MULLEN AUTOMOTIVE INC

Previous wording

This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section titled “Risk Factors” in Item 1A above. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation (and expressly disclaim any obligation) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under the section titled “Risk Factors” in Item 1A above may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Current wording

This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the section titled “Risk Factors” in Item 1A. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation (and expressly disclaim any obligation) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described under the section titled “Risk Factors” in Item 1A above may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Previous wording

The consolidated condensed financial statements include the accounts of the Company and its wholly owned subsidiaries Mullen Investment Properties LLC, a Mississippi corporation, Ottava Automotive, Inc., a California corporation, Mullen Real Estate, LLC, a Delaware corporation, as well as a 60%-owned subsidiary Bollinger Motors Inc., a Delaware corporation. Intercompany accounts and transactions have been eliminated, if any. The financial statements reflect the consolidated condensed financial position and results of operations of Mullen, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

Current wording

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Mullen Investment Properties LLC, a Mississippi corporation, Ottava Automotive, Inc., a California corporation, Mullen Real Estate, LLC, a Delaware corporation, as well as a majority-owned subsidiary Bollinger Motors Inc., a Delaware corporation. Intercompany accounts and transactions have been eliminated. The financial statements reflect the consolidated financial position and results of operations, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

Previous wording

We are a development stage company and have only recently started to generate notable revenues. As we expand production and commercialization of vehicles, we expect the majority of our revenue to be derived from sales of commercial vehicles. We are planning to ramp up production and reach sufficient revenue levels in subsequent periods – primarily from sales of Commercial Delivery Vehicles (Class 1 – 6). As we continue to develop our product line, we expect additional revenue streams in the future, also from the sales of Sport Utility Vehicles ("SUVs") and the flexible leasing of our electric vehicles ("EVs").

Current wording

We are planning to ramp up production and reach sufficient revenue levels in subsequent periods – primarily from sales of Commercial Delivery Vehicles (Class 1 – 6). As we continue to develop our product line, we expect additional revenue streams in the future, also from the sales of Sport Utility Vehicles ("SUVs") and the flexible leasing of our electric vehicles ("EVs").

Previous wording

In accordance with accounting standards, we recognize revenue from the sale of electric vehicles upon transfer of control to a customer. In general, the control is transferred at the point of delivery to the customer but certain contracts with our dealers contain a return provision, stating that they may return unsold vehicles after 1 year. Since the Company does not have sufficient relevant statistics of returns yet, we defer revenue recognition until the vehicles have been sold by such dealer or until there is sufficient evidence to justify a reasonable estimate for consideration to which the Company expects to be entitled. Payments from customers are generally expected to be received within 30-60 days after delivery.

Current wording

In accordance with accounting standards, we recognize revenue from the sale of electric vehicles upon transfer of control to a customer. In general, the control is transferred at the point of delivery to the customer but certain contracts with our dealers contain a return provision, stating that they may return unsold vehicles after 1 year. Since the Company does not have sufficient relevant statistics of returns yet, we defer revenue recognition until the vehicles have been sold by such dealer or until there is sufficient evidence to justify a reasonable estimate for consideration to which the Company expects to be entitled.

Previous wording

Costs of goods sold primarily includes vehicle components and parts, labor costs, amortized tooling costs, provisions for estimated warranty expenses, and other relevant costs associated with the production of our vehicles.

Current wording

Costs of revenues primarily includes vehicle components and parts, labor costs, amortized tooling costs, provisions for estimated warranty expenses, and other relevant costs associated with the production of our vehicles.

Previous wording

Research and development expenses increased by approximately $7.5 million or 88% from approximately $8.6 million through the three months ended December 31, 2022, to approximately $16.2 million through the three months ended December 31, 2023. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping costs and other expenses related to preparation to mass-production of electric vehicles such as Mullen Five EV, Mullen One EV cargo van, etc.

Current wording

Research and development expenses increased by approximately $3.5 million or 17% from approximately $20.5 million through the three months ended March 31, 2023, to approximately $24.0 million through the three months ended March 31, 2024. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping costs and other expenses related to preparation to mass-production of electric vehicles such as Mullen Five EV, Mullen One EV cargo van, etc.

Previous wording

Interest expense decreased by approximately $2.6 million, or 91%, from approximately $2.8 million through the three months ended December 31, 2022, to approximately $0.3 million through the three months ended December 31, 2023, primarily due to a decrease in convertible debt that has was fully converted in March, 2023.

Current wording

Interest expense decreased by approximately $1.6 million, or 86%, from approximately $1.9 million through the three months ended March 31, 2023, to approximately $0.3 million through the three months ended March 31, 2024, primarily due to a decrease in convertible debt that has was fully converted by March 31, 2023 and repayment of a $5 million note in January 2024.

Previous wording

The net loss attributable to common stockholders (after preferred dividends) was approximately $61.4 million, or $15.32 net loss per share, for the three months ended December 31, 2023, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $376.9 million, or $6,233.08 loss per share, for the three months ended December 31, 2022 (giving effect to reverse stock splits, see below).

Current wording

The net loss attributable to common stockholders (after preferred dividends) was approximately $132.5 million, or $19.39 net loss per share, for the three months ended March 31, 2024, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $106.9 million, or $1,167.18 loss per share, for the three months ended March 31, 2023 (giving effect to reverse stock splits, see below).

Previous wording

General and administrative expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, salaries, rent, repairs and maintenance, utilities and office expense, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $21.8 million or 33% from approximately $65.0 million in the three months ended December 31, 2022, to approximately $43.2 million in the three months ended December 31, 2023, primarily due to decreases in compensation to employees, depreciation expense, and lease expense offset by increases in professional fees, utilities, office expense, advertising and promotions expenses.

