UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2021~~June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ___

Commission File Number: 001-34887

MULLEN AUTOMOTIVE INC.

(Exact name of registrant as specified in its charter)

Delaware		~~86-3289406~~90-1025599
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1405 Pioneer Street
Brea, California 92821

(Address of principal executive offices)

(714) 613-1900

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MULN	The Nasdaq Stock Market, LLC (Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~February 11,~~August 10, 2022 a total of ~~34,942,304~~509,294,481 shares of the Registrant’s common stock, par value $0.001, (“Common Stock”) were issued and outstanding.

Table of Contents

MULLEN AUTOMOTIVE INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:	2

	Condensed Consolidated Balance Sheets as of ~~December 31, 2021~~June 30, 2022 (unaudited) and September 30, 2021	2

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)	3

	Condensed Consolidated Statements of Stockholders Equity (Deficit) for the three and nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021 ~~and 2020~~ (unaudited)	56

	Notes to Unaudited Condensed Consolidated Interim Financial Statements	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3834

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4442

Item 4.	Controls and Procedures	4442

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4644

Item 1A.	Risk Factors	4644

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4644

Item 3.	Defaults Upon Senior Securities	4644

Item 4.	Mine Safety Disclosures	4644

Item 5.	Other Information	4644

Item 6.	Exhibits	4845

SIGNATURES		4946

~~F-1~~1

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MULLEN AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2021

September 30, 2021

ASSETS





CURRENT ASSETS





Cash and cash equivalents

$
360

$
42,174

Restricted Cash

61,100

—

Materials and supplies

55,753

55,753

Deferred advertising

—

261,550

Prepaid Expenses

6,526,737

6,201,247

Other current assets

1,738,256

250,331

Notes Receivable

15,090,552

90,552

TOTAL CURRENT ASSETS

23,472,760

6,901,607

Property, equipment and leasehold improvements, net

13,103,704

1,181,477

Intangibles assets, net

2,276,943

2,495,259

Right-of-use assets

2,213,991

2,350,929

Other assets

4,345,893

4,243,222

TOTAL ASSETS

$
45,413,291

$
17,172,494

LIABILITIES AND SHAREHOLDERS' EQUITY





CURRENT LIABILITIES





Accounts payable

$
4,228,527

$
5,206,310

Accrued expenses and other current liabilities

18,272,697

19,126,765

Liability to issue shares

6,322,500

7,027,500

Lease liabilities, current portion

623,343

599,898

Notes payable, current portion

18,905,021

39,200,970

TOTAL CURRENT LIABILITIES

48,352,088

71,161,443

Notes payable, net of current portion

238,259

247,612

Lease liabilities, net of current portion

1,697,222

1,857,894

Other liabilities

5,617,192

5,617,192

TOTAL LIABILITIES

55,904,761

78,884,141

Commitments and Contingencies (Note 18)





DEFICIENCY IN STOCKHOLDERS' EQUITY





Preferred Stock; $0.001 par value; 58,000,000 shares authorized; 10,760,585 and 5,667,682 shares issued and outstanding at December 31, 2021 and September 30, 2021 respectively.

10,760

5,668

Common Stock; $0.001 par value; 500,000,000 shares authorized; 23,936,162 and 7,048,387 issued and outstanding at December 31, 2021 and September 30, 2021 respectively.

23,935

7,048

Additional Paid-in Capital

176,312,422

88,650,286

Accumulated Deficit

(186,838,587)

(150,374,649)

TOTAL DEFICIENCY IN STOCKHOLDERS' EQUITY

(10,491,470)

(61,711,647)

TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

$
45,413,291

$
17,172,494

~~See accompanying notes to condensed consolidated interim financial statements.~~

~~F-2~~

~~Table of Contents~~

~~MULLEN AUTOMOTIVE, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

Three months ended December 31,

2021

2020
OPERATING EXPENSES




General and administrative

$
12,901,084

$
2,952,678
Research and development

1,157,323

518,023
Total Operating Expense

14,058,407

3,470,701
Loss from Operations

(14,058,407)

(3,470,701)

Interest expense

(22,438,945)

(2,406,330)
Loss on debt settlement

(41,096)

—
Gain on extinguishment of indebtedness, net

74,509

880,581
Net Loss

$
(36,463,938)

$
(4,996,450)

Net Loss per Share

$
(2.09)

$
(0.98)

Weighted average shares outstanding, basic and diluted

17,471,173

5,099,218

~~See accompanying notes to condensed consolidated interim financial statements.~~

~~F-3~~

~~Table of Contents~~

~~MULLEN AUTOMOTIVE, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF DEFICENCY IN STOCKHOLDERS’ EQUITY~~(unaudited)


	June 30, 2022		September 30, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	60,934,439	$	42,174
Restricted cash		176,824		—
Materials and supplies		76,163		55,753
Deferred advertising		24,699		261,550
Prepaid expenses		1,142,023		6,201,247
Other current assets		734,223		250,331
Notes receivable		—		90,552
TOTAL CURRENT ASSETS		63,088,371		6,901,607
Property, equipment and leasehold improvements, net		13,443,071		1,181,477
Intangible assets, net		2,180,785		2,495,259
Right-of-use assets		1,939,829		2,350,929
Other assets		3,612,774		4,243,222
TOTAL ASSETS	$	84,264,830	$	17,172,494

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$	3,076,409	$	5,206,310
Accrued expenses and other current liabilities		13,911,341		19,126,765
Series E option liability		23,085,886		—
Liability to issue shares		14,118,227		7,027,500
Lease liabilities, current portion		680,185		599,898
Notes payable, current portion		3,645,764		39,200,970
TOTAL CURRENT LIABILITIES		58,517,812		71,161,443
Notes payable, net of current portion		5,256,611		247,612
Lease liabilities, net of current portion		1,334,518		1,857,894
Other liabilities		—		5,617,192
TOTAL LIABILITIES		65,108,941		78,884,141
Commitments and Contingencies (Note 17)

STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock; $0.001 par value; 58,000,000 shares authorized; 0 and 5,667,683 shares issued and outstanding at June 30, 2022 and September 30, 2021 respectively.		—		5,668
Common Stock; $0.001 par value; 500,000,000 shares authorized; 498,694,481 and 7,048,387 shares issued and outstanding at June 30, 2022 and September 30, 2021 respectively.		498,694		7,048
Additional Paid-in Capital		297,540,727		88,650,286
Accumulated Deficit		(278,883,532)		(150,374,649)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		19,155,889		(61,711,647)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	84,264,830	$	17,172,494

See accompanying notes to condensed consolidated interim financial statements.

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended June 30,				Nine months ended June 30,
	2022		2021		2022		2021
OPERATING EXPENSES
General and administrative	$	10,896,800	$	4,926,154	$	53,067,316	$	12,555,572
Research and development		7,324,365		1,479,399		9,665,126		2,535,693
Total Operating Expense		18,221,165		6,405,553		62,732,442		15,091,265
Loss from Operations		(18,221,165)		(6,405,553)		(62,732,442)		(15,091,265)

Interest expense		(5,346,766)		(8,339,195)		(29,906,225)		(13,784,976)
Other financing costs		—		(506,654)		—		(1,559,961)
Loss on debt settlement		—		—		(41,096)		—
Gain (loss) on extinguishment of indebtedness, net		—		—		74,509		890,581
Incentive fee to creditor for transfer of note payable		(23,085,886)		—		(23,085,886)		—
Loss on disposal of fixed assets		(50,574)		—		(50,574)		—
Penalty for insufficient authorized shares		(3,495,000)		—		(3,495,000)		—
Revaluation of Liability to Issue Shares		3,045,000		—		3,045,000		—
Other income (expense), net		(12,317,169)		—		(12,317,170)		—
Net Loss	$	(59,471,560)	$	(15,251,402)	$	(128,508,884)	$	(29,545,621)

Net Loss per Share	$	(0.16)	$	(2.90)	$	(0.79)	$	(5.79)

Weighted average shares outstanding, basic and diluted		376,786,685		5,262,206		169,531,688		5,100,831

See accompanying notes to condensed consolidated interim financial statements.

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, 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)


	Nine Months Ended June 30, 2021
	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)
Shares issued for cash	—		—	—		—	—		—	52,144		52		1,291,449		—		1,291,501
Warrant issuances	—		—	—		—	—		—	—		—		4,566,218		—		4,566,218
Stock-based compensation	—		—	—		—	—		—	—		—		1,705,618		—		1,705,618
Beneficial conversion feature of convertible debt	—		—	—		—	—		—	—		—		268,519		—		268,519
Net loss	—		—	—		—	—		—	—		—		—		(15,251,402)		(15,251,402)
Balance, June 30, 2021	116,789	$	116	5,567,319	$	5,568	—	$	—	5,200,056	$	5,200	$	78,662,652	$	(135,679,691)	$	(57,006,155)

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
Stock-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)
Beneficial conversion feature of convertible debt	—		—	—		—	—		—	—		—		—		—		—
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
Stock-based compensation	—		—	—		—	—		—	1,912,500		1,913		5,100,822		—		5,102,735
Cashless Warrant exercise	—		—	—		—	—		—	170,231,117		170,232		(170,232)		—		—
Issuance of common stock for note receivable	—		—	—		—	—		—	14,343,550		14,344		(14,344)		—		—
Issuance of common stock for conversion of preferred stock	—		—	(2,783,659)		(935)	(2,139,543)		(2,139)	4,923,202		4,923		(1,849)		—		—
Issuance of common stock for conversion of debt	—		—	—		—	—		—	17,500,000		17,500		22,907,500		—		22,925,000
Beneficial conversion feature of convertible debt	—		—	—		—	—		—	—		—		3,336,853		—		3,336,853
Reclassification of convertible security to derivative liability	(1,934)		(2)	—		—	(6,163,780)		(8,013)	—		—		—		—		(8,015)
Dividends accumulated on preferred stock	—		—	—		—	—		—	—		—		(2,285,792)		—		(2,285,792)
Net loss	—		—	—		—	—		—	—		—		—		(59,471,560)		(59,471,560)
Balance, June 30, 2022	—	$	—	—	$	—	—	$	—	498,694,481	$	498,694	$	297,540,727	$	(278,883,532)	$	19,155,889

See accompanying notes to condensed consolidated interim financial statements.

~~F-4~~5

Table of Contents

MULLEN AUTOMOTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Three Months Ended December 31,


2021

2020
Cash Flows from Operating Activities




Net Loss

$
(36,463,938)

$
(4,996,450)
Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization

307,699

108,427
Employee stock compensation

1,604,293

566,179
Issuance of shares for services

2,495,487

26,162
Non-cash interest and other operating activities

3,062,048

1,918,453
Non-cash lease expense

136,938

77,644
Amortization of debt discount

19,212,176

487,876
Loss on asset disposal

1,298

—
(Gain) on extinguishment of debt

(74,509)

(880,581)
Loss on debt settlement

41,096

—

Changes in operating assets and liabilities:




Other current assets

(1,226,376)

161,959
Other assets

(1,225,252)

40,629
Accounts payable

(977,783)

(31,563)
Accrued expenses and other liabilities

(1,468,751)

2,679,880
Lease liabilities

(137,228)

(73,303)
Net cash (used) provided by operating activities

(14,712,802)

85,312

Cash Flows from Investing Activities




Purchase of equipment

(10,462,219)

(31,335)
Purchase of intangible assets

—

(41,250)
Net cash (used) in investing activities

(10,462,219)

(72,585)

Cash Flows from Financing Activities




Changes in net parent investment

—

(1,997,844)
Proceeds from issuance of notes payable

7,300,000

2,265,000
Proceeds from issuance of common stock

10,894,659

—
Proceeds from shares issued for cash

—

—
Proceeds from liability to issue preferred C shares

20,000,000

—
Payment of notes payable

(13,000,351)

(88,964)
Net cash provided by financing activities

25,194,308

178,192

Increase (decrease) in cash

19,286

190,919

Cash, beginning of period

42,174

33,368
Cash, ending of period

$
61,460

$
224,287

Supplemental disclosure of Cash Flow information:




Cash paid for interest

$
1,424,345

$
3,945
Supplemental disclosure for non-cash activities:




Refinance of existing debt

$
—

$
1,560,235
Preferred shares issued in exchange for convertible debt

$
24,991,755

$
—


	Nine Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities
Net Loss	$	(128,508,884)	$	(29,545,621)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		918,855		338,321
Impairment charge - materials		—		74,495
Employee stock compensation		5,056,821		2,024,426
Issuance of shares for services		27,422,889		1,731,779
Non-cash interest and other operating activities		3,879,496		—
Non-cash lease expense		411,100		391,433
Amortization of debt discount		19,584,041		4,817,504
Loss on revaluation of derivatives		14,118,227		—
Loss on asset disposal		50,574		—
Loss (gain) on extinguishment of debt		23,011,377		(890,581)
Loss on debt settlement		41,096		—

Changes in operating assets and liabilities:
Material and supplies		(20,410)		(87,165)
Other current assets		5,466,441		(564,168)
Other assets		(1,960,058)		(14,515)
Accounts payable		(2,129,901)		1,918,768
Accrued expenses and other liabilities		(10,119,169)		7,144,718
Lease liabilities		(443,089)		(376,501)
Net cash used in operating activities		(43,220,594)		(13,037,107)

Cash Flows from Investing Activities
Purchase of equipment		(10,968,389)		(78,140)
Purchase of intangible assets		(305,044)		(63,299)
Net cash used in investing activities		(11,273,433)		(141,439)

Cash Flows from Financing Activities
Changes in investment by Mullen Technologies, Inc.		—		6,157,956
Proceeds from issuance of notes payable		12,142,791		8,068,500
Proceeds from issuance of common stock		40,151,308		—
Proceeds from issuance of preferred stock		63,925,000		—
Proceeds from note receivable		15,000,000		—
Payment of notes payable		(15,655,983)		(417,051)
Net cash provided by financing activities		115,563,116		13,809,405

Increase (decrease) in cash		61,069,089		630,859
Cash, beginning of period		42,174		33,368
Cash, ending of period	$	61,111,263	$	664,227

Supplemental disclosure of Cash Flow information:
Cash paid for interest	$	1,500,106	$	11,514
Supplemental disclosure for non-cash activities:
Refinance of indebtedness	$	28,867,187	$	—
Issuance of common stock for conversion of debt	$	17,356,500	$	—
Preferred shares issued in exchange for convertible debt	$	23,192,500	$	—
Initial recognition of right-of-use assets and lease liabilities	$	—	$	1,129,003

See accompanying notes to condensed consolidated interim financial statements.

~~F-5~~6

MULLEN AUTOMOTIVE, INC.

NOTES TO 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,~~stockholders, followed by a reverse merger with and into Net Element, Inc. (“NETE” or “Net Element”).

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission"). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“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-K filed with the Commission for the year ended 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 financial statements include the accounts of the Company and its wholly owned 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 ~~December 31, 2021,~~June 30, 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 condensed consolidated 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 nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ reflect all expenses and activities directly attributable to MAI, and an allocation of MTI’s general and administrative expenses incurred (prior to the reorganization) 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 inter-entity balances and transactions have been eliminated.

The equity capital presented in the condensed consolidated financial statements reflect the retrospective application of the November 5, 2021 capitalization and corporate reorganization arising from the merger transaction with NETE.

These financial statements have been prepared based upon the historical cost amounts recorded by MTI. These condensed consolidated financial statements may not be indicative of MAI financial performance and do not necessarily reflect what its financial position, results of operations, and cash flows would have been had Mullen operated as an independent entity during the years presented.

~~F-6~~7

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NOTE 2 – LIQUIDITY, CAPITAL RESOURCES, AND GOING CONCERN CONSIDERATION

The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. Our principal source of liquidity consists of existing cash and restricted cash of approximately ~~$61,000~~$61.1 million at ~~December 31, 2021.~~June 30, 2022. During the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, the Company used ~~$14.7~~$43.2 million of cash for operating activities and had anet working capital ~~deficiency~~ of approximately ~~$24.9~~$4.6 million at ~~December 31, 2021.~~June 30, 2022.

During the three months ended ~~December 31, 2021,~~June 30, 2022, the Company obtained additional financing in the amount of ~~$7.26~~$15.0 million in ~~unsecured convertible notes;~~equity issuances. During the nine months ended June 30, 2022, the Company obtained additional financing in the amount of $12.2 million in notes payable; $10 million in equity from Net Element merger; and ~~$20~~$108.6 million in equity ~~commitments (See Note 5, Debt).~~issuances.

