30, 2021 and $0.5 million for the six months June 30, 2020. Interest Expense: Interest expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 is as follows;   Funding Source   Six months ended June 30, 2021     Six months ended June 30, 2020     Increase / (Decrease)   RBL Notes     691,117       669,100       22,017   Other     28,475       20,334       8,142   Total   $ 719,592     $ 689,433     $ 30,159   Total Other Income: Total other income was approximately $2.0 million for the six months ended June 30, 2021 and was primarily due to approximately $442,000 in connection with the gain on extinguishment of debt relating to the PPP Note and late fees of approximately $1.5 million owed by Mullen, which remain unpaid. For additional information see "Recent Developments-Mullen Merger and Related Transactions". 29 Table of Contents Results of Operations for the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020 We reported a net income attributable to common stockholders of approximately $1.3 million or $0.21 per share income for the three months ended June 30, 2021 as compared to a net loss of approximately $325,000 or $0.08 per share loss for the three months ended June 30, 2020. The decrease in net loss attributable to stockholders of approximately $1.6 million was primarily due to an increase in net revenues of approximately $19.6 million and approximately $500,000 in late fees owed by Mullen during the three months ended June 30, 2021. The following tables set forth our sources of revenues, cost of revenues and the respective gross margins for the three months ended June 30, 2021 and 2020.     Three             Three                       Months Ended             Months Ended             Increase /   Source of Revenues   June 30, 2021     Mix     June 30, 2020     Mix     (Decrease)   North American Transaction Solutions   $ 32,015,097       96.2 %   $ 12,977,536       94.6 %   $ 19,037,561   International Transaction Solutions     1,276,838       3.8 %     741,073       5.4 %     535,765   Total   $ 33,291,935       100.0 %   $ 13,718,609       100.0 %   $ 19,573,326       Three             Three                       Months Ended     % of     Months Ended     % of     Increase /   Cost of Revenues   June 30, 2021     revenues     June 30, 2020     revenues     (Decrease)   North American Transaction Solutions   $ 28,561,909       89.2 %   $ 11,016,028       84.9 %   $ 17,545,881   International Transaction Solutions     1,020,689       79.9 %     520,759       70.3 %     499,930   Total   $ 29,582,598       88.9 %   $ 11,536,787       84.1 %   $ 18,045,811       Three             Three                       Months Ended     % of     Months Ended     % of     Increase /   Gross Margin   June 30, 2021     revenues     June 30, 2020     revenues     (Decrease)   North American Transaction Solutions   $ 3,453,188       10.8 %   $ 1,961,508       15.1 %   $ 1,491,680   International Transaction Solutions     256,149       20.1 %     220,314       29.7 %     35,835   Total   $ 3,709,337       11.1 %   $ 2,181,822       15.9 %   $ 1,527,515   Net revenues consist primarily of service fees from transaction processing. Net revenues were approximately $33.3 million and $13.7 million for the three months ended June 30, 2021 and 2020, respectively. The Company’s revenues, which are largely tied to processing volumes were materially impacted beginning in the final two weeks of March 2020. Since the quarter ended December 31, 2020, the Company has seen a significant recovery in its end-to-end payment volumes as some merchants began resuming their normal operations.  Cost of revenues represents direct costs of generating revenues, including commissions, mobile operator fees, interchange expense, processing, and non-processing fees. Cost of revenues for the three months ended June 30, 2021 were approximately $29.6 million as compared to approximately $11.5 million for the three months ended June 30, 2020. The increase in cost of revenues was primarily due to a significant increase in net revenues. The gross margin for the three months ended June 30, 2021 was approximately $3.7 million, or 11.1% of net revenues, as compared to approximately $2.2 million, or 15.9% of net revenues, for the three months ended June 30, 2020. The decrease in the overall gross margin percentage was primarily the result of the competitive pressure in our industry and a large wholesale client converting their merchant processing relationship to our platform. Our wholesale platform generally provides for lower margins compared to our other products and services. 