MULLEN AUTOMOTIVE INC

NOTE** 1 –DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Mullen Automotive Inc., a Delaware corporation (“Mullen”, “we” or the “Company”), is a Southern California-based development-stage electric vehicle company that operates in various verticals of businesses focused within the automotive industry.

Mullen Automotive Inc., a California corporation (“Previous Mullen”), was originally formed on* April20,* 2010, as a developer and manufacturer of electric vehicle technology and operated as the Electric Vehicle (“EV”) division of Mullen Technologies, Inc. (“MTI”) until* November 5, 2021,at which time Previous Mullen underwent a capitalization and corporate reorganization by way of a spin-off to its shareholders, followed by a reverse merger with and into Net Element, Inc., which was accounted for as a reverse merger transaction, in which Previous Mullen was treated as the acquirer for financial accounting purposes. (the “Merger”). The Company changed its name from “Net Element, Inc.” to “Mullen Automotive Inc.” and the Nasdaq ticker symbol for the Company’s common stock changed from “NETE” to “MULN” on the Nasdaq Capital Market at the opening of trading on November5,* 2021.

Mullen is building and delivering the newest generation of commercial trucks through the Bollinger Motors and ELMS acquisitions.

Since acquiring a controlling interest in Bollinger Motors, Inc. in* September 2022,Mullen has strategically expanded into the medium-duty truck segments (Classes4*-6) and the electric Sport Utility and Pickup Truck markets. In* October 2022,Mullen successfully completed a significant acquisition of assets from Electric Last Mile Solutions (ELMS), which included a manufacturing facility in Mishawaka, Indiana, and all necessary intellectual property for the design and production of Class1* and Class3 electric vehicles. Thefirst electric vehicles, produced at our Tunica, Mississippi plant, were successfully delivered to customers in* August 2023.*

Since starting production, we have invoiced 397 vehicles, totaling $17.3 million. For thesix months ended* March 31, 2024,we delivered 362 vehicles valued at $16.3 million. The Company willnot* recognize revenue or accounts receivable until payment is received, and the return policy for the vehiclesno longer applies once the dealer sells the vehicles to the final customer.

Basis of Presentation and Principles of Consolidation

The unaudited 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, Mullen Advanced Energy Operations, LLC, a California corporation, as well as a 60%-owned (on a fully dilutive basis) subsidiary Bollinger Motors Inc., a Delaware corporation. Intercompany accounts and transactions, if any, have been eliminated. Noncontrolling interest presented in these consolidated financial statements relates to the portion of equity (net assets) in subsidiariesnot attributable, directly or indirectly, to Mullen. Net income or loss are allocated to noncontrolling interests by multiplying the relative ownership interest of the noncontrolling interest holders for the period by the net income or loss of the entity to which the noncontrolling interest relates.

These unaudited interim consolidated financial statements and the accompanying notes have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed consolidated financial statements for any interim period arenot necessarily indicative of the results to be expected for the full year or for any other future years or interim periods. Comprehensive loss isnot separately presented as the amounts are equal to net loss for thethree andsix months ended* March 31, 2024and2023*. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form10-K for the year ended* September 30, 2023filed with the SEC on January 16, 2024.*

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Reverse Stock Splits

During the calendar year ended* December 31, 2023we have completed3* reverse stock splits in order to regain compliance with NASDAQ Listing Rule5550(a)(2). In* May 2023,we completed a1*-for-25 reverse split of our outstanding shares of common stock. In* August 2023,we completed a1*-for-9 reverse split of our outstanding shares of common stock. In* December 2023,the stockholders approved a proposal to authorize a reverse stock split of the Company’s common stock at a ratio within the range of1*-for-2 to1-for-100, as determined by the Board of the Company. The Board approved a1-for-100 reverse stock split effective on* December**21,* 2023. As a result of the reverse stock split, every 100 shares of the Company’s pre-reverse stock split common stock combined and automatically became1 share of common stock.

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 Rule5550*(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 Rule5620*(a). The Company is now in full compliance with Nasdaq’s continued listing requirements and will continue to be listed and traded on the Nasdaq Capital Market.

As a result of the reverse stock splits, the number of shares of common stock that can be issued upon exercise of warrants, preferred stock, and other convertible securities, as well as any commitments to issue securities, that provide for adjustments in the event of a reverse stock split, was appropriately adjusted pursuant to their applicable terms for the reverse stock splits. If applicable, the conversion price for each outstanding share of preferred stock and the exercise price for each outstanding warrant was increased, pursuant to their terms, in inverse proportion to the split ratio such that upon conversion or exercise, the aggregate conversion price for conversion of preferred stock and the aggregate exercise price payable by the warrant holder to the Company for shares of common stock subject to such warrant will remain approximately the same as the aggregate conversion or exercise price, as applicable, prior to the reverse stock splits.

The reverse stock splits havenot changed the authorized number of shares or the par value of the common stock nor modified any voting rights of the common stock.

No proportionate adjustment was made to the number of shares reserved for issuance pursuant to the Company’s2022 Equity Incentive Plan (the*“2022* Plan”) pursuant to an amendment to the2022 Plan approved by stockholders in* August 2023,increasing the maximum aggregate number of shares of common stock and stock equivalents available for the grant of awards under the2022* Plan by an additional 52,000,000 shares, which amount isnot subject to any decrease or increase in the number shares of common stock resulting from a stock spilt, reverse stock split, recapitalization, combination, reclassification, the payment of a stock dividend on the common stock or any other decrease in the number of such shares of common stock effected without receipt of consideration by the Company.

No fractional shares were issued in connection with the reverse stock splits. All shares of common stock that were held by a stockholder were aggregated subsequent to the reverse stock split and each fractional share resulting from such aggregation held by a stockholder was rounded up to the next whole share. As a result, an additional 321,048 shares were issued for the benefit of stockholders that would otherwise obtain fractional shares upon reverse stock split in* December 2023.*

The number and par value of Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock werenot affected by the reverse stock splits, but their conversion ratios have been proportionally adjusted. There wereno outstanding shares of Series B Preferred Stock as of the effective date of the reverse stock splits.