The Coronavirus (“COVID-19”) continues to impact countries, communities, supply chains and markets, global financial markets, and various industries. To date, COVID-19 has had a material and disruptive impact on our strategy in EV product development and the ability to obtain external financing to fund its development activities. Company management is unable to predict whether the global pandemic will continue to have a material impact on our future financial condition and results of operations.

Going Concern

As an early-stage development company, our ability to access capital is critical. Our management plans to continue to raise additional capital through a combination of equity and debt 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 ability to continue as a going concern over the next twelve months from the date of filing this report. Since inception, we have incurred significant accumulated losses of approximately ~~$186.8~~$278.9 million, and management expects to continue to incur operating losses over the near future.

On July 26, 2022, MAI stockholders approved a proposal to issue $275 million in Series D Preferred Stock and associated warrants in exchange for cash. The projected capital raise is expected to provide sufficient liquidity and capital resources for 2023. On August 5, 2022, the Company filed a S-3 Registration Statement for selling stockholders. The Company will receive approximately $43 million in cash in exchange for Series C Preferred Stock and associated warrants for the remainder of 2022.

Proceeds from the ~~business combination with Net Element, the~~planned capital raise and exercise of warrants ~~and a qualified public offering, should they materialize,~~ are expected to provide Mullen with sufficient liquidity and capital resources to fund its operating expenses and capital requirements for at least the next 12 months. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 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.

Push-Down Accounting

The carve-out financial statements for the periods presented prior to November 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

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as the equivalent of Mullen Automotive Inc. issuing stock for the net assets of Net Element, accompanied by a recapitalization. Accordingly, these condensed consolidated 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.

~~F-7~~

~~Table of Contents~~

~~NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

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 a 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 ~~December 31, 2021~~June 30, 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 ~~December 31, 2021,~~June 30, 2022, the restricted cash balance was ~~$61,000.~~$176,824. Customer deposits are accounted for within other ~~liabilities~~liabilities.

Deferred Advertising

At ~~December 31, 2021~~June 30, 2022 and September 30, 2021, deferred advertising was 0$24,699 and $261,550, respectively. The ~~cost~~costs 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.

~~F-8~~9

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~~NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

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.

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 the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Income Taxes

Prior to Mullen’s capitalization and corporate reorganization, our operations were included in the tax filings of MTI. The cash and deferred tax positions between us and MTI and are formalized in a tax sharing agreement.

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases 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 ~~December 31, 2021~~June 30, 2022 and September 30, 2021, there were no material changes to either the nature or the amounts of the uncertain tax positions.

The Company’s 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 tax law. We maintain a full valuation allowance against the value 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 ~~December 31, 2021~~June 30, 2022 and September 30, 2021.

~~F-9~~10

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~~NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

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 Company’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 Company follows the ~~FASB issued~~provisions of Accounting Standards Update (ASU) No. ~~2016-02,~~2016 02, “Leases” (ASU ~~2016-02). The core principle of ASU 2016-02 is that lessees should recognize on its balance sheet, assets and liabilities arising from~~2016 02), which requires a ~~lease. In accordance with that principle, ASU 2016-02 requires that a~~ lessee to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term. Lessees shall classify all leases 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 accordance with ASC 720-35, “Other Expenses – Advertising Cost.”

Research and Development Costs

Research and development costs are expensed as ~~incurred and includes impairment charges in the amounts of $1,157,323 and $518,023 for the three months ended December 31, 2021 and 2020, respectively.~~incurred. Research and development expenses primarily consist of costs associated with the development of our two electric vehicle product lines, the Mullen Five ~~show car.~~

~~F-10~~

~~Table of Contents~~

~~NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~car and the Mullen One van.

Share-Based Compensation

We account for share-based awards issued by MAI in accordance with ASC Subtopic 718-10, “Compensation – Share ~~Compensation”,~~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 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

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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 nine months ended ~~December 31, 2021~~June 30, 2022 and ~~2020.~~

~~Other Financing Costs~~

Pursuant to the terms of the First Amendment to the Company’s Agreement and Plan of Merger with Net Element, we incurred a daily $13,333 penalty for delays in the consummation of the merger transaction. We recorded charges of 0 for the three months ended December 31, 2021 associated with these delays, which charges are included in the condensed consolidated statement of operations and are included in accounts payable in the consolidated balance sheet at December 31, 2021 and September 30, 2021.

Related Party Transactions

We have related party transactions with certain of our directors, officers, and principal ~~shareholders.~~stockholders. 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.

~~F-11~~

~~Table of Contents~~

~~NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued~~

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. ~~There were no amounts in excess of insured limitations at December 31, 2021 and September 30, 2021.~~

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.” 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). The ASU will be effective for the Company’s fiscal years beginning ~~after December 15, 2021, (December 15, 2023 for smaller reporting companies). We have~~October 1, 2022. The Company has issued debt and equity instruments, the accounting for which could be impacted by

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this update. Company management is evaluating the impact this guidance on our financial condition and results of operations.

NOTE 4 – INTANGIBLE ASSETS

For the ~~three~~nine months ended ~~December 31,~~June 30, 2022 and 2021, ~~and 2020,~~ we incurred website development and trademark costs of ~~$5,361~~$310,405 and ~~$0,~~$63,299, respectively. These costs historically have been capitalized, as the website iswas in the development stage ~~resulting~~and costs resulted 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~~Trademark costs relate to legal fees incurred for registration of trademarks ~~account for all of the costs of trademark at December 31, 2021.~~and patents. Amortization of these costs will commence when the trademark application and registration process has been completed.

~~F-12~~

~~Table of Contents~~

~~NOTE 4 – INTANGIBLE ASSETS – Continued~~

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.


	December 31, 2021						September 30, 2021						June 30, 2022						September 30, 2021
	Gross				Net		Gross				Net		Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
Finite-Lived Intangible Assets	Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
Website design and development	$	2,660,391	$	(443,399)	$	2,216,992	$	2,660,391	$	(221,699)	$	2,438,692	$	2,660,391	$	(886,797)	$	1,773,594	$	2,660,391	$	(221,699)	$	2,438,692
Intellectual property		71,182		(71,182)		—		71,182		(69,205)		1,977		71,182		(71,182)		—		71,182		(69,205)		1,977
Trademark		59,951		—		59,951		54,590		—		54,590		407,191		—		407,191		54,590		—		54,590
Total Finite-Lived Intangible Assets	$	2,791,524	$	(514,581)	$	2,276,943	$	2,786,163	$	(290,904)	$	2,495,259	$	3,138,764	$	(957,979)	$	2,180,785	$	2,786,163	$	(290,904)	$	2,495,259

Total future amortization expense for finite-lived intellectual property is as follows:


Years Ended December 31,	Future Amortization
2022 (nine months)	$	670,458
Years Ended June 30,			Future Amortization
2022 (three months)			$	221,699
2023		886,797		886,797
2024		719,688		665,099
Thereafter				407,190
Total Future Amortization Expense	$	2,276,943	$	2,180,785

For the three and nine months ended ~~December 31, 2021 and 2020,~~June 30, 2022, amortization expense for the intangible assets was ~~$223,676~~$221,699 and $667,075 and was $5,932 and $17,796 for the three and nine months ended June 30, 2021, respectively.

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 December 31, 2021:~~

Net Carrying Value

Unpaid Principal

Contractual

Contractual
Type of Debt

Balance

Current

Long-Term

Interest Rate

Maturity
Matured Notes

$
3,718,585

$
3,718,585

$
—

0.00% - 15.00
%
2016 - 2021
Promissory Notes

14,531,554

14,531,554

—

28.00
%
2021 – 2022
Real Estate Note

274,983

36,724

238,259

5.00
%
2023
Loan Advances

618,158

618,158

—

0.00% - 10.00
%
2019 – 2020
Less: Debt Discount

—

—

—

NA

NA
Total Debt

$
19,143,280

$
18,905,021

$
238,259

NA

NA

~~F-13~~

~~Table of Contents~~

~~NOTE 5 – DEBT –~~ ~~Continued~~

~~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 December 31, 2021:~~

Years Ended December 31,


2022 (9 months)

2023

2024

Total
Total Debt

$
18,905,021

$
238,259

$
—

$
19,143,280

~~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 $3,718,585 in promissory notes and 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 months ended December 31, 2021 and 2020, we recorded interest expense of $22,438,945 and $2,406,330, respectively.

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 months ended December 31, 2021 and 2020, was $19,212,176 and $486,876, 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 three months ended December 31, 2021 and 2020, the carrying amount of indebtedness that was settled via issuance of MTI shares was $23,192,500 and $0, respectively.

~~F-14~~

~~Table of Contents~~

~~NOTE 5 – DEBT – Continued~~

~~Convertible Debt Issuances and Warrants~~

~~TDR Relationship~~

On May 16, 2021, we received debt financing through MTI entering into an unsecured $4.4 million convertible note agreement with TDR Capital. The convertible note was issued with OID of 10% ($0.4 million); carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 17,446,000 shares of MTI common stock (1,358,112 MAI warrants). The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The value ascribed to the warrants was $24,358,875, resulting in an additional debt discount of $3,726,816 and a beneficial conversion discount of $673,184. These discounts are being amortized over the 12-month term of the debt. The number of shares issuable upon conversion are determined according to the formula: Conversion Amount/Conversion Price, subject to certain adjustments. On November 4, 2021, the merger effective date, TDR Capital (together with their affiliates) is limited to a 9.9% ownership cap common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On July 26, 2021, we received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with TDR Capital. The convertible note is issued with OID of 10% or $0.1 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 4,361,500 shares of MTI common stock (339,528 MAI warrants). The MTI warrant exercise price is $0.6877~~(MAI exercise price is $8.84)~~ per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion is determined according to the formula: Conversion Amount/Conversion Price, subject to certain adjustments. On November 4, 2021, the merger effective date, TDR Capital (together with their affiliates) is limited to a 9.9% ownership cap common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On September 3, 2021, we received debt financing through MTI entering into an unsecured $6.6 million convertible note agreement with TDR Capital. The initial sale and purchase is $550,000 principal and detached warrants to acquire up to 2,180,750 shares of MTI stock (169,764 MAI warrants). The second sale and purchase is $6,050,000 principal and detached warrants to acquire up to 23,988,500 shares of MTI stock (1,867,423 MAI warrants). The combined convertible notes are issued with OID of 10% ($0.66 million); carries an interest rate of 15% and has a maturity date of one year. The MTI warrant exercise price is $0.6877 (MAI exercise price is $8.84) per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion is determined according to the formula: Conversion Amount/Conversion Price of $0.6877, subject to certain adjustments. On November 4, 2021, the merger effective date, TDR Capital (together with their affiliates) is limited to a 9.9% ownership cap common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

~~Digital Power Lending, LLC~~

On July 22, 2021, the Company received debt financing through MTI entering into an unsecured $2.42 million convertible note agreement with Digital Power Lending, LLC. The convertible note is issued with OID of 10% or $0.242 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 9,595,300 shares of MTI common stock (746,961 MAI warrants). The MTI warrant exercise price is $0.6877 ~~(MAI exercise price is $8.84)~~ per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion of the conversion amount shall be determined according to the formula: Conversion Amount/Conversion Price, subject to certain adjustments. On November 5, 2021, the merger effective date, Digital Power Lending, LLC (together with their affiliates) is limited to a 9.9% ownership cap in common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

~~F-15~~

~~Table of Contents~~

~~NOTE 5 – DEBT –~~ ~~Continued~~

On August 19, 2021, the Company received debt financing through MTI entering into an unsecured $1.1 million convertible note agreement with Digital Power Lending, LLC. The convertible note is issued with OID of 10% or $0.1 million; carries an interest rate of 15% and has a maturity date of one year. The convertible note is unsecured and includes detached warrants to acquire up to 4,361,500 shares of MTI common stock (339,528 MAI warrants). The MTI warrant exercise price is $0.6877 ~~(MAI exercise price is $8.84)~~ per common share and expires five years from the date of issuance. The number of conversion shares issuable upon conversion of the conversion amount shall be determined according to the formula: Conversion Amount/Conversion Price, subject to certain adjustments. On November 5, 2021, the merger effective date, Digital Power Lending, LLC. (together with their affiliates) is limited to a 9.9% ownership cap in common stock then outstanding after giving effect to the issuance of common stock issuable upon exercise of the warrants.

On October 25, 2021, MTI amended the exchange agreement to include the $1,100,000 debt financing and detached warrants with JADR Consulting Group PTY Limited. The agreement represents Amendment No. 6 and Joinder to the Exchange Agreement that was originally signed on May 7, 2021 and amended on May 20, 2021. On November 5, 2021, the merger effective date, the investors exchanged the convertible debt for shares of MAI's Series C Preferred Stock, par value $0.001 per share. The right to additional purchases of preferred stock expires 12 months from the merger close date between Net Element and MAI.

On November 5, 2021, the Company received debt financing through MTI entering into an unsecured $110,000 convertible note agreement with Michael Friedlander. The convertible note is issued with OID of 10% or $10 thousand; carries an interest rate of 15% and has a maturity date of one year. On November 5, 2021, the merger effective date, the investors exchanged the convertible debt for shares of MAI’s Series C Preferred Stock, par value $0.001 per share. The right to additional purchases of preferred stock expires 12 months from the merger close date between Net Element and MAI.

~~Assignment and Assumption of Rights~~

~~On October 25, 2021, JADR Consulting Group PTY Limited and TDR Capital entered into agreement of Assignment and Assumption of Rights. On September 3, 2021, the Assignor ("~~~~TDR Capital~~~~") agreed to purchase $6,600,000 in convertible debt and warrants to acquire 2,037,164 shares of MAI common stock. The Assignor has agreed with the Assignee ("~~~~JADR Consulting Group PTY Limited~~") to assign all rights, title and interest in the aggregate original amount of $3,300,000 and warrants to acquire 1,201,521 shares of MTI common stock for the aggregate purchase price of $3,000,000. The Company received funding between October 27, 2021 and November 4, 2021.

~~On October 27, 2021, Amendment No. 6 and Joinder to the Exchange Agreement was modified to reflect the changes of the Assignment and Assumption of Rights document.~~

~~Convertible Debt to Equity Conversion (Exchange Agreements)~~

The Notes described above were issued pursuant to Prior SPAs with the various Noteholders in 2020 and 2021 generally to finance Mullen Technologies’ electric vehicle business. The Prior SPAs provided for the issuance of the Notes and a specified number of warrants allowing the Noteholders to purchase common stock at an exercise price of $0.6877 per share, at any time prior to an expiration date that is generally 5 years after the date of issuance.

~~At the effective time of the Merger, each of the warrants to purchase Mullen Technologies common stock were canceled and converted automatically into a Warrant.~~

~~F-16~~

~~Table of Contents~~

~~NOTE 5 – DEBT~~ ~~- Continued~~

Mullen Technologies and the holders (“Noteholders”) of $10,762,500 in aggregate principal amount of 15% unsecured convertible notes (the “Notes”) previously issued pursuant to certain Securities Purchase Agreements between Mullen Technologies and the Noteholders (“Prior SPAs”) entered into an Exchange Agreement (the “Exchange Agreement”) dated as of May 7, 2021, as amended, pursuant to which the Noteholders exchanged their Notes for Series C Preferred Stock of Mullen Technologies (the “Exchange Shares”). A condition to the Noteholders’ obligation to exchange the Notes included that the Company had received conditional approval for listing our Common Stock on the Nasdaq Capital Market and all conditions for closing the Merger had been met. In connection with the initial issuance of the Notes and further to the Exchange Agreement, the Noteholders also received a total of 42,759,290 additional warrants to purchase Mullen Technologies common stock at a purchase price of $0.6877 per share.

The Exchange Agreement requires Mullen Technologies to file a registration statement with the SEC under the Securities Act to register the sale of shares of common stock issuable upon conversion of the Exchange Shares by the Noteholders (the “Registration Statement”). On February 1, 2022, the S-3 Registration Statement was filed with the SEC and became effective on February 3, 2022.

At the effective time of the Merger, (i) each of the Exchange Shares were canceled and converted automatically into the right to receive 0.078 shares of the Series C Preferred Stock, (ii) each of the warrants to purchase Mullen Technologies common stock were canceled and converted automatically into a Warrant and (iii) the obligations under the Exchange Agreement were assumed by the Company.

~~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 $25,367,925 and $33,296,648 as of December 31, 2021 and September 30, 2021, respectively, and are in default. The amounts owed to other DBI-affiliated entities is $524,911 and $982,500 and $1,082,500, as of December 31, 2021 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.