30 Table of Contents Operating Expenses Analysis: Operating expenses were approximately $3.1 million for the three months ended June 30, 2021, as compared to $2.2 million for three months ended June 30, 2020. Operating expenses for the three months ended June 30, 2021 primarily consisted of selling, general and administrative expenses of approximately $2.1 million, bad debt expense of approximately $500,000 and depreciation and amortization expense of approximately $500,000. Operating expenses for the three months ended June 30, 2020 primarily consisted of selling, general and administrative expenses of approximately $1.4 million, bad debt expense of approximately $33,000, and depreciation and amortization expense of approximately $800,000. The net increase was primarily due to additional personnel retained to meet the demand of growth, the increase in bad debt expense due to the increase in net revenues, fees in connection with the Form S-4 filing, which were partially offset by the reduction of compensation of certain employees, consultants, and executives of the Company. The components of our selling, general and administrative expenses are reflected in the tables below. Selling, general and administrative expenses for the three months ended June 30, 2021 and 2020 consisted of operating expenses not otherwise delineated in our Condensed Consolidated Statements of Operations and Comprehensive Loss, as follows: Three months ended June 30, 2021                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ 468,053     $ 154,778     $ 325,100     $ 947,931   Professional fees     217,495       32,117       438,633       688,245   Rent     64,178       17,223       4,885       86,286   Business development     37,222       6,559       35,151       78,932   Travel expense     5,474       25,851       15,124       46,449   Filing fees     -       -       16,075       16,075   Transaction gains     -       (36,843 )     -       (36,843 ) Office expenses     54,124       5,934       17,612       77,670   Communications expenses     39,157       34,698       15,808       89,663   Insurance expense     -       -       41,832       41,832   Other expenses     537       8,607       5,477       14,621   Total   $ 886,240     $ 248,924     $ 915,697     $ 2,050,861   Three months ended June 30, 2020                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ 536,915     $ 91,825     $ 118,574     $ 747,314   Professional fees     55,336       39,537       241,288       336,161   Rent     13,070       13,325       39,093       65,488   Business development     32,228       -       3,805       36,033   Travel expense     638       9,373       39,894       49,905   Filing fees     -       -       15,525       15,525   Transaction losses     -       (80,512 )     -       (80,512 ) Office expenses     41,976       3,759       16,879       62,614   Communications expenses     40,083       46,374       15,863       102,320   Insurance expense     -       -       42,000       42,000   Other expenses     292       2,104       6,085       8,481   Total   $ 720,538     $ 125,785     $ 539,006     $ 1,385,329   Variance                                                                   Category   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   Salaries, benefits, taxes and contractor payments   $ (68,862 )   $ 62,953     $ 206,526     $ 200,617   Professional fees     162,159       (7,420 )     197,345       352,084   Rent     51,108       3,898       (34,208 )     20,798   Business development     4,994       6,559       31,346       42,899   Travel expense     4,836       16,478       (24,770 )     (3,456 ) Filing fees     -       -       550       550   Transaction gains/losses     -       43,669       -       43,669   Office expenses     12,148       2,175       733       15,056   Communications expenses     (926 )     (11,676 )     (55 )     (12,657 ) Insurance expense     -       -       (168 )     (168 ) Other expenses     245       6,503       (608 )     6,140   Total   $ 165,702     $ 123,139     $ 376,691     $ 665,532   31 Table of Contents Salaries, benefits, taxes and contractor payments increased by approximately $200,000 on a consolidated basis for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. The net increase was primarily due to additional personnel retained to meet the demand of growth offset by the reduction of compensation of certain employees, consultants, and executives of the Company.  Segment   Salaries and benefits for the three months ended June 30, 2021     Salaries and benefits for the three months ended June 30, 2020     Increase / (Decrease)   North American Transaction Solutions   $ 468,053     $ 536,915     $ (68,862 ) International Transaction Solutions     154,778       91,825       62,953   Corporate Expenses & Eliminations     325,100       118,574       206,526   Total   $ 947,931     $ 747,314     $ 200,617   Three months ended June 30, 2021                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   General Legal   $ 38,479     $ 1,196     $ 25,965     $ 65,640   SEC Compliance Legal Fees     -       -       317,338       317,338   Accounting and Auditing     -       -       739       739   Tax Compliance and Planning     -       -       4,800       4,800   Consulting     179,016       30,921       89,791       299,728   Total   $ 217,495     $ 32,117     $ 438,633     $ 688,245   Three months ended June 30, 2020                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Total   General Legal   $ -     $ -     $ 13,284     $ 13,284   SEC Compliance Legal Fees     -       -       35,390       35,390   Accounting and Auditing     -       -       98,264       98,264   Consulting     55,336       39,537       94,350       189,223   Total   $ 55,336     $ 39,537     $ 241,288     $ 336,161   Variance                                                                   Professional Fees   North American Transaction Solutions     International Transaction Solutions     Corporate Expenses & Eliminations     Increase / (Decrease)   General Legal   $ 38,479     $ 1,196     $ 12,681     $ 52,356   SEC Compliance Legal Fees     -       -       281,948       281,948   Accounting and Auditing     -       -       (97,525 )     (97,525 ) Consulting     123,680       (8,616 )     (4,559 )     110,505   Total   $ 162,159     $ (7,420 )   $ 197,345     $ 352,084   All other operating expenses were relatively in line with the previous comparable quarter, with the exception of an increase of approximately $353,000 in professional fees paid in connection with the Form S-4 registration statement relating to the contemplated merger.   . 32 Table of Contents Total Other Income and Expenses Delineated in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss):  Bad Debt Expense Analysis: We reflected a bad debt expense on the accompanying consolidated statements of operations, which represents uncollected fees of approximately $500,000 for the three months ended June 30, 2021, compared to bad debt expense, representing uncollected fees of approximately $33,000 for the three months ended June 30, 2020. The increase in bad debt expense was primarily due to billing adjustments relating to chargebacks made by our processors due to the to the effects of the COVID-19 pandemic on our merchants, and a corresponding significant increase in our net revenues. Depreciation and Amortization Expense: Depreciation and amortization expense consists primarily of the amortization of merchant portfolios in connection with residual buyout arrangements and client acquisition costs.  Depreciation and amortization expense was approximately $529,000 for the three months ended June 30, 2021 and $772,000 for the three months ended June 30, 2020. Interest Expense: Interest expense for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 is as follows; Funding Source   Three months ended June 30, 2021     Three months ended June 30, 2020     Increase / (Decrease)   RBL Notes   $ 345,003     $ 330,853     $ 14,150   Other     18,309       10,167       8,142   Total   $ 363,312     $ 341,020     $ 22,292   Total Other Income: Total other income was approximately $1.0 million for the three months ended June 30, 2021 primarily due to approximately $442,000 in connection with the gain on extinguishment of debt relating to the PPP Note and late fees of approximately $500,000 million owed by Mullen, which remain unpaid. For additional information see "Recent Developments-Mullen Merger and Related Transactions". 33 Table of Contents Liquidity and Capital Resources Total assets at June 30, 2021 were approximately $30.8 million compared to approximately $26.8 million at December 31, 2020. The net increase in total assets is primarily the result of an increase in accounts receivable due to an increase in revenues and the Late Fees due from Mullen, which remain unpaid. At June 30, 2021 we had total current assets of approximately $18.4 million and approximately $14.0 million at December 31, 2020. The primary reason for the increase in total current assets is primarily the result of an increase in accounts receivable due to an increase in revenues and the Late Fees due from Mullen, which remain unpaid. Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We had net income attributable to common stockholders of approximately $1.6 million for the six months ended June 30, 2021 and a net loss of approximately $5.9 million for the year ended December 31, 2020 and have an accumulated deficit of approximately $182.3 million and a positive working capital of approximately $2.9 million at June 30, 2021. A significant portion of this positive working capital at June 30, 2021 relates to amounts due from Mullen Technologies which remains unpaid (See Note 5 - Due from Mullen in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report). The COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, promotion of social distancing measures, “shelter-in-place,” “stay-at-home,” total lock-down orders, business limitations or shutdowns and similar orders.  More recently, many news agencies have reported the spread of new variants of COVID-19, such as the Delta variant, that are significantly more contagious than previous strains. The spread of these new strains are causing some government authorities to reimplement the aforementioned measures, and some businesses to implement their own restrictions, to try to reduce the spread of COVID-19 that had become less prevalent.  