The Company retroactively adjusted its historical financial statements to reflect the reverse stock splits (SeeNote10** - Loss per sharefor reverse stock splits effect on loss per share). All issued and outstanding common stock and per share amounts contained in the financial statements have been adjusted to reflect the reverse stock splits for all periods presented. The common stock and additional paid-in-capital line items of the financial statements were adjusted to account for the reverse stock splits for all periods presented (with $833,431 value of common stock decreased and additional paid-in-capital increased on* September 30, 2022).*

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

These consolidated financial statements have been prepared on the basis that assumes the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

During thesix months ended* March 31, 2024*, the COVID-19 pandemic didnot have a material impact on our operating results. The Company hasnot observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it isnot possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity.

The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern over the nexttwelve months from the date of filing this report. 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 thesix 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 thesix 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. The Company believes that substantial doubt about its ability to continue as a going concern does exist as its cash on hand will be insufficient to meet its working capital and capital expenditure requirements for a period of at leasttwelve months from the date of the filing of this Form10-Q.

If the Company doesnot secure adequate funding to fulfill its current liabilities, it anticipates seeking bankruptcy protection in various jurisdictions within30 days of publishing these financial statements. The Company anticipates that its available funds will be insufficient to cover its obligations for at least the nexttwelve months from the date this Form10-Q was filed. Consequently, there is significant uncertainty regarding the Company's ability to continue operating. The Company is actively pursuing additional funds (seeNote21* Subsequent Events* - $50 Million Note and Warrant Financing, $100 Million Financing Arrangement, and First Tranche of $50 Million Financing Payable on Execution). As part of its cost-cutting measures, the Company plans to further reduce its workforce and streamline operations, including downsizing its physical locations. However, there isno guarantee that the Company will be able to restructure its debts and/or secure the necessary financing on favorable terms.

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.

Use of Estimates

The preparation of our 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 consolidated financial statements and the reported amounts of total expenses in the reporting periods. Estimates are used for, butnot limited to, cash flow projections and discount rate for calculation of goodwill impairment, fair value and impairment of long-lived assets, including intangible assets, inventory reserves, accrued expenses, fair value of financial instruments, depreciable lives of property and equipment, income taxes, contingencies, valuation of preferred stock and warrants. Additionally, the rates of interest on several debt agreements have been imputed where there wasno stated interest rate within the original agreement. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for carrying values of assets and liabilities and the recording of costs and expenses that arenot readily apparent from other sources. The actual results* may*differ materially from these estimates.

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Risks and Uncertainties

We operate within an industry that is subject to rapid technological change, intense competition, and significant government regulation. 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. The Company is dependent on its suppliers, including single source suppliers, for the production of the Mullen vehicles and depends on ability of these suppliers to deliver necessary components of our products in a timely manner at prices, quality levels and volumes acceptable to us. Anyone or combination of these or other risks could have a substantial influence on our future operations and prospects for commercial success.

Business Combination

Business acquisitions are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)805 “Business Combinations”. FASB ASC805 requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable tangible and intangible assets acquired, the liabilities assumed and any noncontrolling interest in the acquired entity, and recognize and measure goodwill or a gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is recorded as goodwill. Adjustments to fair value assessments are recorded to goodwill over the measurement period (not longer thantwelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense.

Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, and so near their maturity (generally, with original maturities ofthree months or less) that they present insignificant risk of changes in value because of changes in interest rates.

Restricted Cash

The main part of restricted cash in amount of $7 million relates to an escrow account that will become the property of the party determined in the arbitration with GEM Group (seeNote19* – Contingencies and Claims*). The amount and interest earned will be released only upon further order of the arbitrator, a court or other tribunal of competent jurisdiction, or by agreement of the parties.

Cash obtained from customer deposits is held by the Company and is restricted from use to fund operations. Refundable deposits were $430 thousand as of* March 31, 2024*.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various advance payments made for goods or services to be received in the future.

Inventory

Inventories are stated at the lower of cost or net realizable value and consist of raw materials, work in progress and finished goods. Cost of inventories is determined using the standard cost method, which approximates actual cost on afirst-infirst-out basis. This method includes direct materials, direct labor, and a proportionate share of manufacturing overhead costs based on normal capacity. Regular reviews are performed to identify and account for variances between the standard costs and actual costs. Any variances identified are recognized in the cost of revenues during the period in which they occur.

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The Company regularly reviews its inventories for excess and obsolete items by assessing their net realizable value (NRV). The NRV is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This analysis considers factors such as demand forecasts, product life cycles, product development plans, and current market conditions. Provisions are made to reduce the carrying value of the inventories to their net realizable value. Once inventory is written down, a new, lower-cost basis is established, and the inventory isnot subsequently written up if market conditions improve. All such inventory write-downs are included as a component of cost of revenues in the period in which the write-down occurs. Adjustments to these estimates and assumptions could impact our financial position and results of operations.

Property, Plant, and Equipment, net

Property, plant, and equipment is 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 donot extend the useful lives of related assets are expensed as incurred.

Estimated Useful Lives

Expenditures for major improvements are capitalized, while minor replacements, maintenance and repairs, which donot 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, plant, and equipment* may**not* be recoverable in accordance with the provisions of ASC360, “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

Income taxes are recorded in accordance with ASC740**, "Income Taxes". 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 thannot that some or all of the deferred tax assets willnot be realized.

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Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the “more likely thannot” threshold for financial statement recognition and measurement. These are transactions that occur during the ordinary course of business for which the ultimate tax determination* maybe uncertain. At March 31, 2024and2023*, there wereno material 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. The Company maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because the Company believes the recoverability of the tax assets isnot more likely thannot as of* March 31, 2024*.