~~F-17~~

~~Table of Contents~~

~~NOTE 5 – DEBT - Continued~~

~~SBA Loans~~

~~On April 14, 2020, MTI entered a promissory note (the “~~~~Note~~~~”) evidencing an unsecured loan (the “~~~~Loan~~~~”) in the amount of $885,426 made under the Paycheck Protection Program (the “~~~~PPP~~~~”). The Note matures on April 14, 2022 and bears interest at a rate of 1% per annum. Pursuant to the terms of the Coronavirus, Aid, Relief and Economic Security Act (“~~~~CARES Act~~”) and the PPP, the Company applied to the Lender for forgiveness for the amount due on the Loan. The amount eligible for forgiveness is based on the amount of Loan proceeds used (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. During November 2020, the SBA approved the loan forgiveness amount of $875,426 in principal and $5,155 in interest on November 20, 2020. The loan forgiveness was accounted for as a gain on debt extinguishment of $890,581 in the Consolidated Statement of Operations for the year ended September 30, 2021.

~~In September 2020, MTI entered a promissory note (the "~~~~Note~~") in the amount of $10,000 by the SBA under the EIDL program. Monthly installment payments on the Note will begin twelve months from the date of the Note, with the balance of any accrued principal and interest at 3.75% annually, payable thirty years from the date of the Note. An application was submitted to the Lender for loan forgiveness, which was approved for the full amount on February 18, 2021.

~~Loss on Debt Settlement~~

~~The Company incurred a $41,904 loss on debt settlement for the $540K CarMoxy Loan.~~

~~Release of Liability, Debt Paydowns and Payoffs~~

~~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~~.

~~On November 29, 2021, MAI (through MTI) repaid the $140,000 loan from the NY Group, which had matured on January 24, 2021.~~

~~On November 29, 2021, MAI (through MTI) repaid the $25,000 loan from MABM Holdings loan, which matured on January~~ 13 ~~2021.~~

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:~~

~~$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.~~

~~$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.

~~F-18~~

Table of Contents

Short and Long-Term Debt

The following is a summary of our indebtedness at June 30, 2022:


	Net Carrying Value
	Unpaid Principal						Contractual		Contractual
Type of Debt	Balance		Current		Long-Term		Interest Rate		Maturity
Matured Notes	$	3,049,955	$	3,049,955	$	—	0.00% - 15.00	%	Past Due
Promissory Notes		5,000,000		—		5,000,000	8.99	%	2024
Convertible Notes		1,096,787		—		1,096,787	28.00	%	2024
Real Estate Note		256,850		37,651		219,199	5.00	%	2023
Loan Advances		558,158		558,158		—	0.00% - 10.00	%	Past Due
Less: Debt Discount		(1,059,375)		—		(1,059,375)	NA		NA
Total Debt	$	8,902,375	$	3,645,764	$	5,256,611	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 June 30, 2022:


	Years Ended June 30,
	2022 (6 months)		2023		2024		Total
Total Debt	$	3,645,764	$	219,199	$	5,037,412	$	8,902,375

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%. 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 nine months ended June 30, 2022, we recorded interest expense of $5,346,766 and $29,906,225 and $8,339,195 and $13,784,976 for the three and nine months ended June 30, 2021, respectively.

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 nine months ended June 30, 2022 and 2021, was $19,584,041 and $4,817,504, respectively.

Table of Contents

~~NOTE 5~~

ended June 30, 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 June 30, 2022, the remaining unamortized discount was $973,652.

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 – ~~DEBT - Continued~~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 June 30, 2022 and September 30, 2021, respectively. The amounts owed to other DBI-affiliated entities is 0 and $982,500, as of June 30, 2022 and September 30, 2021, respectively.

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 condensed consolidated 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. The principal pay down to Drawbridge occurred on November 15, 2021.

On June 17, 2022, the Company entered into an Amended and Restated Secured Convertible Note and Security Agreement (the “A&R Note”) with Esousa Holdings LLC, a New York limited liability company (“Esousa”). The A&R Note amends and restates that certain promissory note dated July 23, 2020, entered into between the Mullen Technologies, Inc. (“Original Borrower”) and DBI Lease Buyback Servicing LLC, a Delaware limited liability company (“DBI”) for a principal amount of $23,831,553.98 (the “Original Note”). The Company had previously assumed all of the obligations of the Original Borrower under the Original Note upon the completion of the Merger. Esousa purchased rights under the Original Note from DBI immediately prior to entering into the A&R Note.

The A&R Note extends the maturity date of the Original Note by two years, from July 23, 2022 to July 23, 2024. The A&R Note provided Esousa the right to convert all or any portion of the then-outstanding principal balance of the A&R Note into that number of shares of the Common Stock of the Company. The transaction is accounted for as an extinguishment of debt with Drawbridge and the related expense within the “Incentive fee to creditor for transfer of note payable” line item of the Statement of Operations. The new debt with Esousa is viewed as a loan modification.

Table of Contents

On June 27, 2022, the Company received notification from Esousa that it was exercising the A&R Note’s conversion feature to partially convert the note and accrued interest in exchange for 28,000,000 shares. The conversion price was $0.9918 per share and the principal of the A&R Note has a remaining balance of $1,096,787.

Due to the limited number of authorized shares available to settle the conversion only 17,500,000 shares were issued. The remaining shares owed to the creditor is recognized as a derivative liability within the “Liability to issue shares” line item of the Balance Sheet. The Company agreed to pay a $3,495,000 penalty to Esousa, settleable in cash or stock, by August 31, 2022. This fee was recognized as Penalty for insufficient authorized shares within the Statement of Operations and within Accrued Expenses on the Balance Sheet.

In connection with entering into the A&R Note with Esousa, the Company granted Drawbridge an option to purchase up to $25 million worth of shares of a yet to be created Series E Preferred Stock from the Company (the “Series E Purchase Option”). Refer to Note 6, Fair Value Measurements and Note 17, Commitments and Contingencies, for details on the Series E Purchase option.

Release of Liability, Debt Paydowns and Payoffs

Since the reverse merger with Net Element in November 2021, there have been numerous debt paydowns and payoffs with the releases of liability obtained from former creditors. The debt portfolio has been reduced by approximately $5 million, excluding the principal paydowns of $10 million on the Drawbridge Loan. The latest debt payoff occurred on April 1, 2022, the Company repaid the $500,000 loan from MNB Capital Group, which had a maturity date of December 16, 2022.

Convertible Notes 2020-2021

Between August 2020 and ~~December~~November 2021, MTI issued unsecured convertible notes totaling ~~$23,192,500, of which $7,260,000 were issued during the three months ended December 31, 2021.~~$23,192,500. The unsecured convertible notes ~~issued during the three months ended December 31, 2021 bear~~bore interest at 15%~~, mature in one year,~~ and included warrants to acquire shares of common stock based on a specified formula. Interest iswas accrued in arrears until the last business day of each calendar year quarter. The default rate on the note ~~increases~~would increase to 20% ~~when~~if quarterly interest payments are not timely made by MTI.

~~Convertible Notes~~

��


Convertible

Interest

Default

Maturity

Warrants

Exercise

Exercise
Date of Issuance

Note ($)

Rate

Interest Rate

Date

(#)

Date

Price ($)
8/26/2020

$
1,000,000

15
%
20
%
8/26/2021

226,397

8/26/2025

$
8.84
8/26/2020

200,000

15
%
20
%
8/26/2021

45,279

8/26/2025

$
8.84
8/26/2020

200,000

15
%
20
%
8/26/2021

45,279

8/26/2025

$
8.84
8/26/2020

100,000

15
%
20
%
8/26/2021

22,640

8/26/2025

$
8.84
9/25/2020

105,000

15
%
20
%
9/25/2021

29,715

9/25/2025

$
8.84
9/25/2020

157,500

15
%
20
%
9/25/2021

44,572

9/25/2025

$
8.84
9/25/2020

105,000

15
%
20
%
9/25/2021

29,715

9/25/2025

$
8.84
10/12/2020

660,000

15
%
20
%
10/12/2021

203,757

10/12/2025

$
8.84
10/12/2020

33,000

15
%
20
%
10/12/2021

10,188

10/12/2025

$
8.84
10/12/2020

27,500

15
%
20
%
10/12/2021

8,490

10/12/2025

$
8.84
11/9/2020

660,000

15
%
20
%
11/9/2021

203,757

11/9/2025

$
8.84
11/9/2020

33,000

15
%
20
%
11/9/2021

10,188

11/9/2025

$
8.84
11/9/2020

27,500

15
%
20
%
11/9/2021

8,490

11/9/2025

$
8.84
12/7/2020

660,000

15
%
20
%
12/7/2021

203,756

12/7/2025

$
8.84
12/7/2020

33,000

15
%
20
%
12/7/2021

10,188

12/7/2025

$
8.84
12/7/2020

27,500

15
%
20
%
12/7/2021

8,490

12/7/2025

$
8.84
12/15/2020

157,500

15
%
20
%
12/15/2021

44,572

12/15/2025

$
8.84
12/15/2020

157,500

15
%
20
%
12/15/2021

44,572

12/15/2025

$
8.84
1/7/2021

660,000

15
%
—

1/7/2022

203,757

1/7/2026

$
8.84
1/7/2021

33,000

15
%
—

1/7/2022

10,188

1/7/2026

$
8.84
1/7/2021

27,500

15
%
—

1/7/2022

8,490

1/7/2026

$
8.84
1/7/2021

—

—

—

—

2,038
*
1/7/2026

$
8.84
1/7/2021

192,500

15
%
—

1/7/2022

59,429

1/7/2026

$
8.84
1/7/2021

82,500

15
%
—

1/7/2022

25,470

1/7/2026

$
8.84
1/7/2021

192,500

15
%
—

1/7/2022

59,429

1/7/2026

$
8.84
1/7/2021

110,000

15
%
—

1/7/2022

33,960

1/7/2026

$
8.84
3/10/2021

660,000

15
%
—

3/10/2022

203,757

3/10/2026

$
8.84
3/10/2021

33,000

15
%
—

3/10/2022

10,188

3/10/2026

$
8.84
3/10/2021

27,500

15
%
—

3/10/2022

8,490

3/10/2026

$
8.84
5/7/2021

—

—

—

—

82,326
**
5/7/2026

$
8.84
5/7/2021

—

—

—

—

33,316
**
5/7/2026

$
8.84
5/7/2021

—

—

—

—

10,504
**
5/7/2026

$
8.84
5/7/2021

—

—

—

—

19,167
**
5/7/2026

$
8.84
5/16/2021

4,400,000

15
%
20
%
5/16/2022

1,358,112

5/16/2026

$
8.84
7/22/2021

2,420,000

15
%
20
%
7/22/2022

746,961

7/22/2026

$
8.84
7/26/2021

1,100,000

15
%
20
%
7/26/2022

339,528

7/26/2026

$
8.84
8/19/2021

1,100,000

15
%
20
%
8/19/2022

339,528

8/19/2026

$
8.84
9/3/2021

550,000

15
%
20
%
9/3/2022

169,764

9/3/2026

$
8.84
10/5/2021

1,100,000

15
%
20
%
10/5/2022

395,712

10/5/2026

$
8.84
10/18/2021

385,000

15
%
20
%
10/18/2022

138,500

10/18/2026

$
8.84
10/19/2021

1,265,000

15
%
20
%
10/19/2022

455,068

10/19/2026

$
8.84
10/27/2021

550,000

15
%
20
%
10/27/2022

197,857

10/27/2026

$
8.84
10/27/2021

1,100,000

15
%
20
%
10/27/2022

395,712

10/27/2026

$
8.84
11/4/2021

2,750,000

15
%
20
%
11/4/2022

989,277

11/4/2026

$
8.84
11/5/2021

110,000

15
%
20
%
11/5/2022

37,356

11/5/2026

$
8.84
11/5/2021***

—

—

—

—

490,030

11/5/2026

$
8.84
Total

$
23,192,500

—

—

—

7,876,068

—

—

*	As part of placement agent, Cambria received five-year warrants to purchase 6% of the MTI common shares issuable under convertible notes sold in the Regulation D offering to investors introduced by the firm.

~~F-19~~

~~Table of Contents~~

~~NOTE 5 – DEBT - Continued~~

On May 7, 2021, MTI issued additional warrants of 1,866,665 (MAI - 145,313) that were added to the Exchange Agreement for no additional consideration to acquire additional common shares of common stock to 4 convertible debt holders given changes in the exchange share calculation, which will be consistent with the exchange share calculation of other convertible debt holders. The Exchange Agreement supersedes the original agreements that were issued by MTI and allows the convertible debt holder to exchange their debt for the newly created Series C Preferred Stock, par value of $0.001. The new series of preferred stock was created upon the merger effectiveness date between Net Element and MAI.

~~***~~

Additional warrants granted to investors granted to for no additional consideration to acquire additional common shares of common stock to 4 convertible debt holders given changes in the exchange share calculation, which will be consistent with the exchange share calculation of other convertible debt holders.

~~Convertible Notes~~

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 ~~December 31,~~June 30, 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

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following three levels:

Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2: Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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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 at 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 Liabilities Measured at Fair Value on a Recurring Basis

As of June 30, 2022, the Company has an insufficient number of authorized shares available for issuance for the conversion of Series C Preferred Stock and any remaining associated warrants for common stock. Therefore, these financial instruments meet the definition of a derivative until MAI stockholders approve the increase in authorized common and preferred shares. The MAI Board of Directors approve this measure on July 26, 2022. The remaining Series C preferred stock and warrants are valued using the Black Scholes option valuation model. The estimated fair value of the Common Stock warrants was $1,233,025. the Company also recognized a liability to issue shares related to convertible preferred stock, which was $6,394,543.

On July 26, 2022, an increase in the Company’s authorized number of shares was approved and the Company filed the Certificate of Amendment to the Company’s Certificate of Incorporation with the Delaware Secretary of State accordingly. Refer to Note 19, Subsequent Events for further details.

The fair value of the warrants and other convertible instruments includes inputs that are not observable in the market and thus represents a Level III financial liability. The assumptions used that represent management’s best estimates of the fair value of the Company’s warrants and other convertible instruments issued and outstanding were as follows:


	June 30, 2022
Expected term (in years)		4.75 - 9.97
Volatility		152	%
Dividend yield		0.00	%
Risk-free interest rate		2.98 - 3.01	%
Exercise price	$	8.834

Financial Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company must estimate the fair value of the Series E Preferred Stock commitment from the Drawbridge-DBI transaction. Based on the Option Pricing Model and the implied equity value as of June 17, 2022, we determined the fair value of the Series E option to be $23,085,886. The fair value of the Series E option includes inputs that are not observable in the market and thus represents a Level III financial liability. The assumptions used that represent management’s best estimates of the fair value of the Series E option were as follows:


Unobservable Inputs	June 17, 2022
Expected term (in years)		5.0
Volatility		151.8	%
Annual Rate of Quarterly Dividends		—	%
Discount Rate - Bond Equivalent Yield		3.34	%
Stock Price	$	1.52
Conversion Price	$	1.32

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

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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.

NOTE 7 – ~~DEFICIENCY IN~~ 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.

~~F-20~~

~~Table~~ At June 30, 2022, the Company had 58,000,000 shares of ~~Contents~~Preferred Stock authorized with $0.001 par value per share. There were 0 and 5,667,683 shares of Preferred Stock issued and outstanding at June 30, 2022 and September 30, 2021, respectively.

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 nine months ended ~~December 31, 2021~~June 30, 2022 and ~~2020.~~2021.

The Series C Preferred Stock bears a cumulative 15.0% per annum fixed dividend payable no later than the 5^th 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 payable 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

~~NOTE 7 – DEFICIENCY IN STOCKHOLDERS’ EQUITY – Continued~~18

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Liquidation

Based on a reverse ratio of one share of the Company for 12.8485 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~~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

~~F-21~~

~~Table of Contents~~

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~~At June 30, 2022, the Company had 500,000,000 shares of common stock authorized with $0.001 par value per share. There were ~~23,936,162~~498,694,481 and 7,048,387 shares of common stock issued and outstanding at ~~December 31, 2021~~June 30, 2022 and September 30, ~~2021.~~2021, respectively.

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~~NOTE 7 – DEFICIENCY IN STOCKHOLDERS’ EQUITY – Continued~~

The holders of Common Stock are entitled to 1 vote for each share of Common Stock held at all meetings of ~~shareholders.~~stockholders. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the common ~~shareholders~~stockholders 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 Company issued pre-merger Warrants ~~were issued~~ at an initial exercise price of $0.6877 per share, which were immediately exercisable ~~upon issuance~~ and have a ~~term of five years from the date of issuance.~~five-year term. 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~~$8.834 per share. The Warrants were exercisable for an aggregate of ~~15,075,707~~1,579,631 shares of Common Stock as of ~~December 31, 2021.~~June 30, 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.