The COVID-19 pandemic and these measures have significantly impacted, and may continue to impact, the restaurant and hospitality industries. As a result, the Company’s revenues, which are largely tied to processing volumes in these verticals, were materially impacted during 2020. Since the quarter ended December 31, 2020, the Company has seen a significant recovery in its end-to-end payment volumes as some merchants began resuming their normal operations. However, while end-to-end volumes for the three and six months ended June 30, 2021 have exceeded those for the respective three and six months ended June 30, 2020, the ultimate impact that the COVID-19 pandemic and, in particular, the highly contagious Delta variant, will have on the Company’s consolidated results of operations in future periods remains uncertain and will depend on future developments, which are continuously evolving and cannot be predicted. This includes, but is not limited to, the duration and spread of the COVID-19 pandemic and the Delta variant, its severity, the emergence and severity of other variants, the availability and the efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to utilize them, other protective actions taken to contain the virus or treat its impact, such as restrictions on indoor dining, travel and transportation, and how quickly and to what extent normal economic and operating conditions will continue. The Company will continue to evaluate the nature and extent of these potential impacts to its business, consolidated results of operations, and liquidity. During March 2020, our Company evaluated its liquidity position, future operating plans, and its labor force, which included a reduction in the labor force and compensation to executives and other employees, in order to maintain current payment processing functions, capabilities, and continued customer service to its merchants. We are also seeking sources of capital to pay our contractual obligations as they come due, in light of these uncertain times. Management believes that its operating strategy will provide the opportunity for us to continue as a going concern as long as we are able to obtain additional financing. At this time, due to the unprecedented and rapid spread of COVID-19 and its variants, we cannot predict the impact of these conditions on our ability to obtain financing necessary for the Company to fund its future working capital requirements.  Our Company has also decided to explore strategic alternatives and potential options for its business, including sale of the Company or certain assets, licensing of technology, spin-offs, or a business combination. Accordingly, the Company has entered into a merger agreement in connection with the contemplated merger with Mullen Automotive and certain related transactions, including a divestiture of the Company’s existing business operations. See “—Recent Developments—Mullen Merger and Related Transactions” and Note 14 - Subsequent Events in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report for additional information. On May 7, 2020, the Company entered into a promissory note (the “PPP Note”) evidencing an unsecured loan (the “Loan”) in the amount of $491,493 made to the Company under the Paycheck Protection Program (the “PPP”). The PPP Note was to mature on May 7, 2022 and bore interest at a rate of 1% per annum. Beginning December 7, 2020, the Company was required to make 17 monthly payments of principal and interest, with the principal component of each such payment based upon the level amortization of principal over a two-year period from May 7, 2020. Pursuant to the terms of the CARES Act and the PPP, the Company could apply to the Lender for forgiveness for the amount due on the Loan. The amount eligible for forgiveness was based on the amount of Loan proceeds used by the Company (during the eight-week period after the Lender makes the first disbursement of Loan proceeds) for the payment of certain covered costs, including payroll costs (including benefits), interest on mortgage obligations, rent and utilities, subject to certain limitations and reductions in accordance with the CARES Act and the PPP. On May 9, 2021, our Company was informed by the Small Business Administration that the loan forgiveness application was approved. The Company reversed the amount due and reflected it as a gain on extinguishment of debt during the three months ended June 30, 2021. As part of our Company's plan to obtain capital to fund future operations, on March 27, 2020, our Company entered into a Master Exchange Agreement (the “ESOUSA Agreement”) with ESOUSA Holdings, LLC ("ESOUSA"), a related party. Prior to entering into the ESOUSA Agreement, ESOUSA agreed to acquire an existing promissory note that had been previously issued by the Company, of up to $2,000,000 in principal amount outstanding plus interest due to RBL Capital Group, LLC ("RBL"). Pursuant to the ESOUSA Agreement, the Company had the right, at any time prior to March 27, 2021, to request ESOUSA, and ESOUSA agreed upon each such request, to exchange this promissory note in tranches on the dates when the Company instructs ESOUSA, for such number of shares of the Company’s common stock (“Common Stock”) as determined under the ESOUSA Agreement based upon the number of shares of Common Stock (already in ESOUSA’s possession) that ESOUSA sold in order to finance its purchase of such tranche of the promissory note from RBL. ESOUSA will purchase each tranche of the promissory note equal to 88% of the gross proceeds from the shares of Common Stock sold by ESOUSA to finance the purchase of such Exchange Amount from RBL. Each such tranche to be $148,000 unless otherwise agreed to by the Company and ESOUSA. On April 23, 2020 and August 3, 2020, the Company entered into certain amendments to the ESOUSA Agreement, which together increased from $2,000,000 to $15,000,000 the principal amount and