Intangible Assets, net

Intangible assets consist of acquired and developed intellectual property. In accordance with ASC350, “Intangibles—Goodwill and Others,”* goodwill and other intangible assets with indefinite lives (including in-process research and development assets acquired in a business combination) arenot* 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 to120 months. The costs to periodically renew our intangible assets are expensed as incurred.

Impairment of Long-Lived Assets

The Company periodically evaluates long-lived assets (both intangible assets and property, plant, and equipment) for impairment whenever events or changes in circumstances indicate that a potential impairment* mayhave occurred. If such events or changes in circumstances arise, the Company compares the carrying amount of the long-lived assets to the estimated future undiscounted cash flows expected to be generated by the long-lived assets. If the estimated aggregate undiscounted cash flows are less than the carrying amount of the long-lived assets, an impairment charge, calculated as the amount by which the carrying amount of the assets exceeds the fair value of the assets, is recorded. The fair value of the long-lived assets is determined based on the estimated discounted cash flows expected to be generated from the long-lived asset unless another method provides a more reliable estimate. If an impairment loss is recognized, the adjusted carrying amount of a long-lived asset is recognized as a new cost basis of the impaired asset. Impairment loss isnot* reversed even if fair value exceeds carrying amount in subsequent periods.

Extinguishment of Liabilities

The Company derecognizes financial liabilities when the Company’s obligations are discharged, cancelled, or expired.

Leases

The Company follows the provisions of ASC842, “Leases”, which requires 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. We categorize leases with contractual terms longer thantwelve months as either operating or finance. Finance leases are generally those leases that allow us to substantially utilize or pay for the entire asset over its estimated life. All other leases are categorized as operating leases. Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified upon lease commencement. When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider the option in determining the classification and measurement of the lease. Our leases* may*include variable payments which are expensed as incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

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Contingencies and Commitments

The Company follows ASC440 and ASC450 to account for contingencies and commitments. Certain conditions, as a result of past events,* mayexist as of the balance sheet date, which mayresult in a loss to the Company, but which will only be resolved whenone* or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that* may*result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency isnot probable but is reasonably possible, or is probable but cannot be reasonably estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Legal costs associated with such loss contingencies are expensed as incurred. Loss contingencies considered remote are generallynot disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Accrued Expenses

Accrued expenses are expenses that have been incurred butnot yet paid and are classified within current liabilities on the consolidated balance sheets.

Revenue Recognition

The Company’s revenue includes revenue from the sale of electric vehicles and is accounted for in accordance with ASC606, “Revenue from Contracts with Customers”. The Company applies afive-step analysis to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation. Payments for electric vehicles sales are generally received at or shortly after delivery. Sales tax is excluded from the measurement of the transaction price. The revenue from the sale of electric vehicles is recognized when control of the vehicle is transferred to the customer. In general, the control is transferred at the point of delivery to the customer, signifying the fulfillment of our primary performance obligation under ASC606. Certain contracts with our dealers contain a return provision, stating that they* mayreturn unsold vehicles after1* year. Since the Company doesnot 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. For any amounts received (or receivable) for which the Company doesnot recognize revenue when it transfers products to customers, a refund liability is recognized. Relevant vehicles transferred to the dealer are presented as “Finished goods delivered to dealer for distribution” in the consolidated balance sheets at initial cost, less any expected costs to recover those products (including potential decreases in the value to the entity of returned products). At the end of each reporting period, the Company updates the measurement of these assets and refund liabilities. The Company didnot generate any significant revenue from its core business operations during thethree andsix months ended* March 31, 2024*.

The Company’s cost of goods sold includes mainly production costs of vehicles sold in the relevant period as well as a provision for expected warranty expenses.

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General and Administrative Expenses

General and administrative expenses include expensesnot related to production, such as salaries and employee benefits, professional fees, rent, repairs and maintenance, utilities and office expense, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, and licenses. Advertising costs are expensed as incurred and are included in general and administrative expenses. Trade show expenses are deferred until occurrence of the future event in accordance with ASC720‑35, “Other Expenses –* Advertising Cost.” Advertising costs for thethree* andsix months ended* March 31, 2024* were approximately $7.3 million and $13.6 million, respectively.

Research and Development Costs

Per ASC730, "Research and Development," the Company recognizes all research and developments costs in the statement of operations as they occur. These include expenses related to the design, development, testing, and improvement of our electric vehicles and corresponding technologies. Assets with alternative future uses are capitalized and depreciated over their useful lives, with the depreciation expense reported under research and development costs.

Share-Based Compensation

The share-based awards issued by the Company are accounted for in accordance with ASC Subtopic718-10, “Compensation –* Share Compensation*,” which requires fair value measurement on the grant date and recognition of compensation expense for all shares of common stock of the Company issued to employees, non-employees and directors. Generally, the fair value of awards is estimated based on the market price of the shares of common stock of the Company the day immediately preceding the grant date. The fair value of non-marketable share-based awards (granted to employees before the Company became public) has been estimated based on an independent valuation. The Company recognizes forfeitures of award in the periods they occur.

The overwhelming part of share-based awards to employees per employment contracts, and a certain part of contracts with non-employees (consultants), are classified as equity with costs and additional paid-in capital recognized ratably over the service period. A significant part of the Company’s share-based awards to consultants is liability-classified: mainly if the number of shares a consultant is entitled to depends on a certain monetary value fixed in the contract. An accrued part of liability in this case is revaluated each period based on earned portion of the grant and changes in market price of the shares of common stock of the Company, until sufficient number of shares is issued.

The Company has also adopted incentive plans that entitle the Chief Executive Officer to share-based awards generally calculated as 1-3% of then outstanding number of shares of common stock, issuable upon achievement of specific financial and operational targets (milestones) that are supposed to significantly increase value of the Company. This share-based compensation is accrued over the service term when it is probable that the milestone will be achieved. The liability to issue stock (presented within non-current liabilities if the achievement is expected later than12 months after the balance sheet date) is revalued on every balance sheet date based on the length of the service period, current market price of the common stock and on the number of shares of common stock outstanding – until the shares have been issued, or until fulfilling the milestone requirements becomes unlikely.