~~F-22~~

~~Table of Contents~~

The following table summarizes warrant activity for the ~~three~~nine months ended ~~December 31, 2021 and 2020:~~June 30, 2022:


		Weighted Average
	MAI shares	Exercise Price
Warrants outstanding at September 30, 2021	4,924,447	$	8.834
Warrants exercised	(28,420,265)	$	8.834
Warrants granted	25,075,449	$	8.834
Warrants expired	—	$	—
Warrants outstanding at June 30, 2022	1,579,631	$	8.834

Weighted Average

MAI shares

Exercise Price
Warrants outstanding at September 30, 2021

4,924,447

$
8.84
Warrants exercised

—

$
—
Warrants granted

10,151,260

$
8.84
Warrants expired

—

$
—
Warrants outstanding at December 31, 2021

15,075,707

$
8.84

Weighted Average

MAI shares

Exercise Price
Warrants outstanding at September 30, 2020

540,905

$
8.84
Warrants exercised

—

$
—
Warrants granted

756,448

$
8.84
Warrants expired

(97,308)

$
8.84
Warrants outstanding at December 31, 2020

1,200,045

$
8.84

~~NOTE 7 – DEFICIENCY IN STOCKHOLDERS’ EQUITY – Continued~~

2020-2021 Warrants

The warrants are exercisable for a five-year period commencing upon ~~issuance .~~issuance. The estimated fair value of the MAI warrants ~~issued and outstanding as of December 31, 2021 is $133,269,241~~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:


	December 31, 2021			June 30, 2022
Expected term (in years)		5.0			5.0
Volatility		135	%		135	%
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		0.98%-1.17	%		0.98% - 1.17	%
Common stock price	$	4.16		$	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.

~~Equity Transactions~~

~~Acuitas $20 Million Equity Purchase~~

On May 7, 2021, MTI executed a $20,000,000 equity purchase agreement with the Acuitas Group Holdings, who committed to purchase shares of the MAI Series C Preferred Stock at a price of $8.84 per share. Upon NASDAQ uplifting and trading volume of stock, this equity commenced funding. On November 4, 2021, Acuitas Group Holdings wired $20,000,000 to MTI before the merger effective date with Net Element that occurred on November 5, 2021. As part of the merger transaction, Acuitas Group Holdings received 6,793,051 warrants with an adjusted exercise price of $8.84 and

~~F-23~~20

Table of Contents

On April 15, 2022, the Securities and Exchange Commission (“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.

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 shares up to an aggregate of $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 was required to file a registration statement with the SEC covering the sale of the Common Stock issued under the Equity Line of Credit and such registration statement must be declared effective. The Registration Statement was filed on February 1, 2022 and was declared effective on February 3, 2022.

As of June 30, 2022, MAI has received net proceeds of approximately $29.6 million from the Equity Line of Credit and Esousa has received 54,811,504 shares of common stock.

matures in five years. The investor also received 2,767,745 shares of Series C Preferred Stock. The preferred shares and warrants have been registered for sale via the S-3 Registration Statement that became effective on February 3, 2022.

~~Cambria – Investment Banking Services Agreement~~

On July 16, 2021 and September 8, 2021, MTI agreed to a proposal with Cambria a placement agent services for investment offerings up to $3,000,000. As a result of the agreement, MTI is obligated to pay a financing fee of 6.0% of aggregate gross proceeds and warrants equal to 6.0% of the offering. To date, Cambria has raised $750,000 in equity financing. The equity purchases of Series C Preferred Stock have detached warrants with strike price of $8.84. The warrants have a five-year maturity. On November 5, 2021, the merger effective date, investors received e Series C Preferred Stock.

~~NOTE 7 – DEFICIENCY IN STOCKHOLDERS’ EQUITY – Continued~~

The table below represents the post-merger shares for equity capitalization. As of December 31, 2021, MAI issued Series C Preferred Stock and associated warrants to the investors within the Cambria relationship

Date

Series C Preferred Stock

Warrants

Additional Warrants

Maturity Date

Exercise Price
7/23/2021

8,490

25,470

—

7/23/2026

$
8.84
7/23/2021

5,660

16,980

—

7/23/2026

$
8.84
7/23/2021

11,320

33,960

—

7/23/2026

$
8.84
7/23/2021

8,490

25,470

—

7/23/2026

$
8.84
7/23/2021

—

—

9,016
*
7/23/2026

$
8.84
9/8/2021

19,810

59,429

—

9/8/2026

$
8.84
9/8/2021

19,810

59,429

—

9/8/2026

$
8.84
9/8/2021

11,320

33,960

—

9/8/2026

$
8.84
Total

84,900

254,698

9,016

—

—

●

~~Represents placement agent fees to Cambria.~~

NOTE 8 – LOSS PER SHARE

Earnings per common share (“EPS”) is computed by dividing net income allocated to common ~~shareholders~~stockholders 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~~stockholders 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 nine months ended ~~December 31,~~June 30, 2022 and 2021, the convertible debt and ~~2020, the Series A~~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.

The following table presents the reconciliation of net income attributable to common stockholders to net income used in computing basic and diluted net income per share of common stock:


	Three months ended June 30,				Nine months ended June 30,
	2022		2021		2022		2021
Net income attributable to common stockholders	$	(59,471,560)	$	(15,251,402)	$	(128,508,884)	$	(29,545,621)
Less: Accumulated Preferred Stock Dividends		(2,285,792)		—		(4,805,740)		-
Net income used in computing basic net income per share of common stock	$	(61,757,352)	$	(15,251,402)	$	(133,314,624)	$	(29,545,621)

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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 such awards, which is generally recognized as a charge to income ratably over the vesting period. Since ~~we are public~~Mullen Automotive is a publicly reporting company, the employee shares are valued each month, using the MULN closing stock price on the NASDAQ CM.

~~F-24~~

~~Table of Contents~~

~~NOTE 9 – MAI SHARE- BASED COMPENSATION – Continued~~

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 December 31,				For the three months ended June 30,				For the nine months ended June 30,
Composition of Stock-Based Compensation Expense	2021		2020		2022		2021		2022		2021
Employee MAI share issuance	$	1,604,293	$	566,179	$	1,721,434	$	1,091,554	$	5,014,421	$	2,024,426
MAI shares for services		2,495,487		26,162		3,381,301		440,650		27,423,361		1,731,779
MAI Share-Based compensation expense	$	4,099,780	$	592,341	$	5,102,735	$	1,532,204	$	32,437,782	$	3,756,205

NOTE 10 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


	December 31, 2021		September 30, 2021		June 30, 2022		September 30, 2021
Accrued Expenses and Other Liabilities
Accrued expense - other	$	1,229,929	$	2,051,696	$	5,618,811	$	2,051,696
Accrued payroll		4,596,272		4,586,057		3,576,061		4,586,057
Accrued interest		12,446,496		12,489,012		4,716,469		12,489,012
Total	$	18,272,697	$	19,126,765	$	13,911,341	$	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 December 31, 2021 and September 30, 2021 are $4,277,297 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 18, Contingencies and Claims.

Accrued interest relates to finance charges on debt financing, including $3,495,000 payable due to insufficient shares being available for conversion, and represents interest on loans, and convertible notes payable throughout 2021. See Note 5, Debt. Accrued expense – other includes $4,805,739 in accrued accumulated preferred stock dividends.

NOTE 11 – NOTE RECEIVABLE

On October 8, 2021, MAI (through MTI) and CEOcast, Inc. entered into an agreement, whereby ~~CEOCast,~~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, and the payment of principal will be made in 6 equal monthly installments beginning on the first business day of the calendar month . Before payments begin to the Company, the shares underlying the warrants must be registered via an effective registration statement filed with the U.S. Securities and Exchange Commission.

In late April and early May 2022, MAI received $15 million in 3 $5 million cash increments from CEOcast, Inc. In return, CEOcast, Inc. received warrants to acquire shares of common stock. As of this June 30, 2022, CEOcast, Inc. has exercised its warrants for 14,343,550 MAI common shares.

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NOTE 12 –LIABILITY TO ISSUE STOCK

Liability represents stock payable that is accrued for and issuable at a future date for ~~Preferred Management Partners~~certain convertible securities and ~~Cambria Investment Banking Services. See Note 18, Commitments~~warrants and ~~Contingencies,~~was $14,118,227 as of June 30, 2022. The liability to issue stock to consultants and ~~Note 20, Subsequent Events.~~employees as compensation and was 0 and $7,027,500 as of June 30, 2022 and September 30, 2021, respectively.

~~F-25~~

~~Table of Contents~~

NOTE 13 – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Property, equipment, and leasehold improvements, net consists of the following:


	December 31,		September 30,		June 30,		September 30,
	2021		2021		2022		2021
Building	$	8,078,757	$	804,654	$	8,078,757	$	804,654
Furniture and Equipment		485,534		111,102		490,823		111,102
Vehicles		45,887		45,887		45,887		45,887
Computer Hardware and Software		172,505		139,742		350,083		139,742
Machinery and Equipment		6,946,019		2,597,654		6,929,731		2,597,654
Construction-in-progress						280,844		—
Leasehold Improvements		40,367		66,379		40,096		66,379
Subtotal		15,769,069		3,765,418		16,216,221		3,765,418
Less: Accumulated Depreciation		(2,665,364)		(2,583,941)		(2,773,150)		(2,583,941)
Property, Equipment and Leasehold Improvements, Net	$	13,103,705	$	1,181,477	$	13,443,071	$	1,181,477

Depreciation expense related to property, equipment and leasehold improvements for the ~~three~~three-and-nine months ended ~~December 31,~~June 30, 2022 was $86,598 and $251,780, and was $109,058 and $320,525 for the three and nine months ended June 30, 2021, ~~and 2020 was $84,022 and $102,495,~~ 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 127,400sf 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. Construction-in-progress includes development and construction that is currently in progress at the AMEX facility.

NOTE 14 – OTHER ASSETS

Other assets consist of the following:


	December 31, 2021		September 30, 2021		June 30, 2022		September 30, 2021
Other Assets
Coda Materials	$	76,588	$	76,587	$	76,588	$	76,587
Show Room Cars		4,082,665		2,739,995		3,349,545		2,739,995
Security Deposits		186,640		186,640		186,641		186,640
Deposit on Property (See Note 16)		—		1,240,000		—		1,240,000
Total Other Assets	$	4,345,893	$	4,243,222	$	3,612,774	$	4,243,222

~~F-26~~23

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NOTE 15 – OPERATING EXPENSES

General and Administrative Expenses consists of the following:


	Three months ended December 31,				Three months ended June 30,				Nine months ended June 30,
	2021		2020		2022		2021		2022		2021
Professional fees	$	5,139,332	$	941,728	$	4,908,855	$	1,458,969	$	31,773,409	$	4,858,544
Salaries		3,161,920		1,151,668		3,177,790		2,125,097		10,556,783		4,359,245
Depreciation and amortization		307,699		108,427		308,297		114,991		918,855		338,321
Lease		459,535		356,168		474,032		513,169		1,493,150		1,248,573
Settlements and penalties		294,812		54,588		169,607		57,017		1,054,439		136,515
Employee benefits		368,052		83,293		639,779		82,092		1,552,939		253,638
Utilities and office expense		179,028		67,457		202,652		99,475		428,565		239,709
Advertising and promotions		2,452,790		29,541		644,423		17,104		3,570,016		270,320
Taxes and licenses		72,279		5,130		8,805		33,744		25,926		45,248
Repairs and maintenance		19,220		41,880		167,173		66,501		246,875		166,836
Other		446,416		112,798		195,387		357,995		1,446,359		638,623
Total	$	12,901,084	$	2,952,678	$	10,896,800	$	4,926,154	$	53,067,316	$	12,555,572

Within professional fees is MTI shares for services, which is the issuance of MTI shares for services rendered to consultants and professional service firms. The expense is recorded at fair value of MTI shares issued (see Note 15, Other Assets). For the three months ended December 31, 2021 and 2020, the Company recorded $916,295 and $26,162, respectively, for shares for services.

Research and development consist of the following:


	Three months ended December 31				Three months ended June 30,				Nine months ended June 30,
	2021		2020		2022		2021		2022		2021
Research & Development
Professional fees	$	1,157,323	$	518,023	$	7,324,365	$	1,479,399	$	9,665,126	$	2,535,693
Total	$	1,157,323	$	518,023	$	7,324,365	$	1,479,399	$	9,665,126	$	2,535,693

Research and development costs are expensed as incurred. Research and development expenses primarily consist of Mullen Five EV ~~show car~~and Mullen One EV cargo van development and are primarily comprised of engineering, homologation, and prototyping costs and personnel-related costs for employees and consultants.

In December 2020, the Company entered into an agreement with Thurner, Inc. to design and develop two show electric vehicles. The car design was completed during Q3 2021. The total cost for Phase 1 is $483,254.

In December 2020, MTI entered into a Statement of Work with Phiaro, Inc. for its show car development for approximately $1.6 million. The show car project program started in December 2020 and completed November 2021. The program is for the initial show car development of the Mullen Five, which is a mid-size electric SUV. The program start began in January 2021. The initial show cars in development consist of two mid-size electric SUVs.

~~F-27~~24

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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 lease 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.


	June 30, 2022			September 30, 2021
Assets:
Operating lease right-of-use assets	$	1,939,829		$	2,350,929
Liabilities:
Operating lease liabilities, current		(680,185)			(599,898)
Operating lease liabilities, non-current		(1,334,518)			(1,857,894)
Total lease liabilities	$	(2,014,703)		$	(2,457,792)
Weighted average remaining lease terms:
Operating leases		2.75 years			3.34 years
Weighted average discount rate:
Operating leases		28	%		28	%

December 31, 2021

September 30, 2021

Assets:





Operating lease right-of-use assets

$
2,213,991

$
2,350,929

Liabilities:





Operating lease liabilities, current

(623,343)

(599,898)

Operating lease liabilities, non-current

(1,697,222)

(1,857,894)

Total lease liabilities

$
(2,320,565)

$
(2,457,792)

Weighted average remaining lease terms:





Operating leases

3.14 years

3.34 years

Weighted average discount rate:





Operating leases

28
%

28
%
Cash paid for amounts included in the measurement of lease liabilities for the fiscal year ended September 30, 2021, and 2020

$
293,387

$
1,057,438


Operating lease costs:	For the three months ended December 31,				For the three months ended June 30,				For the nine months ended June 30,
	2021		2020		2022		2021		2022		2021
Fixed lease cost	$	286,482	$	150,235	$	327,409	$	280,169	$	1,066,680	$	765,409
Variable lease cost		129,605		199,367		158,399		126,218		418,999		362,817
Short-term lease cost		96,592		27,795		34,473		127,795		160,250		183,386
Sublease income		(53,144)		(21,229)		(46,144)		(21,013)		(152,431)		(63,039)
Total operating lease costs	$	459,535	$	356,168	$	474,137	$	513,169	$	1,493,498	$	1,248,573

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.

~~F-28~~25

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~~NOTE 16 – LEASES – Continued~~

The following table reflects maturities of operating lease liabilities at ~~December 31, 2021:~~June 30, 2022:


Years ending
December 31,
2022 (9 months)	$	908,149
June 30,
2022 (3 months)			$	294,069
2023		1,157,693		1,157,693
2024		824,287		824,287
2025		436,155		436,156
2026		222,787		222,787
Thereafter		—		—
Total lease payments	$	3,549,071	$	2,934,992
Less: Imputed interest		(1,228,506)		(920,289)
Present value of lease liabilities	$	2,320,565	$	2,014,703

~~NOTE 17 – INCOME TAXES~~

On December 2, 2019, we entered into a tax sharing agreement with Mullen Technologies Inc. Although our results are included in the Mullen Technologies consolidated tax return for U.S. federal income tax purposes, our tax provision is calculated primarily as though MAI was a separate taxpayer. However, under certain circumstances, transactions between us and Mullen Technology are assessed using consolidated tax return rules. Tax sharing agreement governs the payment of tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of tax returns, and provide for certain other matters relating to taxes

For the quarter ended December 31, 2021 and years ended September 30, 2021 and 2020, we had income tax NOL carryforwards of approximately $193 million for Federal and $192 million for California, which will expire as follows:

NOL Carryforward

December 31,

September 30,

2021

2021
Federal

2034-2037

$
36,566,294

$
29,838,716
Indefinite

$
199,385,113

$
162,818,819

Total Federal

$
235,951,407

$
192,657,535

California

2034-2040

$
194,955,026

$
191,722,566

Total California

$
194,955,026

$
191,722,566

December 31,

December 31,

September 30,

September 30,


2021

2021 - %

2021

2021 - %

Income tax benefit at statutory rate

$
(7,657,427)

21.00
%
$
(9,247,200)

21.00
%
State income taxes

—

—
%

800

—
%
Permanent Differences

430,252

(0.35)
%

158,166

(0.36)
%
Valuation Allowance

7,229,304

(20.65)
%

9,091,163

(20.65)
%
Other

(2,129)

—
%

(2,129)

—
%
Total (benefit) provision for income taxes

$
—

—
%
$
800

—
%

We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities.