unpaid interest of one or more promissory notes of the Company or its direct or indirect subsidiaries that ESOUSA either purchased in whole or has an irrevocable right to purchase in tranches from RBL in connection with the ESOUSA Agreement. On March 27, 2020, the Company received its first tranche of RBL promissory notes in the aggregate amount of $148,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. Included in other accrued expenses at June 30, 2021 is approximately $145,000 in connection with this first tranche for which shares of Common Stock have not yet been issued. Concurrently with this transaction, the Company received an equivalent aggregate amount of $148,000 from RBL under the Loan and Security Agreement (“Credit Facility”) with RBL. On April 28, 2020, the Company received its second tranche of RBL promissory notes in the aggregate amount of $143,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 65,862 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $143,000 from RBL under the Credit Facility.  On August 11, 2020, the Company received its third tranche of RBL promissory notes in the aggregate amount of $707,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 66,190 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $707,000 from RBL under the Credit Facility.  On August 21, 2020, the Company received its fourth tranche of RBL promissory notes in the aggregate amount of $401,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 45,654 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $401,000 from RBL under the Credit Facility.  On September 25, 2020, the Company received its fifth tranche of RBL promissory notes in the aggregate amount of $426,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement.  The Company issued 50,000 shares of Common Stock to ESOUSA in connection with this exchange.  Concurrently with this transaction, the Company received an equivalent aggregate amount of $426,000 from RBL under the Credit Facility.  On December 30, 2020, the Company received its sixth tranche of RBL promissory notes in the aggregate amount of $1,960,000, less any fees, from ESOUSA to be exchanged for Common Stock pursuant to the ESOUSA Agreement. The Company issued 200,000 shares of Common Stock to ESOUSA in connection with this exchange. Concurrently with this transaction, the Company received an equivalent aggregate amount of $1,960,000 from RBL under the Credit Facility. On July 9, 2021, the Company entered into a new Master Exchange Agreement with ESOUSA.  See Note 14 - Subsequent Events in the condensed consolidated unaudited financial statements contained in Part I, Item 1 of this Report for additional information. Consummation of the Merger, the Divestiture, the Private Placement and the other transactions contemplated in the Restated Merger Agreement, is subject to customary conditions including, among others, the approval of the Company’s stockholders. There is no guarantee that the Merger, the Divestiture, the Private Placement or the other transactions contemplated in the Restated Merger Agreement will be completed. These conditions raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 34 Table of Contents The net income (loss) attributable to Net Element, Inc. stockholders was approximately $1.6 million of net income for the six months ended June 30, 2021 compared to approximately $1.7 million of net loss for the six months ended June 30, 2020. Operating activities used approximately $1.2 million of cash for the six months ended June 30, 2021 as compared to approximately $315,000 of cash used for the six months ended June 30, 2020. The change is primarily the result of the increase in net income, accounts receivable, and late fees due from Mullen for the six months ended June 30, 2021 as compared to the previous six months ended June 30, 2020. Investing activities used approximately $387,000 in cash for the six months ended June 30, 2021 as compared to approximately $395,000 in cash used in investing activities for the six months ended June 30, 2020.  Financing activities provided approximately $1.2 million in cash for the six months ended June 30, 2021 as compared to approximately $920,000 of cash provided by financing activities for the six months ended June 30, 2020.  Off-balance sheet arrangements At June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. Item 3. Quantitative and Qualitative Disclosures about Market RiskRisk. Not applicable. 38 Table of Contents Item 4. Controls and ProceduresProcedures. AsEvaluation of the end of the period covered by this Report, our management conducted an evaluation, under the supervisionDisclosure Controls and with the participation of our chief executive officer and our chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Procedures Disclosure controls and procedures are designed to provide reasonable but not absolute, assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. Management has designed disclosure controls and procedures that reasonably enable the management including the CEO and CFO to deliberate and take timely decisions regarding required disclosure. Based on thatAs required by the SEC Rules 13a-15(b) and 15d-15(b), we are obligated to conduct an evaluation under the supervision