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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 hierarchy as per requirements of ASC820, “Fair value measurements”, i.e.:

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value* may*fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Expected credit losses

The estimation of expected credit losses that* maybe incurred as we work through the invoice collection process with our customers and other counterparties requires us to make judgments and estimates regarding probability the amounts due to us are going to be paid. We monitor our customers' payment history and current credit worthiness to determine that collectability is reasonably assured. We also consider the overall business climate in which our customers and other counterparties operate. On March 31, 2024* and* September 30, 2023*,no material allowance for credit losses needed to be recognized to cover anticipated credit losses under current conditions. However, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional credit losses that* may*be recognized.

Concentrations of Credit Risk

The Company maintains 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* mayexceed these federal limitations. However, we havenot* experienced any losses in such accounts and management believes we arenot exposed to any significant credit risk on these accounts due to high credit rating of relevant financial institutions. The amounts in excess of insured limits as of* March 31, 2024* and* September 30, 2023* are $29.0 million and $154.9 million, respectively.

Accounting Pronouncements

The Company has implemented all applicable accounting pronouncements that are in effect. The following pronouncements have been recently adopted by the Company:

ASU2022-04 -Supplier Finance Program (SFP). This ASU requires that a buyer in a SFP disclose qualitative and quantitative information about its program, including the nature of the SFP and key terms, outstanding amounts as of the end the reporting period, and presentation in its financial statements. This pronouncement hasnot had an impact on the Company’s consolidated financial statements.

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ASU2016-13 -Measurement of Credit Losses on Financial Instruments (CECL). This guidance, commonly referred to as Current Expected Credit Loss (“CECL”), changes impairment recognition to a model that is based on expected losses rather than incurred losses. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including trade receivables. The Company evaluated and determined the amendment didnot have a material effect on the consolidated financial statements.

The following are accounting pronouncements that have been issued but arenot yet effective for the Company’s consolidated financial statements:

In* August 2020,the FASB issued ASUNo.* 2020-06, Debt—Debt with Conversion and Other Options (Subtopic470-20), and Derivatives and Hedging—Contracts in an Entity’s Own Equity (Subtopic815-40):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in ASUNo. 2020-06 simplify the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exceptions for contracts in an entity’s own equity. For smaller reporting companies ASU2020-06 is effective for fiscal years beginning after* December 15, 2023,including interim periods within those fiscal years. The Company doesnot* expect its application to have a material impact on the Company’s consolidated financial statements.

In* November 2023,the FASB issued Accounting Standards Update2023*-07—**Segment Reporting (Topic280*): Improvements to Reportable Segment Disclosures.It requires all annual disclosures currently required by ASC280* to be included in interim periods and requires disclosure of significant segment expenses regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and applicable additional measures of segment profit or loss used by the CODM when allocating resources and assessing business performance. All public entities will be required to report segment information in accordance with the new guidance starting in annual periods beginning after* December 15, 2023.*The Company expects to enhance segment reporting disclosures based on new requirements.

In* December 2023,the FASB issued ASUNo.* 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASUNo. 2023-09, which enhances the transparency, effectiveness and comparability of income tax disclosures by requiring consistent categories and greater disaggregation of information related to income tax rate reconciliations and the jurisdictions in which income taxes are paid. The guidance is effective for public business entities for fiscal years beginning after* December 15, 2024,*with early adoption permitted. The Company expects to enhance income tax disclosures based on new requirements.

Other accounting pronouncements issued butnot yet effective arenot believed by management to be relevant or to have a material impact on the Company’s present or future consolidated financial statements.

NOTE4 – SEGMENT INFORMATION

Our CEO and Chairman of the Board, as the chief operating decision maker, makes decisions about resources to be acquired, allocated and utilized to each operating segment. The Company is currently comprised of 2 major operating segments:

All long-lived assets of the Company are in the United States of America.

The table below represents main financial information pertaining to the segments (there wereno material differences from the last annual report in the basis of segmentation or in the basis of measurement of segment profit or loss).

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NOTE 5 –** INVENTORY**

The Company's inventories are stated at the lower of cost or net realizable value and consist of the following:

During thesix months ended* March 31, 2024*, approximately $0.9 million of the Company's inventories was consumed for R&D activities, which was recognized as part of research and development expense in the consolidated statement of operations.

NOTE 6 –** GOODWILL AND OTHER INTANGIBLE ASSETS**

Goodwill

The goodwill in net carrying amount of $0 and $28,846,832 as of* March 31, 2024* and as of* September 30, 2023*, respectively, and pertains to the Bollinger Motors Inc. acquisition on* September 7, 2022.Goodwill isnot* amortized and is tested for impairment annually, or more frequently if there are indicators of impairment. The Company’s management evaluated the goodwill attributable to Bollinger Motors and determined that it was fully impaired.

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Upon the quantitative goodwill impairment test, impairment* mayarise to the extent carrying amount of a reporting unit that includes goodwill (i.e. Bollinger production unit, seeNote4 – Segment information*) exceeds its fair value. As a result of impairment test performed on* March 31, 2024by management, impairment in amount of $28,846,832 was recognized in the financial statements for thesix* months ended* March 31, 2024,*mainly due to the uncertainty of future fundings required to support the business operations of Bollinger Motors and decrease of Company's market capitalization.

Other intangible assets

Intangible assets with indefinite useful lives arenot amortized but instead tested for impairment. Due to unfavorable market conditions and decline of the market prices of the Company’s common stock, we have tested indefinite-lived in-process research and development assets, acquired in* September 2022as part of the Bollinger segment (seeNote4 - Segment information*), for recoverability on* March 31, 2024*and recognized impairment loss in amount of $58,304,612, mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization.