~~F-29~~

~~Table of Contents~~

~~NOTE 17 – INCOME TAXES – Continued~~

~~Significant components of the Company’s net deferred tax assets as of December 31, 2021 and September 30, 2021 and 2020 are as follows:~~

December 31,

September 30,

September 30,


2021

2021

2020
Deferred tax assets:




Net Operating loss carryforwards

66,000,217

38,676,405

31,413,378
Charitable Contributions

—

894

1,176
Accrued Expenses

226,308

315,555

104,164
Impairment Other

—

—

83,845
Other Assets

—

364,419

261,842
163(j) Limitation

19,203,511

14,491,332

4,178,291

Total gross deferred tax assets

85,430,036

53,848,604

36,042,696

Less valuation allowance

(85,430,036)

(53,416,875)

(35,747,087)

Total net deferred tax assets

332,578

431,729

295,609

Deferred tax liabilities:





Intangibles

(223,676)

(146,639)

(157,641)
Fixed Assets

(108,902)

(284,922)

(137,632)
Other

—

(168)

(336)

Total deferred tax liabilities

(332,578)

(431,729)

(295,609)

Net deferred tax assets

$
—

$
—

$
—

For the quarter ended December 31, 2021 and years ended September 30, 2021 and 2020, we recorded a full valuation allowance against the deferred tax assets because we do not believe that the deferred tax assets recorded in 2021 and 2020 are more likely than not to be realizable.

NOTE 1817 – 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.

Series D Preferred Stock Commitment

On June 7, 2022, we entered into a securities purchase agreement, which was amended on June 23, 2022 (the “Securities Purchase Agreement”), with certain investors, pursuant to which upon the terms and subject to the conditions contained therein and solely upon the request of the Company, the investors will be required to purchase an aggregate of $275 million (the “Commitment Amount”) of the Company’s yet to be created Series D Preferred Stock, par value $0.001 per share (the “Series D Preferred Stock”), and five-year warrants exercisable for shares of Common Stock (the “Warrants”). The number of Warrants that may be issued will equal 110% of the shares of Series D Preferred Stock purchased by the investors. The purchase price per share of Series D Preferred Stock will be the lower of (i) $1.27, the closing price of the Company’s stock on the date the Securities Purchase Agreement was executed, or (ii) the closing price of the Common Stock on the trading day immediately preceding the Purchase Date (as defined below), subject to a floor price of $0.10 per share.

Series E Preferred Stock Purchase Option

On June 17, 2022, we entered into a Series E Preferred Stock Purchase Option with Drawbridge to purchase up to $25 million worth of MAI shares. The purchase price per share of Series E Preferred Stock will be the lower of (x) the closing market price of the Company’s common stock on the effective date of the Option Agreement for the Series E Preferred Stock and (y) the closing market price of the Company’s common stock on the date shares of Series E Preferred Stock are issued by the Company in accordance with the terms of the Option Agreement. Shares of Series E Preferred Stock will be convertible into shares of the Company’s common stock on a 1-to-1 basis, subject to adjustment for stock splits and other

~~F-30~~26

Table of Contents

~~NOTE 18 – CONTINGENCIES AND CLAIMS – Continued~~

events. Shares of Series E Preferred ~~Management Partners, Inc. – Consulting Agreement~~

~~On September 23, 2021, MAI entered into~~Stock may be purchased in one or more transactions with a ~~consulting arrangement with Preferred Management Partners, Inc.~~minimum of $5,000,000 per purchase, until December 31, 2024, at which point the Series E Purchase Option shall expire. The Company ~~hereby engages Preferred Management, Inc.~~will be obligated to ~~resume negotiations between MAI and Qiantu Motor Cars to enable~~file a registration statement for 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 sharesresale of the Company’s common stock ~~registered on Form S-8~~issuable upon conversion of shares of Series E Preferred Stock and shall use reasonable best efforts to obtain and maintain the effectiveness of such registration ~~statement. If~~statement during the ~~consultant is successful,~~term of the ~~Company~~Option Agreement.

In connection with the exercise of the Series E Purchase Option, Drawbridge will ~~pay the consultant an additional 750,000 unrestricted~~receive warrants to purchase 3 shares of common stock registered on Form S-8 registration statement. As of this date, the Form S-8 registration statement has been filed but not declared effective until January 11, 2022. The Company has recognized an obligation to issue these shares and a related deferred charge for these consulting services on the condensed consolidated balance sheet.

~~Equity Financing Transactions~~

~~$30M common stock purchase~~

~~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, or $2.5 million per month, in Common Stock ~~over a twelve-month period. At the effective time~~Warrants”) for each share of ~~the Merger, the obligations under the Equity Line of Credit were assumed by the Company.~~

Series E Preferred Stock purchased. The ~~number of shares of~~ Common Stock ~~issued by~~Warrants will have terms and conditions similar to those warrants included in the Company at each draw down date is calculated by multiplying 125% by the amount of each draw down (up to $2,500,000) and then dividing by the closing sale price of the Common Stock on the principal securities exchange or trading market on which the Common Stock is listed or trading on the trading day immediately prior to the draw down. The number of Common Shares issued is then subject to adjustment and will be issued at a purchase ~~price per share equal to 95% of the dollar volume-weighted average price per share of Common Stock during the 10 trading days following the draw down date.~~

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 Company shall not issue any Common Stock under the Equity Line of Credit if that would result in Esousa’s beneficial ownership equaling more than 9.9% of the Company’s ~~outstanding~~Series D Preferred Stock. The Common Stock Warrants will have a term of five years from the date of grant and an exercise price equal to the applicable purchase price for the shares of Series E Preferred Stock. The Common Stock Warrants will also permit cashless exercise to be calculated as a function of the warrant’s Black-Scholes value plus an additional $1.25 per warrant exercised.

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 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.

In May 2022, we transferred $5.6 million cash to a surety bond to cover this liability while our appeal is in process.

Federal and State Tax Liabilities

We have recorded a ~~$4.2 million~~ liability ~~at December 31, 2021~~ 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.

~~F-31~~

~~Table~~ As of ~~Contents~~June 30, 2022, we had an accrued liability of $0.3 million of accrued payroll taxes related to EDD liabilities. This was subsequently paid off in full during July 2022.

~~NOTE 18 – CONTINGENCIES AND CLAIMS – Continued~~

~~The IRS has filed a lien on substantially all of our assets.~~ On April ~~28, 2021, MTI~~14, 2022, the Company entered into an ~~installment agreement~~instalment with the ~~EDD~~IRS to pay ~~$10,000~~$45,000 per month related to unpaid ~~state~~federal payroll ~~tax~~ liabilities ~~of $370,067~~ plus accrued ~~interest. Monthly payments~~interest and penalties. As of ~~$10,000 are being made and will continue until paid in full.~~June 30, 2022 we had an accrued liability of $2.6 million of accrued payroll taxes related to IRS liabilities.

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~~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

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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. ~~Unfortunately, we have~~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 ~~December 31, 2021.~~June 30, 2022.

~~Our management has notified~~On May 12, 2022, the Company received official notification that the 2019 contractual arrangement will resume under the original contractual terms. They acknowledge that the COVID-19 pandemic had delayed the original plan, and Linghang Boao Group ofLTD looks forward to resuming 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.~~battery partnership with Mullen Automotive.

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 ~~4, 2021, MTI entered into~~7, 2022, GEM filed a ~~$350,000,000 equity line financing agreement~~letter brief with ~~GEM Global Yield LLC (“~~~~Purchaser~~~~”) and GEM Yield Bahamas Limited (“~~~~GEM~~~~”). MAI plans~~the arbitrator requesting leave to file a dispositive motion addressing a threshold legal issue ~~and sell common shares to GEM up~~regarding a defined term within a contract executed by the parties. Mullen filed a response to the ~~number of common shares having an aggregate value of $350,000,000. The Purchaser will buy MAI shares based~~letter brief on January 12, 2022.

On January 21, 2022, the ~~operational needs and/or drawdowns of the Company. If the aggregate limit has been reached, the Purchaser will increase the aggregate limit in an amount up~~arbitrator issued a procedural order granting GEM’s request to $150,000,000. The commitment fee, equal to 2% of the Aggregate Limit, will be charged for each draw-down. The fee may be paid in cash or freely tradeable common shares of the Company. The commitment begins when we effect the public listing of MAI common stock for tradingfile a dispositive motion. GEM filed its dispositive motion is on ~~a U.S. national securities exchange. The agreement matures in 36 months after the public listing of MAI common shares.~~

~~Pursuant~~February 14, 2022. Mullen’s filed its opposition to the ~~GEM Agreement,~~dispositive motion on March 3, 2022. On April 4, 2022, the ~~commitment began~~court denied GEM’s dispositive motion. The parties exchanged discovery requests on May 10, 2022. Responses were served on June 14, 2022. The follow up hearing with the ~~“Public Listing Date”, defined~~arbitrator set for June 22, 2022 was adjourned. The parties recently served amended responses along with supplemental document productions on August 2, 2022 as required by the ~~date that we effected (i)~~arbitrator at the July 27, 2022 hearing related to ongoing discovery issues. The parties expect a ~~“Reverse Merger Transaction” (defined in~~ruling from the GEM Agreement as a reverse merger of a similar transaction between MAI and a special purpose acquisition company whose securities are publicly traded) or (ii) the direct listing of the Company’s common stock on a public market. Further to the GEM Agreement, we are obligated to issue warrants providing GEM the right to purchase up to 6.6% of our common shares outstanding on the Public Listing Date. As the Company is not effecting a Reverse Merger Transaction (that is, Net Element is not a special purpose acquisition company) nor is the Company effecting a direct listing of its common shares, the Company does not believe it is obligated under the GEM Agreement to pay fees nor issue warrants to GEM. In addition, the Company has agreed with a lender of its convertible promissory notes that the Company would not initiate utilization of the GEM Agreement.

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~~NOTE 18 – CONTINGENCIES AND CLAIMS – Continued~~

As the Company did not effect a Reverse Merger Transaction as defined in the GEM agreement (that is, Net Element was not a special purpose acquisition company) nor did the Company effect a direct listing of its common shares, the Company does not believe it is obligated to pay fees nor issue warrants to GEM under the GEM Agreement. In addition, the Company has agreed with a lender of its convertible promissory notes that the Company would not initiate utilization of the GEM Agreement. Based upon information presently known to management, the Company believes that the potential liability will notarbitrator regarding same shortly. All party depositions have ~~a material adverse effect on its financial condition, cash flows or results of operations. Therefore, no liability has~~ been ~~reflected on the condensed consolidated financial statements.~~scheduled.

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,~~June 30, 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 30, 2022.

TOA Trading LLC Litigation

This claim arises out of an alleged breach of contract related to an unpaid finder’s fee. On April 11, 2022, Plaintiffs TOA Trading LLC and Munshibari LLC filed a complaint against Mullen Automotive, Inc. and Mullen Technologies, Inc. in the United States District Court for the Southern District of Florida. On May 18, 2022, the Company filed a Motion to Dismiss or in the Alternative, Transfer Venue. Plaintiffs filed their opposition on June 3, 2022. The Company filed its reply on June 8, 2022. The court has taken the motions under submission. The Company expects a ruling in two-to-three months.

Based upon information presently known to management, the Company believes that the potential liability from this claim, 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 condensed consolidated financial statements.

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Net Element Stockholder Litigation

On May 28, 2021, a Net Element ~~shareholder~~stockholder 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~~stockholder 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 condensed consolidated financial statements.

Mullen Stockholder Litigation

Margaret Schaub v. Mullen Automotive, Inc.

On May 5, 2022, Plaintiff Margaret Schaub filed a complaint against Mullen Automotive, Inc. f/k/a Net Element, Inc, David Michery, and Oleg Firer in the United States District Court Central District of California on (Case No. 2:22-cv-03026). The complaint alleges violation of section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and violation of section 20(a) of the Exchange Act arising out of claims made in the Hindenburg article. On June 16, 2022, the Company’s insurance company (AXIS) accepted coverage for this lawsuit. The Company engaged King & Spaulding as defense counsel.

On July 5, 2022, movants Duy Nguyen, Mejgan Mirbaz, and David Reed filed motions to consolidate this matter and the Gru matter (see below) into once case and for appointment of lead plaintiff/lead counsel. Subsequently, Plaintiff Nguyen withdrew his motion and Plaintiff Reed filed notice that he did not oppose Plaintiff Mirbaz’ motion. On August 4, 2022, the court granted Plaintiff Mirbaz’ unopposed motion to consolidate the case and for appointment as lead plaintiff/counsel. The court further vacated the August 5, 2022, hearing on the motions to consolidate.

The Company was served with the complaint on August 1, 2022. Its response is due filed on or before August 22, 2022.

David Gru v. Mullen Automotive, Inc.

On May 12, 2022, Plaintiff David Gru filed a complaint against Mullen Automotive, Inc. f/k/a Net Element, Inc, David Michery, and Oleg Firer in the United States District Court Central District of California (Case No. 8:22-cv-976). The complaint alleges violation of section 10(b) of the Exchange Act and Rule 10b-5 against all defendants and violation of section 20(a) of the Exchange Act arising out of claims made in the Hindenburg article. On June 16, 2022, the Company’s insurance company (AXIS) accepted coverage for this lawsuit. The Company has not been served with the complaint. The Company engaged King & Spaulding as defense counsel. On August 4, 2022, the court consolidated this action into the Schaub action (see above). As a result, the court ordered this matter to administratively closed.

Ram Hari Khadka v. Mullen Automotive, Inc.

This claim was filed on June 23, 2022 in the Court of the Chancery of the State of Delaware (Case No. Case No. 2022-0542) by Plaintiff Ram Hari Khadka against Mullen Automotive, Inc., David Michery, Jerry Alban, Kent Puckett, Mary Winter, Mark Betor, William Miltner, and Jonathan New . The matter arises out of an alleged breach of fiduciary duty related to a grant of performance equity awards to the Company’s Chief Executive Officer pursuant to a performance stock award agreement, which was recommended for approval by the Company’s Compensation Committee on April 29, 2022 and approved by its Board of Directors on May 5, 2022. The Company engaged McDermott Will & Emery LLP as defense counsel. The Company finalized and issued a supplemental disclosure to its June 10, 2022 proxy statement to its

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stockholders in advance of its July 26, 2022, annual meeting of stockholders. The supplemental disclosure provides additional information to stockholders regarding the performance stock award agreement.

On July 29, 2022, Plaintiff filed a notice and proposed order voluntarily dismissing the action and moot and retaining jurisdiction to determine Plaintiff's counsel's application for an award of attorney's fees and reimbursement of expenses. The order was entered by the court on August 5, 2022.

Jeff Witt v. Mullen Automotive, Inc.

On August 1, 2022, Plaintiffs Jeff Witt and Joseph Birbigalia, derivatively on behalf of nominal defendant Mullen Automotive, Inc. f/k/a Net Element, Inc. filed a derivative complaint on August 1, 2022 in the United States District Court Central District of California (Case No. Case No. 2:22-cv-05336) against David Michery, Ignacio Novoa, Mary Winter, Kent Puckett, Mark Betor, William Miltner, Jonathan New, Mullen Automotive, Inc. f/k/a Net Element, Inc.. The matter arises out of an alleged breach of fiduciary duty, unjust enrichment, abuse of control, waste of corporate assets, and violation of Section 14 of the Exchange Act related to claims made in the Hindenburg article. The lawsuit further alleges that all defendants caused the Company to issue the false and misleading statements that were outlined in the Hindenburg piece. The Company has engaged King & Spaulding as defense counsel. Once the Company has been served, it anticipates filing a motion to stay this matter pending the outcome of the Schaub matter.

On August 3, 2022, the Company reported this matter to its insurance carrier. The Company is awaiting a coverage determine from its carrier.