and with the participation of our chiefmanagement, including our principal executive officer and chiefprincipal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not deemed effective due to the material weaknesseseffective. Changes in our internal control over financial reporting (as defined in Rule 13a-15(f )and Rule 15d-15(f ) under the Exchange Act), as discussed in Item 9A. Controls and Procedures of the Company’s Form 10-K for the fiscal year ended December 31, 2020, under the heading “Management’s Report on Internal Control over Financial Reporting.”Reporting Changes in Internal Control As of June 30, 2021, the material weaknesses in our internal controls over financial reporting disclosed in our Form 10-K for the year ended December 31, 2020 have not yet been fully remediated; however, significant progress were made during 2019 in remediating certain material weaknesses. Several steps taken in improving and remediating internal controls over financial reporting have included retaining a financial reporting manager, the formation of a disclosure committee, as well as, formal education and training of our Board members. Remediation activities for our material weaknesses include: ● Risk Assessment. We are continuing the process of designing and implementing an improved enterprise wide risk management process that follows the COSO 2013 framework and one aspect of this process will focus on identifying and mitigating risks to our business that could have an impact on our internal control over financial reporting. Our process includes periodic updates of the enterprise risk universe through the consideration of current and historical risks, periodic input from executive management, and our domestic and international segment local management. Each time a new potential risk is identified, we will evaluate if any additional controls are required to mitigate risks to our internal control over financial reporting. During the year ended December 31, 2019, management sent a consultant to Russia in an effort to fully understand, implement, train, and eventually test the internal controls relating to our International Transaction Solution's segment’s internal control over financial reporting. The local management team in our International Transaction Solution's segment is continuing in the process of documenting processes, controls, and recommendations provided under the guidance and assistance of the Company's consultant. Due to the ongoing COVID-19 pandemic and the surge in the Delta variant, the Company has had to allocate resources to mitigate risks with its current merchant accounts and evaluated its operational plans to eliminate any potential exposure to its disclosure controls and procedures. Pending the outcome of this uncertainty, including health concerns, certain personnel continuing to work remotely, and travel restrictions to Russia, we cannot determine how or when we expect to remediate the material weaknesses noted above, including the allocation of appropriate resources to department heads during 2021. Except as stated above, thereThere were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Actthat occurred during the three and six months ended June 30, 2021March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reportingreporting. Inherent Limitations on Effectiveness of Disclosure Controls and ProceduresInternal Control over Financial Reporting Control systems,Because of their inherent limitations, our disclosure controls and procedures and our internal control over financial reporting may not prevent material errors or fraud. A control system, no matter how well conceived and operated, are designed tocan provide aonly reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further,The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the designcontrols may become inadequate because of a control system must reflectchanges in conditions or that the fact that there are resource constraints, and the benefitsdegree of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to errorcompliance with our policies or fraudprocedures may occur and not be detected.deteriorate. ​ 39 35 Table of Contents PART II —II. OTHER INFORMATION Item 1. Legal proceedingsProceedings For a discussion ofOther than as set forth below, there have been no material developments during the fiscal quarter covered by this Report for our legal proceedings Refer to Note 10. "Commitmentsthat were disclosed in our Annual Report on Form 10-K for the year ended September 30, 2021. We are aware that on May 5, 2022 a purported class action lawsuit was filed by Margaret Schaub, individually and Contingencies - Litigation, Claims and Assessments”on behalf of all others similarly situation, in the condensed consolidated unaudited financial statements contained in Part I, Item 1U.S. District Court of Central California. As of the date of this Report, which sectionfiling, we have not been served with any such complaint.   It is incorporatedour understanding that the lawsuit alleges that during the period between June 15, 2020 and April 6, 2022 the Company made materially false and misleading statements regarding the Company's business, operations, and compliance policies in violation of federal securities laws.  