Intangible assets with finite useful lives are amortized over the period of estimated benefit using the straight-line method. The weighted average useful life of intangible assets is 8.3 years. The straight-line method of amortization represents management’s best estimate of the distribution of the economic value of the intangible assets. An impairment loss in amount of $15,142,455 was recognized in respect of the intangible assets of the ELMS/Legacy Mullen segment (engineering designs) during thesix months ended* March 31, 2024* - mainly due to performance misses compared to the previous budgets. Their accumulated depreciation in amount of $1,057,877 was derecognized in correspondence with initial cost to present the new cost basis of these assets in accordance with ASC350-30.

Total future amortization expense for finite-lived intangible assets is as follows:

For thethree andsix months ended* March 31, 2024*, amortization of the intangible assets was $1,310,278 and $2,630,155, and it was $763,269 and $3,519,973 for thethree andsix months ended* March 31, 2023*, respectively.

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NOTE 7 –** DEBT**

Short and Long-Term Debt

Short-term debt is defined as debt with principal maturities ofone year or less, long-term debt has maturities greater thanone year.

The following is a summary of our indebtedness as of* March 31, 2024*:

The following is a summary of our indebtedness as of* September 30, 2023*:

Scheduled Debt Maturities

The following are scheduled debt maturities as of* March 31, 2024*:

Accrued interest

As of* March 31, 2024* and* September 30, 2023*, accrued interest on outstanding notes payable was $1,683,720 and $1,548,723, 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 bore interest at a fixed rate of 8.99% per annum and the principal amount was due March 1, 2024.Collateral for the loan included the title to the Company’s property at1* Greentech Drive, Tunica, MS. Under the Promissory Note, prepaid interest and issuance costs of $1,157,209 were withheld from the principal and recorded as debt discount, which was amortized over the term of the Promissory Note. In* January 2024,*the loan was paid by the Company in full, and the collateral was released.

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Drawbridge and Amended A&R Note with Esousa

On* October 14, 2022,the Company entered into an Amended and Restated Secured Convertible Note and Security Agreement (the “A&R Note”) with Esousa Holdings LLC (“Esousa”), including principal of $1,032,217 (net of debt discount of $64,570) and accrued interest of $316,127 along with the liability to issue 467 shares of common stock (having a then carrying value of $10,710,000) and an obligation to compensate for the losses from market value decline of shares were exchanged for a new convertible note payable with a face value of $12,945,914 and 1,022 shares of common stock (having a fair value of $5,524,600), resulting in a loss on extinguishment of $6,452,170. On November 1, 2022,*the A&R Note payable to Esousa, inclusive of accrued interest, was converted into 2,758 shares of common stock.

Non-convertible secured promissory note

On* December 18, 2023,Mullen entered into a Debt Agreement to issue a non-convertible secured promissory note (the “Note”) with a principal amount of $50 million, purchased for $32 million, reflecting an $18 million original issue discount. The Note, which didnot* include conversion rights, stock, warrants, or other securities, aimed to raise capital for the Company's manufacturing operations. The issuance of this non-convertible Note was expected on thefirst trading day when all closing conditions are met. The $18 million original issue discount was considered a settlement cost related to a dispute over financings that occurred during the fiscal year ended* September 30, 2023.The $18 million settlement cost has been accrued as of September 30, 2023* and is included as accrued expenses and other liabilities at* March 31, 2024* and* September 30, 2023*. The Note contemplated 10% annual interest, escalating to 18% post-Event of Default. It would maturethree months post-issuance. The Note's terms allowed for accelerated repayment upon default, requiring the Company to pay the principal, accrued interest, and other due amounts. The Note was supposed to be secured by the Company’s assets and imposes restrictions on the Company, limiting additional debt, asset liens, stock repurchases, outstanding debt repayment, and affiliate transactions, except for specified exceptions. It mandated prepayment of the principal from net proceeds of any subsequent financing. The funds contemplated by the Debt Agreement havenot been received and, on* May 7, 2024,*the Debt Agreement has been terminated.

Convertible Notes

On* November 14, 2022,the Company entered into AmendmentNo.* 3 (“AmendmentNo. 3”) to the* June 7, 2022,*Securities Purchase Agreement (as amended, the “Series D SPA”). The investors paid $150 million and, in lieu of receiving shares of Series D Preferred Stock and warrants, the investors received notes convertible into shares of the Company’s common stock (“Notes”) and warrants.

AmendmentNo. 3 further provided that the remaining $90 million of the commitment amount will be paid in thefirst half of2023 intwo tranches. The purchase price per share of Series D Preferred Stock would be the lower of (i) $1.27 ($28,575 after reverse stock splits, seeNote1* - Description of Business and Basis of Presentation*), 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 respective purchase date, subject to a floor price of $0.10 per share. Forno additional consideration, for every share of Series D Preferred Stock purchased, investors received warrants to purchase shares of common stock equal to 185% of the number of shares of Series D Preferred Stock purchased by the investors at an exercise price equal to the purchase price for shares of Series D Preferred Stock (the warrants also permit cashless exercise). The Company exercised its right and received these investments in* Apriland June 2023,seeNote8 - Warrants and Other Derivative Liabilities and Fair Value Measurements.*

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On* November 15, 2022,the Company issued the unsecured convertible Notes aggregating $150,000,000 in lieu of Series D Preferred Stock. The Notes bore interest at 15% and were convertible into shares of common stock either: (A) at the option of the noteholder at the lower of: (i) $0.303 (to be adjusted to stock splits); or (ii) the closing price of our common stock on January 3, 2023;or (B) mandatorily on November 21, 2022at the lower of: (i) $0.303 ($6,818 after reverse stock splits, seeNote1 – Description of Business and Basis of Presentation); or (ii) the closing price of our common stock on November 18, 2022,provided adequate unissued authorized shares were available. For each share issued upon conversion, the holders were entitled to 1.85 times as manyfive*-year warrants with an exercise price equal to the conversion price for the Notes.