NOTE 1918 – RELATED PARTY TRANSACTIONS

At ~~December 31, 2021~~June 30, 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)	December 31, 2021					September 30, 2021					June 30, 2022					September 30, 2021
Description	Loan Principal		# of Shares	FV of Shares		Loan Principal		# of Shares	FV of Shares		Loan Principal		# of Shares	FV of Shares		Loan Principal		# of Shares	FV of Shares
Various Notes	$	13,831,554	—	$	—	$	23,831,554	—	$	—	$	—	—	$	—	$	23,831,554	—	$	—
Common Shares		—	8,130,384		42,524,523		—	8,130,384		66,994,364		—	13,931,103		14,209,725		—	8,130,384		66,994,364
Preferred Shares - Series A		—	2,335		3,012		—	2,335		3,012		—	—		—		—	2,335		3,012
Preferred Shares - Series B		—	5,567,319		49,215,100		—	5,567,319		49,215,100		—	—		—		—	5,567,319		49,215,100
Total Related Party Transactions	$	13,831,554	13,700,038	$	91,742,635	$	23,831,554	13,700,038	$	116,212,476	$	—	13,931,103	$	14,209,725	$	23,831,554	13,700,038	$	116,212,476

* Shares are ~~MTI~~MAI common and preferred shares.

~~F-33~~

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~~NOTE 19 – RELATED PARTY TRANSACTIONS – Continued~~

~~The default interest rate on the Drawbridge loans is 28% per annum, and accrued interest is $11,536,371 at December 31, 2021.~~

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 ~~was~~were 0 and $479,914 at June 30, 2022 and September 30, 2021. During the three and nine months ended ~~December 31, 2021,~~June 30, 2022, the Company repaid the outstanding loan ~~balance~~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 nine months ended ~~December 31, 2021,~~June 30, 2022, Mr. Miltner received ~~$231,483~~$178,640 and $804,120, respectively, for legal services rendered to us. Mr. Miltner has been providing legal services to the Company since 2020.

~~Consulting Agreement~~30

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Mary Winters

On October 26, 2021, MAI entered into a1-year consulting agreement with Mary Winters, Corporate Secretary and Director, to compensate for Corporate Secretary Services and director responsibilities for the period offrom October 1, 2021 ~~for one fiscal year ending~~to September 30, 2022, in the amount of $60,000 annually or $5,000 per month. As of June 30, 2022, Ms. Winter has received $30,000 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. On March 3, 2022 this loan was repaid in full.

~~Equity Warrants (EXCHANGE AGREEMENT and EQUITY WARRANTS)~~Ignacio Novoa

~~During 2020 and 2021, as part~~On June 9, 2022, the board of directors of the ~~merger~~Company appointed Ignacio Novoa as a director effective as of the Effective Date. The Company and Mr. Novoa entered into a 1-year Consulting Agreement, dated January 12, 2022, whereby Mr. Novoa provides electric vehicle market research, analysis of market trends in the electric vehicle industry and other research and services. Mr. Novoa was issued an aggregate of 255,500 shares of Common Stock pursuant to the terms of the Consulting Agreement. Other than as described above, Mr. Novoa does not have a direct or indirect material interest in any “related party” transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K. There are no family relationships between Mr. Novoa and any director or executive officer of the Company.

Jerry Alban

On June 7, 2022, Jerry Alban notified the Company that he will retiring effective June 30, 2022 (“Effective Date”). Accordingly, he will no longer be Chief Operating Officer or a member of the board of directors of the Company as of the Effective Date. Mr. Alban’s decision to retire was not the result of any dispute or disagreement with ~~Net Element, we~~the Company on any matter relating to the Company’s operation, policies (including accounting or financial policies) or practices.

On June 27, 2022, the Company entered into a 1-year consulting agreement with Mr. Alban, who is expected to consult on organizational, financial, and operational matters concerning MAI. The agreement is $60,000 per annum with $5,000 monthly installments. The first payment begins on August 1, 2022 with successive payments due on the first day each month thereafter. On June 27, 2022, the Company and Mr. Alban also entered into an ~~Exchange~~Employment Separation Agreement pursuant to which the Company agreed to pay Mr. Alban a single lump sum of $53,846.15 and ~~subsequent amendments with certain holders of convertible debt as an incentive~~issue to ~~convert their convertible debt into~~Mr. Alban 250,000 shares of ~~our series C preferred~~common stock. ~~In connection with this agreement, the Company issued warrants to these investors, which represents a share-based equity incentive (“~~~~Series Preferred C Investors~~”). Series C Preferred Investors also purchased Series Preferred C Stock with detached warrants. The warrants have a fixed and determinable price of $8.84 per common share. The fair value of the MAI warrants is $133,269,241 as of December 31, 2021.

NOTE 2019 – SUBSEQUENT EVENTS

Company management has evaluated subsequent events through ~~February 14,~~August 12, 2022, which is the date these condensed consolidated 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:

~~Short-Term Financing~~Registered Filing

Registration Statement Form S-3

On ~~January 14,~~August 5, 2022, ~~MAI executed a Letter of Intent (“LOI”) with Mark Betor, MAI Director, for a $1,000,000 loan. The loan terms are as follows:~~

●

~~$250,000 loan advance upon the execution of LOI~~

●

~~$750,000 remaining balance is paid to Mullen Automotive upon execution of transaction documents~~

Loan will be evidenced by a Promissory Note with a maturity date for full repayment of loan no later than 90 days from January 11, 2022. Total agreed repayment amount is $1,150,000. Collateral is a first lien position 1 Greentech Drive, Tunica, MS. MAI Board of Directors approved transaction on January 18, 2022. Mr. Betor abstained from voting.

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~~NOTE 20 – SUBSEQUENT EVENTS – Continued~~

~~S-3~~the Company filed Registration Statement

Form S-3. The ~~SEC registration statement that became effective February 3, 2022,~~Company registered the resale of Conversion Shares and the Warrant Shares ~~were included~~ 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”).~~

Stockholders. The ~~securities that were registered for resale, in aggregate totaled 228,568,886 shares~~Offered Shares consisted solely of ~~common stock.~~

●

~~11,392,058 shares of our Common Stock issued to David Michery, our Chief Executive Officer and other stockholders,~~

●

~~148,139,757 shares of our Common Stock issuable upon exercise of the Warrants,~~

●

~~2,454,240 shares of our Common Stock issuable upon conversion of the Note Shares,~~

●

~~5,567,319 shares of our Common Stock issuable upon conversion of our Series B Preferred Stock,~~

●

~~30,087,677 shares of our Common Stock issuable upon conversion of our Series C Preferred Stock and, up to 30,927,835 shares of Common Stock issuable pursuant to the Equity Line of Credit.~~

~~NaN proceeds are expected from the sale or disposition of the shares of common stock. However, proceeds may be received on the from the exercise of warrants and note shares.~~

~~Warrant Exercises~~

~~The table below reflects the number of warrant exercises and common shares granted since the warrant shares were registered under the SEC registration statement became effective on February 3, 2022.~~

# of Warrants

# of Common Stock
Date

Registered Investor Name

Exercised

Requested
2/1/2022

Acuitas Capital LLC

259,033

709,217
2/1/2022

Esousa Holdings LLC

129,516

354,608
2/4/2022

JADR Consulting Limited PTY

50,000

126,558
2/4/2022

TDR Capital

50,000

126,558
2/4/2022

Friedlander, Michael

16,000

40,905
2/9/2022

Mogul, Jess

100,000

347,747
2/9/2022

Fallon, Jim

100,000

347,747
2/10/2022

TDR Capital

400,000

1,449,766
2/10/2022

JADR Consulting Limited PTY

400,000

1,449,766
2/10/2022

Acuitas Capital LLC

137,235

500,000
2/11/2022

Mogul, Jess

62,674

505,109
2/11/2022

Fallon, Jim

31,610

254,781

Total

1,736,068

6,212,762

~~$30~~ ~~Million Esousa Equity Line of Credit – Drawdown~~

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, or $2.5 million per month, in Common Stock over a twelve-month period. At the effective time of the Merger, the obligations under the Equity Line of Credit were assumed by the Company.

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~~NOTE 20 – SUBSEQUENT EVENTS – Continued~~

On February 4, 2022, MAI received $1,125,000 from the equity line of credit. As part of the transaction, Esousa Holdings, LLC received 1,144,688 common shares. The formula is based on $2.5 million divide by the daily closing price of the MAI, which was $2.73) multiplied by 125%. MAI expects to drawdown the remaining balance of the $2.5 million in mid to late February 2022.

~~S-8 Registration Statement~~

~~This Registration Statement on Form S-8 (the “~~~~Registration Statement~~~~”) registers an additional 5,979,500 shares (the “~~~~Shares~~~~”) of common stock, par value $0.001 per share (“~~~~Common Stock~~~~”), of Mullen Automotive Inc. (the “~~~~Company~~~~”), issuable pursuant to the Company’s 2013 Equity Incentive Plan, as amended (the “~~~~2013 Plan~~~~”).~~

~~Preferred Management Partners, Inc. – Consulting Agreement~~

~~In September 2021, Preferred Management Partners entered into a consulting agreement to provide services to MAI. The compensation arrangement is as follows:~~

●

~~Consultant will receive 750,000 unrestricted publicly traded shares of the Company’s common stock registered on Form S-8 Registration statement.~~

For FYE 2021, the common shares were accounted for within Liability to Issue Stock since the S-8 Registration Statement had not been filed. On January 11, 2022, the Company filed with the SEC and Preferred Management Partners received their 750,000 common shares. The share issuance will now be accounted for within equity.

~~Sales of Unregistered Securities~~

~~On January 18, 2022, MAI approved the issuance of an aggregate of 1,908,000 shares of its common stock to certain employees of the Company, including the executive officers listed below:~~


~~Name~~		~~Shares~~
~~David Michery~~		~~1,000,000~~
~~Kerri Sadler~~		~~300,000~~
~~Jerry Alban~~		~~300,000~~
~~Calin Popa~~		~~50,000~~

~~Such securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “~~~~Securities Act~~~~”). The issuance of such securities have not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration requirements.~~

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~~NOTE 20 – SUBSEQUENT EVENTS – Continued~~4,533,353 shares of our Common Stock, 11,139,665 shares of our Common Stock issuable upon conversion of our preferred stock, and up to 508,394,030 shares of our Common Stock issuable upon exercise of outstanding warrants to purchase shares of our Common Stock”.

Annual Meeting of Stockholders

Authorized Increase in Common and Preferred Stock

On July 26, 2022, at the 2022 Annual Meeting, the Company’s stockholders approved an amendment (the “Amendment”) to Section A of Article III of the Company’s Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the Company’s number of shares of authorized common stock, par value $0.01 per share, from 500,000,000 shares to 1,750,000,000 shares and increase the number of shares of Preferred Stock that we are authorized to issue from 58,000,000 shares of Preferred Stock to 500,000,000 shares of Preferred Stock, with a corresponding increase in our total authorized capital stock, which includes Common Stock and Preferred Stock, from 558,000,000 shares to 2,250,000,000 shares.

On July 26, 2022, the Company filed the Certificate of Amendment to ~~Convertible Preferred Security and Warrant Agreements~~the Company’s Certificate of Incorporation with the Delaware Secretary of State implementing the Amendment.

Performance Stock Award Agreement

On ~~February 10,~~May 5, 2022, ~~MAI~~the Company’s Board of Directors (1) determined that the grant of performance equity awards to the Chief Executive Officer (“CEO Performance Award”) pursuant to the Performance Stock Award Agreement (the “PSA Agreement”) was advisable and ~~Esousa Holdings, LLC agreed~~in the best interests of the Company and its stockholders and (2) approved entering into the PSA Agreement and the grant of the CEO Performance Award.

On July 26, 2022, at the 2022 Annual Meeting, the Company’s stockholders approved, for purposes of complying with Nasdaq Listing Rule 5635(c), of the issuance of shares of common stock to ~~amend~~the Company’s Chief Executive Officer, David Michery, pursuant to ~~provisions within~~ the ~~Securities Purchase Agreements:~~PSA Agreement. The CEO Performance Award represents the right of Mr. Michery to receive shares of common stock of the Company based on the achievement of milestones, subject to the terms and conditions set forth in the PSA Agreement.

2022 Equity Incentive Plan

On July 26, 2022, at the 2022 Annual Meeting of Stockholders (“2022 Annual Meeting”) of the Company, the Company’s stockholders approved the 2022 Equity Incentive Plan (the “2022 Plan”). Additional details about the 2022 Plan are set forth in the Company’s Definitive Proxy Statement on Schedule 14A, as filed with the SEC on June 24, 2022 and the Supplement to the Proxy Statement filed with the SEC on July 13, 2022.

The 2022 Plan provides for grants of stock options, stock appreciation rights , stock awards and restricted stock units, all of which are sometimes referred to individually, to employees, consultants, non-employee directors of the Company and its subsidiaries. Stock options may be either incentive stock options, as defined in Section 422 of the Internal Revenue Code, or non-qualified stock options. The 2022 Plan authorizes the grant of awards relating to up to 175,000,000 shares of the Company’s common stock.

Class 1 Directors

On July 26, 2022, the following individuals were elected as Class 1 Directors:

●1.

~~The Holders irrevocably and forever waive their rights under section 2 (c) and 2 (d) of the Warrant, and under section 4 (c) of the Series C Convertible Preferred.~~David Michery

●2.

~~For purposes of section 1 (b), Exercise Price, in the Warrant, the exercise price shall be modified from 0.6877 to $8.834.~~Ignacio Novoa

●3.

Under Section 16 (b) of the Warrant, the definition of Black Scholes Value shall be modified so that the Black Scholes Value shall be increased by $3.00 per Warrant. For example, if the calculations under Section 16 resulted in a value of $7.72, as a result of this Amendment the Black Scholes Value would be increased to $10.72.Mary Winter

●

Under 4(c) of the Convertible Note, the Company will not be subjected to a new issuance price due to subsequent financing less than a price equal to the Conversion Price in effect immediately prior to such issue or sale or deemed issuance or sale.

The nominees have been elected to serve as Class I director on the Board of Directors for a three-year term ending as of the annual meeting in 2025 or until their respective successors are elected and qualify.

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Ratification of Independent Auditor

MAI stockholders approved the appointment of Daszkal Bolton LLP as the independent registered public accounting firm of the Company for the fiscal year ending September 30, 2022.

Binding Agreement

Del Pack Logistics, LLC

On July 11, 2022, the Company signed a binding agreement (the “Agreement”) with DelPack Logistics, LLC (“DPL”), an Amazon Delivery Service Partner, for DPL to purchase up to 600 Mullen Class 2 EV cargo vans over the next 18 months.

Conditions to the Agreement between Mullen and DPL include the following:

DPL will place a purchase order for up to 600 Mullen Class 2 Electric Cargo Vans over the next 18 months

The 600 Class 2 EV Cargo Vans will be fully homologated for the United States

The first 300 fully homologated for the United States Mullen Class 2 EV Cargo Vans can be delivered to DPL

by Nov. 30, 2022, at the request of DPL

All Mullen Class 2 Electric Cargo Vans will be equipped with all airbags as required by United States standards and a cabin comfort package, including adjustable seats, cup holders, an infotainment system, and comfortable passenger seat. In addition, the Mullen Class 2 Electric Cargo Vans will carry a minimum of an 80 kilowatt per hour battery pack.

Business Operations and Plans

Irvine Automotive Development Center

On June 29, 2022, the Company signed a lease with the Lakeview Business Center, LLC. The leased property is located at Suite 100, 100 Technology Drive, Irvine, CA 92618. The approximate rentable space is 31,603 rentable square feet of office space. The new lease will expire in July 2025, with an option to renew for a further 36 months. Under this lease arrangement, the present value of future lease payments is $654,636.

Beginning August 1, 2022, the Company plans to move into the newly leased space. Various departments will be relocated to the new office space, Engineering Design and Development, Styling, Program Management, Marketing, and Finance teams.

Detroit EV Technology Team

On August 3, 2022 the Company announced plans to open a new location in Pontiac, Michigan and the hiring of approximately 11 new hires. The planned “Detroit Tech Center” will be home to a new division of engineers and technology developers focused on Mullen’s Class 1 – 5 commercial vehicle development. At the proposed new location, the Company plans to hire a total of 50 employees by the end of 2022.

Tax Liabilities

Repayment of State Tax Liabilities

On July 19, 2022, the Company repaid its state tax liability of $334,358.11 with the Employment Development Department of California.

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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~~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 ~~December~~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 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.

Components of Results of Operations

We are an early-stage company, and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.

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.”