If we are served with any such complaint, we will assess it at that time. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. In connection with a dispute with ASC GEM regarding an alleged breached Securities Purchase Agreement dated November 13, 2020, on November 9, 2021, the parties appointed an arbitrator. On January 7, 2022, GEM filed a letter brief with the arbitrator requesting leave to file a dispositive motion addressing a threshold legal issue regarding a defined term within a contract executed by reference herein.the parties. Mullen filed a response to the letter brief on January 12, 2022.  On January 21, 2022, the arbitrator issued a procedural order granting GEM’s request to file a dispositive motion. GEM filed its dispositive motion is on February 14, 2022. Mullen’s filed its opposition to the dispositive motion on March 3, 2022. On April 4, 2022, the court denied GEM’s dispositive motion. The parties exchanged discovery requests on May 10, 2022. Responses are due served on or before June 8, 2022. During September through November 2021, the following lawsuits that were filed against Net Element and former members of its board of directors in connection with the Business Combination with Mullen were voluntarily dismissed:  ​ ● Raquel Ruby v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on June 11, 2021 in the United States District Court for the Southern District of New York; ● Thomas Farley v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on June 8, 2021 in the United States District Court for the Eastern District of New York; ● Michael Gatto v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, Mullen Automotive, Inc., Mullen Technologies, Inc., and Mullen Acquisition, Inc., filed on June 3, 2021 in the United States District Court of Delaware; ● Atish Shinde v. Net Element, Inc., Oleg Firer, Howard Ash, Jon Najarian, Todd Raarup, Mullen Technologies, Inc. and Mullen Acquisition, Inc., filed on May 28, 2021 in the United States District Court for the Southern District of New York; ● Shawn Strickland v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, and Todd Raarup, filed on August 10, 2021 in the United States District Court for Delaware; ●  Matthew Whitfield v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, filed on August 13, 2021 in the United States District Court for the Eastern District of Pennsylvania; and ● Robert Wilhelm v. Net Element, Inc., Oleg Firer, Jon Najarian, John Roland, Todd Raarup, filed on August 13, 2021 in the United States District Court for the Southern District of New York. ​ ​ Item 1A. Risk Factors In addition to the information set forth in this Report, you should read and consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,September 30, 2021 filed with the SEC, which could materially affect our business, financial condition, or future results of operation. The risks described in such 40 Table of Contents report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to have a material adverse effect on our business, financial condition and/or future operating results. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ​ On March 24, 2022, the Company issued 428,382 shares of common stock to David Michery.  The issuance of the shares was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. In February 2022, the Company issued 1,000,000 shares of common stock in connection with for the termination of consulting arrangements. ​ Item 3. Defaults Upon Senior Securities None. ​ Item 4. Mine Safety Disclosures Not Applicable. Item 5. Other Information On March 7, 2022, the Company granted to David Michery a bonus of $750,000. ​ On March 7, 2022, the Company’s wholly owned subsidiary, Mullen Investment Properties, LLC entered into a Promissory Note (the “Promissory Note”) with NuBridge Commercial Lending LLC for a principal amount of $5 million. The Promissory Note bears interest at a fixed rate of 8.99% per annum and the principal amount is due March 1, 2024. Collateral for the loan included the title to the Company’s property at 1 Greentech Drive, Tunica, MS Under the Promissory Note, prepaid interest and issuance costs were withheld from the principal and recorded as a discount on the note of $1.2 million, which will be amortized over the term of the note. ​ ​ 41 Table of Contents Item 6. Exhibits Exhibit Number Exhibit Description Exhibit 2.1 Third Amendment dated as of April 30, 2021 to Agreement and Plan of Merger, dated as of August 4, 2020, as amended, among Net Element, Inc., Mullen Acquisition, Inc. and Mullen Technologies, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 30, 2021) 2.2+ Amended and Restated Agreement and Plan of Merger, dated as of May 14, 2021, among Net Element, Inc., Mullen Technologies, Inc., Mullen Acquisition, Inc. and Mullen Automotive, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 14, 2021) 2.3+ Second Amended and Restated Agreement and Plan of Merger, dated as of July 20, 2021, among Net Element, Inc., Mullen Technologies, Inc., Mullen Acquisition, Inc. and Mullen Automotive, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 21, 2021) Description 3.1 ​ Certificate of Corporate DomesticationAmendment to the Second Amended and Restated Certificate of Cazador, filed with the SecretaryIncorporation of State of the State of Delaware on October 2, 2012Mullen Automotive, Inc., dated March 8, 2022  (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the CommissionSEC on October 5, 2012)March 10, 2022). 