As a result, and since the Company had an insufficient number of authorized shares available to settle potential future warrant exercises, the Company recognized a derivative liability of $244,510,164 for the warrants with a corresponding increase in debt discount of $150,000,000 and interest expense of $94,510,164 (presented combined in the Statement of Operations as "Other financing costs - initial recognition of derivative liabilities"). The debt discount was amortized over the term of the Note through the date the convertible notes were mandatorily convertible. Accordingly, the entire amount was expensed in thefirst quarter of the year ended* September 30, 2023.On November 21, 2022,*principal of $59,402,877 was mandatorily converted into 9,815 shares of common stock.

On* December 23, 2022,the Company defaulted on the Notes bynot* having sufficient authorized shares to allow for both the Notes to be fully converted and the warrants to be exercised. On* January 13, 2023,the Company entered into a Settlement Agreement and Release in which investors waived the default prior to February 1, 2023.In exchange, the Company granted the investors the right to purchase additional shares of Series D Preferred Stock and warrants in an amount equal to such investor’s pro rata portion of $10 million. This right expired on June 30, 2023.*

During* February 2023,the remaining balance of the Notes (with the principal of $90,362,418) and accrued interest (in amount of $3,456,941) were converted by the holders into 13,762 shares of common stock. SeeNote8 – Warrants and Other Derivative Liabilities and Fair Value Measurements* with regards to warrants issued upon conversion of these Notes.

NOTE 8 –** WARRANTS AND OTHER DERIVATIVE LIABILITIES AND FAIR VALUE MEASUREMENTS**

ASC825-10 defines fair value 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.

Financial Instruments at Carrying Value That Approximated Fair Value

Certain financial instruments that arenot carried at fair value on the 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, and debt. Accounts payable are short-term in nature and generally are due upon receipt or within30 to90 days.

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

Non-financial assets are only required to be measured at fair value when acquired as a part of business combination or when an impairment loss is recognized. SeeNote 14 –Property, Plant, and Equipment andNote6* –Goodwill and Other Intangible Assets for further information. All these valuations are based on Level3* – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of these assets or liabilities*.*

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Financial Liabilities Measured at Fair Value on a Recurring Basis

Duringsix months ended* March 31, 2024and2023*, the Company had the following financial liabilities measured at fair value on a recurring basis:

Preferred C Warrants

The warrants, which were exercisable for common stock, issued in connection with the sale of Series C Preferred Stock (the “Preferred C Warrants”) in accordance with the* November 2021*Merger Agreement and further amendments, had an exercise price per share of $8.834 (after the reverse stock splits - $198,765) and a cashless exercise option based on certain formula established by relevant contracts.

These warrant liabilities were recognized as liabilities due to requirements of ASC480 because the variable number of shares to be issued upon cashless exercise (which was deemed to be the predominant exercise option) was based predominantly on a fixed monetary value. At each warrant exercise date and each accounting period end the warrant liability for the remaining unexercised warrants was marked-to-market value and the resulting gain or loss was recorded.

During the quarter ended* December 31, 2022,remaining 132 Preferred C Warrants that were outstanding as of September 30, 2022*were fully exercised on a cashless basis.

Preferred D Warrants

In accordance with Series D SPA (seeNote7* - Debt*) for every share of Series D Preferred Stock purchased, the investors received 185% (for the final $100 million voluntary investment right expiring* June 30, 2023 -*110%) warrants (the “Preferred D Warrants”) exercisable for shares of common stock at an exercise price equal to the lower of (i) $1.27 (after the reverse stock splits - $28,575) or (ii) the market price of common stock on the trading day immediately preceding the purchase notice date. The Preferred D Warrants are exercisable during afive-year period commencing upon issuance. The contracts for the Preferred D Warrants contain cashless exercise provisions similar to Preferred C Warrants described above. Therefore, management applied similar accounting treatment to recognition, measurement, and presentation of the warrant liabilities.

In* September 2022,the Company received an initial investment amount of $35 million (exercise price was $0.4379, or $9,853 after reverse stock splits) and issued to investors 79,926,925 shares of Series D Preferred Stock, and 263 Preferred D Warrants (hereinafter warrants and shares of common stock are presented giving effect to the reverse stock splits, seeNote1 – *Description of Business and Basis of Presentation).

By* September 30, 2022,no Preferred D Warrants were exercised, and all Preferred D Warrants remained outstanding with the fair value on September 30, 2022*in the amount of $55,398,551.

During the quarter ended* December 31, 2022,*all initial Preferred D Warrants were exercised on a cashless basis for 10,182 shares of common stock.

In* November 2022,the Company received $150,000,000 and issued, in lieu of Series D Preferred Stock, notes convertible into shares of common stock and Preferred D Warrants. As a result of the conversion of the convertible debt into shares of common stock in November 2022and February 2023,43,616 Preferred D Warrants were issued. By June 30, 2023,*all these Preferred D Warrants were exercised on a cashless basis for 93,664 shares of common stock.

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During* April 2023,we exercised our investment rights under the Series D SPA and requested an additional $45 million (exercise price was $0.1 or $2,250 after reverse stock splits) issuing to investors:273,363,635 Series D Preferred Stock,7,851 shares of common stock (in lieu of Series D Preferred Stock), and 37,000 Preferred D Warrants (post reverse stock split). The warrant liability recognized initially amounted to $73,260,454. By June 30, 2023,*all these Preferred D Warrants were exercised on a cashless basis for 147,672 shares of common stock (post reverse stock split).

In* June 2023,we exercised thesecond* half of our investment right for $45 million (exercise price was $0.432 or $388.8 after reverse stock splits) and, in lieu of Series D Preferred Stock, investors received:60,778 shares of common stock and 54,962 prefunded warrants exercisable forone share of common stock each, as well as 214,120 Preferred D Warrants.

In* June 2023,*one of the investors exercised their investment rights and invested $7 million (exercise price was $0.52 or $468 after reverse stock splits). The Company issued, in lieu of Series D Preferred Stock,14,957 shares of common stock and 27,671 Preferred D Warrants.