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Research and Development Expense

To date, our research 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 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 tax 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 ~~December 31, 2021~~June 30, 2022 to the Three Months Ended ~~December 31, 2020~~June 30, 2021

The following table sets forth our historical operating results for the periods indicated:


	Three Months Ended								Three Months Ended
	December 31,								June 30,
	2021		2020		$ Change		% Change		2022		2021		$ Change		% Change

	(dollar amounts in thousands, except percentages)								(dollar amounts, except percentages)
Operating costs and expenses:
General and administrative	$	12,901,084	$	2,952,678	$	9,948,406	336.93	%	$	10,896,800	$	4,926,154	$	5,970,646	121	%
Research & development		1,157,323		518,023		639,300	123.41	%		7,324,365		1,479,399		5,844,966	395	%
Total operating costs and expenses		14,058,407		3,470,701		10,587,706	305.06	%		18,221,165		6,405,553		11,815,612	184	%
Loss from operations	$	(14,058,407)		3,470,701		(10,587,706)	305.06	%	$	(18,221,165)		(6,405,553)		(11,815,612)	184	%

Other income (expense):
Interest expense		22,438,945		2,406,330		16,179,070	832.50	%		(5,346,766)		(8,339,195)		2,992,429	(36)	%
Loss on debt settlement		(41,096)		—		(41,096)	100.00	%
Gain on extinguishment of indebtedness, net		74,509		880,581		(806,072)	(91.54)	%
Other financing costs										—		(506,654)		506,654	(100)	%
Incentive fee to creditor for transfer of note payable										(23,085,886)		—		(23,085,886)	100	%
Loss on disposal of fixed assets										(50,574)		—		(50,574)	100	%
Penalty for insufficient authorized shares										(3,495,000)		—		(3,495,000)	100	%
Revaluation of Liability to Issue Shares										3,045,000		—		3,045,000	100	%
Other income (expense), net										(12,317,169)		—		(12,317,169)	100	%
Total other income (expense)		(22,405,532)		(1,525,749)		(20,879,783)	1368.49	%		(41,250,395)		(8,845,849)		(32,404,546)	366	%
Net loss	$	(36,463,938)	$	(4,996,450)	$	31,467,489	482.63	%	$	(59,471,560)	$	(15,251,402)	$	(44,220,158)	290	%

General and Administrative

General and administrative expenses increased by ~~$9.9~~$5.9 million or ~~336.93% from $2.9~~121% to $10.8 million in the three months ended ~~December 31, 2020 to $12.9~~June 30, 2022 from $4.9 million in the three months ended ~~December 31,~~June 30, 2021, primarily due to increases in professional services, marketing, and ~~payroll~~compensation related expenses associated with the growth of personnel and resources.

Research and Development

Research and development expenses increased by ~~$.63~~$5.8 million or ~~123.41% from $.51~~395% to $7.3 million ~~through~~in the three months ended ~~December 31, 2020 to $1.1~~June 30, 2022 from $1.5 million ~~through~~in the three months ended ~~December 31,~~June 30, 2021. During the quarter ended December 31, 2021, the development of the Mullen FIVE show cars was completed in November 2021, and the Engineering Team is 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~~engineering, homologation, and ~~are primarily comprised of~~prototyping costs as well as 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.~~and Mullen One van programs.

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Interest Expense

Interest expense ~~increased~~decreased by ~~$20.0~~$3.0 million or ~~672.35% from $2.4~~(36)% to $5.3 million ~~through~~in the three months ended ~~December 31, 2020 to $22.4~~June 30, 2022 from $8.3 million ~~through~~in the three months ended ~~December 31,~~June 30, 2021, primarily due to the decrease in the convertible debt portfolio, as well as the paydown of debt principal during the current fiscal year.

Incentive fee to creditor for transfer of note payable

During June 2022, Incentive fee to creditor for transfer of note payable increased by $23.1 million due to the valuation of the Series E option, which had been issued in connection to the extinguishment of a promissory note with DBI-Drawbridge.

Penalty for insufficient authorized shares

Penalty for insufficient authorized shares increased $3.5 million, compared to the same period in 2021, due to additional charges the Company has committed to pay, in cash or stock, related to the insufficient number of shares authorized.

Revaluation of Liability to Issue Shares

Revaluation of Liability to Issue Shares increased $3.0 million, compared to the same period in 2021, due to a positive change in the liability to issue 10,500,000 shares related to the conversion of a convertible note.

Other income (expense), net

Other expense, net increased by $12.3 million, compared to the same period in 2021, due to the valuation of derivatives and the liability to issue shares in connection with other convertible instruments.

Net Loss

Net loss was $59.5 million for the three months ended June 30, 2022, an increase of $44.2 million or 290% from $15.3 million in the three months ended June 30, 2021, mainly for the reasons discussed above.

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Comparison of the Nine Months Ended June 30, 2022 to the Nine Months Ended June 30, 2021

The following table sets forth our historical operating results for the periods indicated:


	Nine Months Ended
	June 30,
	2022		2021		$ Change		% Change

	(dollar amounts, except percentages)
Operating costs and expenses:
General and administrative	$	53,067,316	$	12,555,572	$	40,511,744	323	%
Research & development		9,665,126		2,535,693		7,129,433	281	%
Total operating costs and expenses		62,732,442		15,091,265		47,641,177	316	%
Loss from operations		(62,732,442)		(15,091,265)		(47,641,177)	316	%

Other income (expense):
Interest expense		(29,906,225)		(13,784,976)		(16,121,249)	117	%
Other financing costs		—		(1,559,961)		1,559,961	(100)	%
Loss on debt settlement		(41,096)		—		(41,096)	100	%
Gain (loss) on extinguishment of indebtedness, net		74,509		890,581		(816,072)	(92)	%
Incentive fee to creditor for transfer of note payable		(23,085,886)		—		(23,085,886)	100	%
Loss on disposal of fixed assets		(50,574)		—		(50,574)	100	%
Penalty for insufficient authorized shares		(3,495,000)		—		(3,495,000)	100	%
Revaluation of Liability to Issue Shares		3,045,000		—		3,045,000	100	%
Other income (expense), net		(12,317,170)		—		(12,317,170)	100	%
Total other income (expense)		(65,776,442)		(14,454,356)		(51,322,086)	355	%
Net loss	$	(128,508,884)	$	(29,545,621)	$	(98,963,263)	335	%

General and Administrative

General and administrative expenses increased by $40.5 million or 323% from $12.6 million in the nine months ended June 30, 2021 to $53.1 million in the nine months ended June 30, 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 $7.1 million or 281% from $2.5 million through the nine months ended June 30, 2021 to $9.7 million through the nine months ended June 30, 2022. During the nine month period ended June 30, 2022, the Engineering Team has been working on battery development and various stages of program car development.

Research and development costs are expensed as incurred. Research and development expenses primarily consist of engineering, homologation, and prototyping costs as well as personnel-related costs for employees and consultants. These costs are expected to rise in the future with continuing development of the Mullen FIVE car and Mullen One van programs.

Interest Expense

Interest expense increased by $16.1 million or 117% from $13.8 million through the nine months ended June 30, 2021 to $29.9 million through the nine months ended June 30, 2022, primarily due to the significant increase in the convertible 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.

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Gain (loss) on extinguishment of debt

During November 2020, the U.S. Small Business Administration (“~~SBA~~”) approved the CARES Act loan forgiveness amount of ~~$875,426~~$0.9 million in principal and accrued interest on November 20, 2020.

Incentive fee to creditor for transfer of note payable

Penalty for insufficient authorized shares

Revaluation of Liability to Issue Shares

Other income (expense), net

Net Loss

Net loss was ~~$36.4~~$128.5 million for the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, an increase of ~~$31.4~~$98.9 million or ~~629.80%~~335% from ~~$4.9~~$29.6 million in the ~~three~~nine months ended ~~December 31, 2020,~~June 30, 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 ~~December 31, 2021,~~June 30, 2022, our cash and cash equivalents amounted to ~~$0.61~~$61.1 million primarily due to $43.9 million from the issuance of 4,974,214 Series C Preferred Stock and ~~our total~~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. We also received additional financing in the amount of $15.0 million in equity issuances.

Total debt ~~amounted to $19.1 million.~~of $8.9 million continues its downward trend. Debt has ~~red ced~~decreased significantly from September 30, 2021 due to principal paydowns, debt payoffs, and conversion of convertible debt to equity. ~~Tax liabilities slightly increased~~

On July 26, 2022, MAI stockholders approved a proposal to ~~$4.2~~issue $275 million ~~from $3.9 million, which is comprised of IRS and other tax jurisdictions related to payroll taxes and sales and use taxes.~~

~~During this quarter, the Company received $20 million from the equity purchase of~~in Series CD Preferred Stock ~~with~~and associated warrants ~~to an unaffiliated investor immediately prior to the Effective Time of the Merger. There~~in exchange for cash. The projected capital raise is ~~approximately $45 million in equity commitments to assist the Company throughout 2022; an agreement with ESOUSA~~expected to provide ~~us with a $30.0 million equity line of credit beginning in February~~sufficient liquidity and capital resources for 2023. On August 5, 2022, ~~and a $15 million note receivable with CEOcast, Inc. that will begin in 2022 after~~ the ~~registration of common shares with the SEC.~~

We received $7.4 million in net proceeds from the Net Element merger transaction. We also received an additional $7.62 million in convertible notes from TDR Capital and JADR Consulting Group Pty Limited.

~~As part of our agreement with NASDAQ, the Company must complete a qualified offering within six months after regulatory approval. In February 2022, The~~ Company filed a S-3 Registration Statement ~~that became effective, which are expected to result~~for selling stockholders. The Company will receive approximately $43 million in cash in exchange for Series C Preferred Stock and associated warrants for the ~~increase~~remainder of ~~common shares outstanding and enhance market capitalization.~~2022.

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We expect our capital expenditures and working capital requirements to increase substantially in the near term, as we seek 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 other 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 or scale back our operations, which could have an adverse impact on our business and financial prospects. See Note 1 to the ~~audited~~condensed consolidated financial statements included elsewhere in this Quarterly Report.

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Debt

To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness and 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 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~~stockholders 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 ~~December 31, 2021:~~June 30, 2022:


	Net Carrying Value									Net Carrying Value
	Unpaid Principal								Contractual	Unpaid Principal								Contractual
Type of Debt	Balance		Current		Long-Term		Interest Rate		Maturity	Balance		Current		Long-Term		Interest Rate		Maturity
Matured Notes	$	3,718,585	$	3,718,585	$	—	0.00% - 15.00	%	2016 - 2021	$	3,049,955	$	3,049,955	$	—	0.00% - 15.00	%	Past Due
Promissory Notes		14,531,554		14,531,554		—	28.00	%	2021 – 2022		5,000,000		—		5,000,000	9	%	2024
Demand Note											—		—		—	27	%	2020
Convertible Unsecured Notes											1,096,787		—		1,096,787	28	%	2024
Real Estate Note		274,983		36,724		238,259	5.00	%	2023		256,850		37,651		219,199	5	%	2023
Loan Advances		618,158		618,158		—	0.00% - 10.00	%	2019 – 2020		558,158		558,158		—	0.00% - 10.00	%	Past Due
Less: Debt Discount		—		—		—	NA		NA		(1,059,375)		—		(1,059,375)	NA		NA
Total Debt	$	19,143,280	$	18,905,021	$	238,259	NA		NA	$	8,902,375	$	3,645,764	$	5,256,611	NA		NA

The following is a summary of our debt as of September 30, 2021:


	Net Carrying Value										Net Carrying Value
	Unpaid Principal						Contractual		Contractual		Unpaid Principal						Contractual		Contractual
Type of Debt	Balance		Current		Long-Term		Interest Rate		Maturity		Balance		Current		Long-Term		Interest Rate		Maturity
Matured Notes	$	5,838,591	$	5,838,591	$	—	0.00% - 15.00	%	2016 - 2021		$	5,838,591	$	5,838,591	$	—	0.00% - 15.00	%	2016 - 2021
Promissory Notes		23,831,912		23,831,912		—	28.00	%	2021 – 2022			23,831,912		23,831,912		—	28.00	%	2021 – 2022
Demand Note		500,000		500,000		—	27.00	%	2020			500,000		500,000		—	27.00	%	2020
Convertible Unsecured Notes		15,932,500		15,932,500		—	15.00%-20.00	%	2021 - 2022	��		15,932,500		15,932,500		—	15.00%-20.00	%	2021 - 2022
Real Estate Note		283,881		36,269		247,612	5.00	%	2023			283,881		36,269		247,612	5.00	%	2023
Loan Advances		1,122,253		1,122,253		—	0.00% - 10.00	%	2019 – 2020			1,122,253		1,122,253		—	0.00% - 10.00	%	2019 – 2020
Less: Debt Discount		(8,060,555)		(8,060,555)		—	NA		NA			(8,060,555)		(8,060,555)		—	NA		NA
Total Debt	$	39,448,582	$	39,200,970	$	247,612	NA		NA		$	39,448,582	$	39,200,970	$	247,612	NA		NA

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Cash Flows

The following table provides a summary of Mullen’s cash flow data for the ~~three~~nine months ended ~~December 31, 2021~~June 30, 2022 and ~~2020:~~2021:


	Three Months Ended December 31,				Nine Months Ended June 30,
	2021		2020

	(dollar amounts in thousands)
Net cash used (provided) in operating activities	$	(14,712,802)	$	85,312
Net cash used in investing activities		(10,462,219)		(72,585)
Net cash provided by financing activities		25,194,308		178,192
Net cash provided by (used in):					2022		2021
Operating activities					$	(43,220,594)	$	(13,037,107)
Investing activities						(11,273,433)		(141,439)
Financing activities						115,563,116		13,809,405

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 ~~$14.7~~$43.2 million in the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, an increase from ~~$.85~~$13.0 million net cash ~~provided by~~used in activities in the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021.

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 build out the manufacturing facility.

Net cash used in investing activities was ~~$10.5~~$11.2 million in the ~~three~~nine months ended ~~December 31, 2021,~~June 30, 2022, an increase from ~~$.72~~$0.1 million used in investing activities in the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021.

Cash Flows provided by Financing Activities

Through ~~December 31, 2021,~~June 30, 2022, we have financed our operations primarily through the issuance of convertible notes equity securities, and ~~equity securities.~~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 ~~$25.2~~$115.6 million for the ~~three~~nine months ended ~~December 31, 2021~~June 30, 2022 primarily due to issuance of ~~notes payable,~~equity, as compared to ~~$.17~~$13.8 million net cash provided by financing activities for the ~~three~~nine months ended ~~December 31, 2020,~~June 30, 2021, which included (i) ~~$7.3~~$12.1 million net proceeds from issuance of notes payable, which was partially offset by $15.1 million of payments of notes payable; (ii) ~~$10.8~~$40.1 million in net proceeds from issuance of Common ~~Stock which was partially offset by $13.0 million of payments of notes payable;~~Stock; (iii) $15 Million in proceeds from a Note Receivable and ~~(iii) $5.2~~(iv) $63.9 million in proceeds to issue preferred C shares.

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Contractual Obligations and Commitments

The following tables summarizes our contractual obligations and other commitments for cash expenditures as of ~~December 31, 2021,~~June 30, 2022, and the years in which these obligations are due:

Operating Lease Commitments


	Scheduled		Scheduled
Years Ended September 30,	Payments
2022 (9 months)	$	908,149
Years Ended June 30,			Payments
2022 (6 months)			$	294,069
2023		1,157,693		1,157,693
2024		824,287		824,287
2025		436,155		436,156
2026		222,787		222,787
2027 and Thereafter		—		—
Total Future Minimum Lease Payments	$	3,549,071	$	2,934,992

We currently lease our headquarters space in the Los Angeles area under a single 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 December 31,																Years Ended June 30,
	2022 (9 months)		2023		2024		2025		2026		2027		Thereafter		Total		2022 (6 months)		2023		2024		2025		2026		2027		Thereafter		Total
Total Debt	$	18,905,021	$	238,259	$	—	$	—	$	—	$	—	$	—	$	19,143,280	$	3,645,764	$	219,199	$	5,037,412	$	—	$	—	$	—	$	—	$	8,902,375

Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements, as defined under SEC rules.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, our management is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Management considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements.

Our significant accounting policies are described in Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report. Because we are a pre-revenue company without commercial operations, management

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believes it does not currently have any critical accounting policies or estimates. Management believes that the accounting policies most likely to become critical in the near future are those described below.

Stock-Based Compensation

We recognize the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of 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

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forfeitures occur. Mullen determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the 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.