Current wording

General and administrative expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, salaries, rent, repairs and maintenance, utilities and office expense, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $21.3 million, or 19%, from approximately $112.4 million in the six months ended March 31, 2023, to approximately $91.1 million in the six months ended March 31, 2024, primarily due to decreases in professional fees and compensation to employees, partially offset by increases in advertising and promotions expenses, and depreciation expense.

Previous wording

The line item “Other financing costs - initial recognition of derivative liabilities” in the three months ended December 31, 2023 is zero versus the three months ended December 31, 2022 when it amounted to approximately $256 million. Similarly, the derivative liability revaluation loss has decreased by 84% from $40.8 million to $6.7 million. These changes are due to the fact that no additional warrants or convertible notes were issued during the three months ended December 31, 2023 and the monetary value of relevant obligations has significantly decreased in comparison to the three months ended December 31, 2022 (seeNotes 7 and 8 to the financial statements).

Current wording

The line item “Other financing costs - initial recognition of derivative liabilities” in the six months ended March 31, 2024 is zero versus the six months ended March 31, 2023 when it amounted to approximately $256.0 million. Similarly, the derivative liability revaluation loss has decreased by $86.1 million from $89.2 million to $3.1 million. These changes are due to the fact that no additional warrants were issued during the six months ended March 31, 2024 and the monetary value of relevant obligations has significantly decreased in comparison to the six months ended March 31, 2023 (seeNotes 7- Debt and 8 -Warrants and Other Derivative Liabilities and Fair Value Measurements to the financial statements).

Previous wording

The Company is currently comprised of 2 major operating segments:

Current wording

The Company is currently comprised of two major operating segments:

Previous wording

During the calendar year ended December 31, 2023 we have completed 3 reverse stock splits in order to regain compliance with NASDAQ Listing Rule 5550(a)(2). In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. The last 1-for-100 reverse stock split was effectuated in December 2023.

Current wording

During the calendar year ended December 31, 2023, we have completed three reverse stock splits in order to regain compliance with NASDAQ Listing Rule 5550(a)(2). In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. In December 2023, we completed the last 1-for-100 reverse stock split of our outstanding shares of common stock.

Previous wording

On January 24, 2024, the Company received formal notice from The Nasdaq Stock Market LLC confirming the Company has regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2).

Current wording

On January 24, 2024, the Company received formal notice from The Nasdaq Stock Market LLC confirming the Company has regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). On March 6, 2024, the Company received formal notice from Nasdaq confirming that it has regained compliance with the annual shareholder meeting requirement set forth in Nasdaq Listing Rule 5620(a). The Company is now in compliance with Nasdaq’s continued listing requirements and will continue to be listed and traded on the Nasdaq Capital Market.

Previous wording

The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $88.9 million as of December 31, 2023. During the three months ended December 31, 2023, the Company used approximately $59.9 million of cash for operating activities. The net working capital on December 31, 2023 amounted to approximately $47.1 million, or approximately $79.3 million after excluding derivative liabilities and liabilities to issue stock that are supposed to be settled by issuing common stock without using cash. For the three months ended December 31, 2023, the Company has incurred a net loss of $64 million and, as of December 31, 2023, our accumulated deficit was $1,923.6 million.

Current wording

The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $29.8 million as of March 31, 2024. During the six months ended March 31, 2024, the Company used approximately $108.5 million of cash for operating activities. The net working capital on March 31, 2024 amounted to approximately $5.3 million, or approximately $18.3 million after excluding derivative liabilities and liabilities to issue stock that are supposed to be settled by issuing common stock without using cash. For the six months ended March 31, 2024, the Company has incurred a net loss of $235.4 million and, as of March 31, 2024, our accumulated deficit was $2,056.0 million.

Previous wording

The following table provides a summary of our cash flow data for the three months ended December 31, 2023 and 2022:

Current wording

The following table provides a summary of our cash flow data for the six months ended March 31, 2024 and 2023:

Previous wording

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 before we start to generate any material cash flow from our business.

Current wording

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. Net cash used in operating activities was $108.5 million in the six months ended March 31, 2024, a 61% increase from $67.6 million net cash used during the six months ended March 31, 2023.

Previous wording

Net cash used in investing activities was $6.9 million in the three months ended December 31, 2023, a 93% decrease from $93.7 million used in investing activities the three months ended December 31, 2022. The primary factor of the change was the ELMS assets acquisition during the three months ended December 31, 2022.

Current wording

Net cash used in investing activities was $12.5 million in the six months ended March 31, 2024, an 87% decrease from $97.4 million used in investing activities during the six months ended March 31, 2023. The primary factor of the change was the ELMS assets acquisition during the three months ended December 31, 2022.

Previous wording

Net cash provided by financing activities was $0.0 for the three months ended December 31, 2023, as compared to $150 million for the three months ended December 31, 2022, when we issued convertible notes in lieu of preferred shares.

Current wording

Net cash used in financing activities was $4.9 million for the six months ended March 31, 2024, as compared to $167.4 million net cash obtained from financing activities for the six months ended March 31, 2023, when we issued convertible notes in lieu of preferred shares.

Previous wording

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 condensed financial statements. Our significant accounting policies are described inNote 3 to the consolidated condensed financial statements. Management believes none of the accounting policies and estimates are considered critical for the preparation of these consolidated condensed financial statements.

Current wording

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 inNote 3 to the consolidated financial statements.

Previous wording

Accounting standard updates issued but not yet effective were assessed and determined to be either not applicable or not expected to have a material impact on our consolidated condensed financial statements.

Current wording

Accounting standard updates issued but not yet effective were assessed and determined to be either not applicable or not expected to have a material impact on our consolidated financial statements.