Final voluntary investment rights under the Series D SPA were exercised by the pool of investors in* June 2023and the Company received $100 million (exercise price was $0.1601, or $144.09 after reverse stock splits, for majority of investors, and $0.1696, or $152.64 after reverse stock splits, forone* investor), issuing to investors, in lieu of Series D Preferred Stock:183,731 shares of common stock and 508,159 prefunded warrants exercisable forone share of common stock each, as well as 761,079 Preferred D Warrants.

The warrant liability recognized in* June 2023upon initial accounting of these investments amounted to $254,962,776. By September 30, 2023,*a part of these prefunded warrants and Preferred D Warrants was exercised on a cashless basis for 2,194,413 shares of common stock (post reverse stock splits).

As of* September 30, 2023*, none of prefunded warrants and 382,436 Preferred D Warrants (recognized as liability in the consolidated balance sheets) exercisable into 1,438,009 shares of common stock with fair value of $64,739,175 remained outstanding.

During thethree months ended* December 31, 2023,a part of remaining Preferred D Warrants were exercised on a cashless basis for 2,020,152 shares of common stock (post reverse stock splits). During thethree* months ended* March 31, 2023,*a part of remaining Preferred D Warrants was exercised on a cashless basis for 1,220,615 shares of common stock.

As of* March 31, 2023,*18,898 Preferred D Warrants (recognized as liability in the consolidated balance sheets) exercisable into 1,070,499 shares of common stock with fair value of $5,122,610 remained outstanding and their exercise (on a cash or cashless basis) was available to investors for a period of approximately 4.2 years.

After the balance sheet date and by the date these financial statements were available to be issued, all remaining Preferred D Warrants were exercised on a cashless basis and there areno more Preferred D Warrants outstanding.

The fair value of warrant obligations is calculated based on the number and market value of shares that can be issued upon exercise of the warrants. The number of shares to be issued in accordance with relevant agreements is variable and depends on (i) lowest closing market price of shares for2 days before the exercise, and (ii) multiplicator calculated based on Black Scholes formula where all elements, except for risk-free rate, are fixed on the investment date. Accordingly, the fair value of warrants on recognition date and on subsequent dates was estimated as a maximum of (i) Black Scholes value for cash exercise of relevant warrants and (ii) current market value of the number of shares the Company would be required to issue upon cashless warrant exercise on a relevant date in accordance with warrant contract requirements. The latter valuation, based on observable inputs (level2), has been higher and reflects the pattern of the warrants exercise since the inception of the Series D SPA.

At each warrant exercise date and each accounting period end the warrant liability for the remaining unexercised warrants is marked-to-market value and the resulting gain or loss is recorded in consolidated statement of operations as a “Gain / (loss) on derivative liability revaluation”.

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All the warrants mentioned in this section provide that if the Company issues or sells, enters into a definitive, binding agreement pursuant to which the 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, 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.

Other derivative liabilities

Other derivative liabilities recognized and remeasured subsequently at fair value include: embedded derivatives issued with convertible notes (primarily, conversion option), and preferred stock that failed equity presentation when the Company had insufficient number of authorized shares available to settle all potential future conversion transactions, automatic increase in interest rate upon an event of default, and optional conversion feature that werenot clearly and closely related to the economic characteristics and risks of a debt host. These derivative liabilities were initially recognized on* November 15, 2022,when the Company entered into AmendmentNo.* 3 to the Series D SPA (seeNote7* - Debt*) having an insufficient number of authorized shares of common stock available for issuance upon conversion of preferred stock and convertible notes payable and the exercise of outstanding warrants. They were carried at fair value and have been reclassified to equity respectively upon final conversion of the Notes, and upon authorization of increase of common stock available for issuance by stockholders of the Company during thethree months ending* March 2023.*

Qiantu Warrants

On* March**14,* 2023, the Company entered into an Intellectual Property and Distribution Agreement (the “IP Agreement”) with Qiantu Motor (Suzhou) Ltd., andtwo of Qiantu Suzhou’s affiliates (herein “Qiantu”). Pursuant to the IP Agreement, Qiantu granted the Company the exclusive license to use certain of Qiantu’s trademarks and the exclusive right to assemble, manufacture, and sell the homologated vehicles based on the Qiantu K-50 model throughout North America and South America for a period offive years (seeNote19* *for more details). These rights will be obtained and the commitment will only be effective upon the Company’s assessment of feasibility and profitability of the project.

As a part of consideration for the Company’s entry into the IP Agreement, the Company issued to Qiantu USA warrants to purchase up to 3,334 (giving effect to the reverse stock splits, seeNote1* – *Description of Business and Basis of Presentation) shares of the Company’s common stock (the “Qiantu Warrants”).

The Qiantu warrants, per contract, are exercisable at Qiantu USA’s discretion at any time from* September30,* 2023 up to and including* September30,* 2024 at 110% of the market price of the Company’s common stock at the close of trading on the earlier of (a) when the Company completes its obligations to its Series D Preferred Stock investors; or (b)* June**15,* 2023, so their exercise price is $234 (giving effect to the reverse stock splits). The Qiantu Warrants have anti-dilution provisions similar to those described above, but they provide for exemption for Series D Preferred Stock transactions rights and obligations that existed on the date the Qiantu Warrants were issued.

As it was expected that the Company* may**not* have a sufficient number of authorized shares of common stock available for issuance during the term of the contract (up to* September 2024),and the shares to be issued upon possible exercise of warrants havenot* been registered, the Qiantu Warrants were recognized at fair value on inception ($6,814,000) and on each subsequent period end. Due to decline in market price of shares the fair value of Qiantu Warrants on* September 30, 2023* decreased to $124,134, and on* March 31, 2024* to $1,876. The difference has been recognized within gains (losses) on derivative liabilities revaluation in the consolidated statements of operations.