Recent Accounting Pronouncements

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). The 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable 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.

As 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 management, including our principal executive officer and principal financial officer, of

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the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. ~~Management has not been in a position to make its assessment regarding internal control over financial reporting due to the circumstances described in detail below. Accordingly,~~Based on our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective.

~~Table of Contents~~

~~Management’s Report on Internal Control over Financial Reporting~~

This Quarterly Report and our Annual Report on Form 10-K filed with the SEC for the year ended September 30, 2021 do not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm as we determined that the Company is currently similarly situated to a newly public company due to the relatively recent closing of the Merger, which was accounted for as a reverse merger transaction, in which Mullen Automotive-California is treated as the acquirer for financial accounting purposes. In making this determination, we have considered the timing and effects of the Merger, which closed on November 5, 2021, and after which, there was a complete change in the business, operations, accounting, board of directors and executive management of the Company and all of the business of the Company was that of Mullen Automotive-California. As a result, the internal controls and related material weaknesses previously reported related to the Company’s prior business and no longer exist with respect to the Company’s current business. Management was not in a position to conduct an assessment because of the impending reverse merger transaction which was at an advanced stage at year end. We plan to file our first assessment regarding internal control over financial reporting in our Annual Report on Form 10-K for the year ending September 30, 2022.

Changes in Internal Control over Financial Reporting

~~Other than what has been described above, there~~There were no changes in our internal control over financial reporting that occurred during the three months ended ~~December 31, 2021 or year ended September~~June 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Disclosure Controls and Internal Control over Financial Reporting

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, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to risks, including that the controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~There have been no material developments during~~Information with respect to this item may be found in Note 17 – Contingencies and Claim of the ~~fiscal quarter covered by~~“Notes to Unaudited Consolidated Financial Statements” included in Part I, Item 1 of this ~~Report for our legal proceedings that were disclosed in our Annual~~Quarterly Report on Form ~~10-K for the year ended September 30, 2021.~~10-Q, which is incorporated herein by reference.

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 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 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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~$15M Note Receivable Transaction~~

~~As previously disclosed in~~In connection the retirement by Jerry Alban from the Company as Chief Operating Officer and a director effective June 30, 2022 (as previously reported in a Current Report on Form ~~10-K for~~8-K filed with the ~~year ended September 30, 2021,~~SEC on ~~October 8, 2021,~~June 10, 2022) (“Effective Date”), on June 27, 2022, the Company ~~entered into a loan transaction with CEOcast as described below.~~

~~Securities Purchase Agreement~~

~~On October 8, 2021, MAI (through MTI)~~ and ~~CEOcast, Inc.~~Mr. Alban entered into an ~~agreement, whereby CEOCast, Inc. irrevocably committed~~Employment Separation Agreement pursuant to ~~purchase,~~which the Company agreed to pay Mr. Alban a single lump sum of $53,846.15 and ~~MAI irrevocably committed~~issue to ~~sell $15 million in warrants to acquire~~Mr. Alban 250,000 shares of common stock.

On June 29, 2022, the Company signed a lease with the Lakeview Business Center, LLC. The ~~aggregate purchase price~~leased property is located at Suite 100, 100 Technology Drive, Irvine, CA 92618. The approximate rentable space is 31,603 rentable square feet of office space. The new lease will expire in July 2025, with an option to renew for a further 36 months. Under this lease arrangement, the present value of future lease payments is $654,636. Beginning August 1, 2022, the Company plans to move into the newly leased space. Various departments will be ~~paid~~relocated to ~~MTI at closing by means of a full recourse promissory note. MAI will issue warrants that are registered in~~ the ~~name of CEOcast, Inc.~~new office space, Engineering Design and Development, Styling, Program Management, Marketing, and Finance teams.

~~Promissory Note~~

On October 8, 2021, CEOcast, Inc. committed to pay to MAI (through MTI) in the principal amount of $15 million. The note receivable bears no interest, and the payment of principal will be made in 6 equal monthly installments beginning on the first business day of the calendar month after warrants.

~~Pre-Funded Common Stock Warrants (Penny Warrants)~~

On October 8, 2021, CEOcast, Inc. is entitled to receive warrants (this “Warrant”) issued by the Company in connection with the note receivable transaction contemplated within the Securities Purchase Agreement. The warrant structure is pre-funded, meaning that it allows MTI to receive the exercise price of a not pre-funded warrant, except for the nominal exercise price, at the time of warrant issuance rather than the time of exercise. The aggregate exercise price of the warrant

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is $0.001 per warrant share. The number of common shares is calculated by multiplying 125% by $2,500,000 and then dividing by the closing sale price for the trading day immediately after the sale price for the trading day immediately after the last closing trade price for MAI securities reported on the principal securities exchange or trading market is listed or trading. The initial closing date is based on the close of the reverse merger transaction with Net Element, which occurred on November 5, 2021. We are obligated to file a registration statement with the SEC covering the sale of the Registrable securities by MAI, which would be declared effective before commencement of the purchases of common stock.

~~$1.0 Million Loan Letter of Intent~~

~~On January 14, 2022, MAI executed a Letter of Intent (“LOI”) with Mark Betor, MAI Director, for a $1,000,000 loan. The loan terms are as follows:~~

●

~~$250,000 loan advance upon the execution of LOI~~

●

~~$750,000 remaining balance is paid to Mullen Automotive upon execution of transaction documents~~

The loan will be evidenced by a Promissory Note with a maturity date for full repayment of loan no later than 90 days from January 11, 2022. Total agreed repayment amount is $1,150,000. Collateral is a first lien position 1 Greentech Drive, Tunica, MS. MAI Board of Directors approved transaction on January 18, 2022. Mr. Betor abstained from voting.

The information set forth above is included herewith for the purpose of providing the disclosure required under “Item 1.01 — Entry into a Material Definitive Agreement” and “Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant” and “Item 3.02 - Unregistered Sales of Equity Securities” of Form 8-K.

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Item 6. Exhibits


Exhibit		Description
3.1		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Mullen 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 SEC on March 10, 2022).
10.1		~~Letter~~Securities Purchase Agreement dated ~~as of November 3, 2021 between the Company and ESOUSA Holdings, LLC~~June 7, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on ~~November 4, 2021)~~June 10, 2022).
~~10.2#~~10.1(a)		~~Employment~~Amendment No. 1 dated June 23, 2022 to Securities Purchase Agreement dated ~~October 25, 2021 between the Company and Kerri Sadler~~June 7, 2022 (incorporated by reference to Exhibit ~~10.21~~10.1 to the Company’s ~~Annual~~Current Report on Form ~~10-K,~~8-K filed with the SEC on ~~December 29, 2021)~~June 24, 2022).
10.2		Amended and Restated Secured Convertible Note and Security Agreement dated June 17, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 21, 2022).
10.3		~~Form of Voting and Support~~Letter Agreement dated as of October 26, 2021 regarding approval of an amendment to certificate of incorporation to reflect a three-year sunset provision pertaining to the voting rights associated with the Series A Preferred StockJune 17, 2022 (incorporated by reference to Exhibit ~~10.23~~10.2 to the Company’s ~~Annual~~Current Report on Form ~~10-K,~~8-K filed with the SEC on ~~December 29, 2021)~~June 21, 2022).
~~10.4~~10.4#		~~Consultant Agreement dated October 26, 2021 between the Company and Mary Winter~~Mullen Automotive Inc. 2022 Equity Incentive Plan (incorporated by reference to ~~Exhibit 10.25~~Appendix B to the Company’s ~~Annual Report on Form 10-K,~~Definitive Proxy Statement (Schedule 14A) filed with the SEC on ~~December 29, 2021)~~June 24, 2022).
~~10.4(a)~~10.5#		~~Form of Securities Purchase~~CEO Performance Stock Award Agreement dated ~~November 4, 2021~~May 5, 2022 between Mullen Automotive Inc. and David Michery (incorporated by reference to Exhibit ~~10.27~~10.2 to the Company’s ~~Annual~~Current Report on Form ~~10-K,~~8-K filed with the SEC on ~~December 29, 2021)~~July 27, 2022).
~~10.4(b)~~		~~Form of Convertible Note dated November 4, 2021 (incorporated by reference to Exhibit 10.27(a) to the Company’s Annual Report on Form 10-K, filed with the SEC on December 29, 2021).~~
~~10.4(c)~~		~~Form of Warrant dated November 4, 2021 (incorporated by reference to Exhibit 10.27(b) to the Company’s Annual Report on Form 10-K, filed with the SEC on December 29, 2021).~~
10.5*		~~Promissory Note dated October 8, 2021 in the principal amount of $15.0 million payable to CEOcast, Inc.~~
10.5(a)*		~~Securities Purchase Agreement dated October 8, 2021 between the Company and CEOcast, Inc.~~
10.5(b)*		~~Pre-Funded Common Stock Purchase Warrant dated October 8, 2021 issued to CEOcast, Inc.~~
10.6*		~~Amendment to Convertible Preferred Security~~Employment Separation Agreement between the Company and ~~Warrant~~Jerry Alban dated ~~February 10,~~June 27, 2022
10.7*		Lease dated June 29, 2022 between the Company and ~~Esousa Holdings, llc~~with the Lakeview Business Center, LLC.
10.8*		Consulting Agreement dated January 12, 2022 between the Company and Ignacio Novoa.
31.1*		Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification 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)

# Indicates management contract or compensatory plan or arrangement.

* Filed herewith (furnished herewith with respect to Exhibit 32.1).

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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.

~~February 14,~~August 12, 2022	By:	/s/ David Michery
		David Michery
		Chief Executive Officer, President and Chairman of the Board
		(Principal Executive Officer)

		/s/ Kerri Sadler
		Kerri Sadler
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

4946

											��
	Convertible		Interest		Default		Maturity	Warrants		Exercise	Exercise
Date of Issuance	Note ($)		Rate		Interest Rate		Date	(#)		Date	Price ($)
8/26/2020	$	1,000,000	15	%	20	%	8/26/2021	226,397		8/26/2025	$	8.84
8/26/2020		200,000	15	%	20	%	8/26/2021	45,279		8/26/2025	$	8.84
8/26/2020		200,000	15	%	20	%	8/26/2021	45,279		8/26/2025	$	8.84
8/26/2020		100,000	15	%	20	%	8/26/2021	22,640		8/26/2025	$	8.84
9/25/2020		105,000	15	%	20	%	9/25/2021	29,715		9/25/2025	$	8.84
9/25/2020		157,500	15	%	20	%	9/25/2021	44,572		9/25/2025	$	8.84
9/25/2020		105,000	15	%	20	%	9/25/2021	29,715		9/25/2025	$	8.84
10/12/2020		660,000	15	%	20	%	10/12/2021	203,757		10/12/2025	$	8.84
10/12/2020		33,000	15	%	20	%	10/12/2021	10,188		10/12/2025	$	8.84
10/12/2020		27,500	15	%	20	%	10/12/2021	8,490		10/12/2025	$	8.84
11/9/2020		660,000	15	%	20	%	11/9/2021	203,757		11/9/2025	$	8.84
11/9/2020		33,000	15	%	20	%	11/9/2021	10,188		11/9/2025	$	8.84
11/9/2020		27,500	15	%	20	%	11/9/2021	8,490		11/9/2025	$	8.84
12/7/2020		660,000	15	%	20	%	12/7/2021	203,756		12/7/2025	$	8.84
12/7/2020		33,000	15	%	20	%	12/7/2021	10,188		12/7/2025	$	8.84
12/7/2020		27,500	15	%	20	%	12/7/2021	8,490		12/7/2025	$	8.84
12/15/2020		157,500	15	%	20	%	12/15/2021	44,572		12/15/2025	$	8.84
12/15/2020		157,500	15	%	20	%	12/15/2021	44,572		12/15/2025	$	8.84
1/7/2021		660,000	15	%	—		1/7/2022	203,757		1/7/2026	$	8.84
1/7/2021		33,000	15	%	—		1/7/2022	10,188		1/7/2026	$	8.84
1/7/2021		27,500	15	%	—		1/7/2022	8,490		1/7/2026	$	8.84
1/7/2021		—	—		—		—	2,038	*	1/7/2026	$	8.84
1/7/2021		192,500	15	%	—		1/7/2022	59,429		1/7/2026	$	8.84
1/7/2021		82,500	15	%	—		1/7/2022	25,470		1/7/2026	$	8.84
1/7/2021		192,500	15	%	—		1/7/2022	59,429		1/7/2026	$	8.84
1/7/2021		110,000	15	%	—		1/7/2022	33,960		1/7/2026	$	8.84
3/10/2021		660,000	15	%	—		3/10/2022	203,757		3/10/2026	$	8.84
3/10/2021		33,000	15	%	—		3/10/2022	10,188		3/10/2026	$	8.84
3/10/2021		27,500	15	%	—		3/10/2022	8,490		3/10/2026	$	8.84
5/7/2021		—	—		—		—	82,326	**	5/7/2026	$	8.84
5/7/2021		—	—		—		—	33,316	**	5/7/2026	$	8.84
5/7/2021		—	—		—		—	10,504	**	5/7/2026	$	8.84
5/7/2021		—	—		—		—	19,167	**	5/7/2026	$	8.84
5/16/2021		4,400,000	15	%	20	%	5/16/2022	1,358,112		5/16/2026	$	8.84
7/22/2021		2,420,000	15	%	20	%	7/22/2022	746,961		7/22/2026	$	8.84
7/26/2021		1,100,000	15	%	20	%	7/26/2022	339,528		7/26/2026	$	8.84
8/19/2021		1,100,000	15	%	20	%	8/19/2022	339,528		8/19/2026	$	8.84
9/3/2021		550,000	15	%	20	%	9/3/2022	169,764		9/3/2026	$	8.84
10/5/2021		1,100,000	15	%	20	%	10/5/2022	395,712		10/5/2026	$	8.84
10/18/2021		385,000	15	%	20	%	10/18/2022	138,500		10/18/2026	$	8.84
10/19/2021		1,265,000	15	%	20	%	10/19/2022	455,068		10/19/2026	$	8.84
10/27/2021		550,000	15	%	20	%	10/27/2022	197,857		10/27/2026	$	8.84
10/27/2021		1,100,000	15	%	20	%	10/27/2022	395,712		10/27/2026	$	8.84
11/4/2021		2,750,000	15	%	20	%	11/4/2022	989,277		11/4/2026	$	8.84
11/5/2021		110,000	15	%	20	%	11/5/2022	37,356		11/5/2026	$	8.84
11/5/2021***		—	—		—		—	490,030		11/5/2026	$	8.84
Total	$	23,192,500	—		—		—	7,876,068		—		—


Date	Series C Preferred Stock		Warrants	Additional Warrants		Maturity Date	Exercise Price
7/23/2021		8,490	25,470	—		7/23/2026	$	8.84
7/23/2021		5,660	16,980	—		7/23/2026	$	8.84
7/23/2021		11,320	33,960	—		7/23/2026	$	8.84
7/23/2021		8,490	25,470	—		7/23/2026	$	8.84
7/23/2021		—	—	9,016	*	7/23/2026	$	8.84
9/8/2021		19,810	59,429	—		9/8/2026	$	8.84
9/8/2021		19,810	59,429	—		9/8/2026	$	8.84
9/8/2021		11,320	33,960	—		9/8/2026	$	8.84
Total		84,900	254,698	9,016		—		—


NOL Carryforward
	December 31,		September 30,
	2021		2021
Federal
2034-2037	$	36,566,294	$	29,838,716
Indefinite	$	199,385,113	$	162,818,819

Total Federal	$	235,951,407	$	192,657,535

California
2034-2040	$	194,955,026	$	191,722,566

Total California	$	194,955,026	$	191,722,566


		# of Warrants	# of Common Stock
Date	Registered Investor Name	Exercised	Requested
2/1/2022	Acuitas Capital LLC	259,033	709,217
2/1/2022	Esousa Holdings LLC	129,516	354,608
2/4/2022	JADR Consulting Limited PTY	50,000	126,558
2/4/2022	TDR Capital	50,000	126,558
2/4/2022	Friedlander, Michael	16,000	40,905
2/9/2022	Mogul, Jess	100,000	347,747
2/9/2022	Fallon, Jim	100,000	347,747
2/10/2022	TDR Capital	400,000	1,449,766
2/10/2022	JADR Consulting Limited PTY	400,000	1,449,766
2/10/2022	Acuitas Capital LLC	137,235	500,000
2/11/2022	Mogul, Jess	62,674	505,109
2/11/2022	Fallon, Jim	31,610	254,781
	Total	1,736,068	6,212,762