3.210.1* ​ Amended and Restated CertificateForm of Incorporation of Net Element International, Inc., a Delaware corporation, filed with the Secretary of State of the State of Delaware on October 2, 2012 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 5, 2012)Warrant issued March 28, 2022 3.310.2* ​ AmendedLetter of Intent dated January 14, 2022 between the Company and Restated Bylaws of Net Element International, Inc., a Delaware corporation (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the Commission on October 5, 2012)Mark Betor 3.410.3 ​ Certificate of Merger, filed with the Secretary of State of the State of Delaware on October 2, 2012 (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the Commission on October 5, 2012) 3.5 Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated December 5, 2013, changing the Company’s name from Net Element International, Inc. to Net Element, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 6, 2013) 3.6 Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated December 16, 2014, to increase authorized common stock to 200 million shares (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on December 17, 2014) 3.7 Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 1, 2015) 3.8 Certificate of Amendment to AmendedSecurity and Restated Certificate of Incorporation, dated June 15, 2015, to increase authorized common stock to 300 million shares (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 16, 2015) 3.9 Amendment No. 1 to the Bylaws of the Company, dated June 15, 2015 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 16, 2015) 3.10 Amendment No. 2 to the Bylaws of the Company, dated July 10, 2015 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 10, 2015) 3.11 Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated May 24, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s second Current Report on Form 8-K filed with the Commission on May 24, 2016) 3.12 Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated June 15, 2016 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on June 16, 2016) 3.13 Certificate of Amendment to Amended and Restated Certificate of Incorporation, dated October 4, 2017 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on October 4, 2017) 10.1 Master Exchange Agreement,Warrant dated as of July 9, 2021 between Net Element, Inc. and ESOUSA Holdings, LLCFebruary 10, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the CommissionSEC on July 12, 2021)February 28, 2022). 10.4 ​ 10.2 Divestiture Agreement, dated as of July 20, 2021 between Net Element, Inc. and RBL Capital Group LLCLoan Commitment with NuBridge Commercial Lending executed February 23, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the CommissionSEC on July 21, 2021)February 28, 2022). 10.4(a)* ​ Guaranty dated March 7, 2022 between NuBridge Commercial Lending, LLC and David Michery 31.1 * 10.5 ​ Amendment to Convertible Preferred Security and Warrant dated February 10, 2022 between the Company and Esousa Holdings, llc (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on February 14, 2022). 31.1* ​ Certification of ChiefPrincipal Executive Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) underof the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* ​ 31.2 * Certification of ChiefPrincipal Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) underof the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* ​ 32.1* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS ​ Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH ​ Inline XBRL Taxonomy Extension Schema Document 101.CAL ​ Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF ​ Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB ​ Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE ​ Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 ​ Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) ​ 101.INS* Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL*  Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB*  Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) # Indicates management contract or compensatory plan or arrangement. * Filed herewith (furnished herewith with respect to Exhibit 32.1). ​ + Certain schedules (or similar attachments) have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish copies of any such schedules (or similar attachments) to the Commission upon request.​ 42 36 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ​ ​ ​ ​ Mullen Automotive Inc. ​ Net Element, Inc.​ ​ May 16, 2022 By: /s/ David Michery ​ ​ David Michery ​ ​ Chief Executive Officer, President and Chairman of the Board ​ ​ (Principal Executive Officer) ​ ​ ​ ​ ​ /s/ Kerri Sadler Dated: August 16, 2021​ By:​ /s/ Oleg Firer Kerri Sadler ​ ​ Name: Oleg Firer Chief Financial Officer ​ ​ Title:  Chief Executive Officer (Principal Executive Officer) Net Element, Inc. Dated: August 16, 2021 By: /s/ Jeffrey Ginsberg Name: Jeffrey Ginsberg Title:  Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) ​ ​ ​ ​ 37 43