Upon issuance and upon revaluation of the instruments, the Company estimated the fair value of these derivatives using the Black-Scholes Pricing Model and binomial option valuation techniques based on the following assumptions: (1) dividend yield of 0%, (2) expected annualized volatility of 198-222%, and (3) risk-free interest rate of 4.3% to 4.7%. These liabilities are classified as having significant unobservable inputs (level3) in the table below.

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Breakdown of items recorded at fair value on a recurring basis in consolidated balance sheets by levels of observable and unobservable inputs as of* March 31, 2024* and on* September 30, 2023* is presented below:

A summary of all changes in warrants and other derivative liabilities is presented below:

NOTE 9 –** STOCKHOLDERS**’** EQUITY**

Common Stock

At a special meeting on* January 25, 2023,stockholders approved the proposal to increase the Company’s authorized common stock capital from 1.75 billion to 5 billion shares. At March 31, 2024*, the Company had 5 billion shares of common stock authorized with $0.001 par value per share.

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As described in detail in theNote1* - Description of Business and Basis of Presentationabove, by December 31, 2023,the Company has effectuated a series of reverse stock splits. All stock splits resulted in reduction of shares of common stock issued and outstanding and didnot* affect authorized common stock or preferred stock. The Company had 7,974,442 and 2,871,707 shares of common stock (post reverse stock splits) issued and outstanding on* March 31, 2024* and* September 30, 2023*, respectively.

The holders of common stock are entitled toone vote for each share of common stock held at all meetings of stockholders. In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the common 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 arenot entitled to receive dividends unless declared by our Board. To date,no dividends have been declared or paid to the holders of common stock.

When the Company receives a warrant exercise notice or preferred stock conversion notice close to the balance sheet date, and issues relevant order to a transfer agent, which is effectively exercised only after the balance sheet date, relevant shares of common stock are presented in the balance sheet as common stock owed butnot issued.

Change in Control Agreements

On* August 11, 2023,*the Board of Directors approved, and the Company entered, Change in Control Agreements with each non-employee director and Chief Executive Officer. Pursuant to the Change in Control Agreements with each non-employee director, upon a change in control of the Company, any unvested equity compensation will immediately vest in full and such non-employee director will receive $5 million. Pursuant to the Agreement with CEO, upon a change in control of the Company, any unvested equity compensation will immediately vest in full and CEO will receive an aggregate percentage of the transaction proceeds as follows:10% of the transaction proceeds that are up to and including $1 billion; plus, an additional 5% of transaction proceeds that are more than $1 billion and up to $1.5 billion; and an additional 5% of transaction proceeds that are more than $1.5 billion. A change in control, as defined in the agreements occurs upon (i) any person becoming the beneficial owner of 50% or more of the total voting power of the Company’s then outstanding voting securities, (ii) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors (as defined in the Change in Control Agreements), or (iii) the consummation of a merger or consolidation of the Company (except when the total voting power of the Company continues to represent at least 50% of the surviving entity), any liquidation, or the sale or disposition by the Company of all or substantially all of its assets.

Preferred Stock

Under the terms of our Certificate of Incorporation, the Board* maydetermine the rights, preferences, and terms of our authorized but unissued shares of Preferred Stock. Pursuant to the terms of its Second Amended and Restated Certificate of Incorporation, as amended, upon conversion of shares of Preferred Stock, such shares so converted are cancelled andnot* issuable. As of* July 26, 2022,as a result of an amendment to its Certificate of Incorporation increasing its authorized Preferred Stock, the Company had 500,000,000 shares of Preferred Stock authorized with $0.001 par value per share, and as of March 31, 2024*, pursuant to its terms of Preferred Stock conversion, the Company had remaining 127,474,455 shares of Preferred Stock authorized. The reverse stock splits (seeNote1** -Description of Business and Basis of Presentation above) didnot affect the number of shares of Preferred Stock authorized and outstanding, but the conversion ratios were proportionately adjusted to decrease the number of shares of common stock to be issued as a result.

The Company has designated Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, and Series AA Preferred Stock, which has been cancelled.

On* May 1, 2024,in connection with the adoption of a Rights Agreement, the Company filed a Certificate of Designation setting forth the rights, powers and preferences of Series A-1 Junior Participating Preferred Stock par value$0.001* per share, seeNote21* - Subsequent Events* for further details.

There wereno transactions with Preferred Stock during thesix months ended* March 31, 2024*.

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Transactions with Preferred Stock during thethree andsix months ended* March 31, 2023* are presented below:

Redemption Rights

The shares of Preferred Stock arenot subject to mandatory redemption.

The Series C Preferred Stock and Series D Preferred Stock are voluntarily redeemable by the Company in accordance with the following schedule, provided that the issuance of shares of common stock issuable upon conversion has been registered and the registration statement remains effective:

Year1: No Redemption

Year2: Redemption at 120% of the Redemption Price

Year3: Redemption at 115% of the Redemption Price

Year4: Redemption at 110% of the Redemption Price

Year5: Redemption at 105% of the Redemption Price

Year6 and thereafter: Redemption at 100% of the Redemption Price

The Series C Preferred Stock and Series D Preferred Stock are redeemable by the Company for a Redemption price per share equal to the Issue Price ($8.84 for Series C Preferred Stock and $0.4379 for remaining Series D Preferred Stock), plus all unpaid accrued and accumulated dividends on such share (whether ornot declared), provided: (A) the Preferred Stock has been issued and outstanding for a period of at leastone year, (B) the issuance of the shares of common stock underlying the Preferred Stock has been registered pursuant to the Securities Act and such registration remains effective, and (C) the trading price for the common stock is less than the Conversion Price for20 trading days in any period of30 consecutive trading days on the Nasdaq Capital Market.

Dividends

The holders of Series A and Series B Preferred Stock are entitled to non-cumulative dividends if declared by the Board of Directors. The holders of the Series A Preferred Stock and Series B Preferred Stock participate on a pro rata basis (on an “as converted” basis to common stock) in any cash dividend paid on common stock. No dividends have been declared or paid duringthree andsix months ended* March 31, 2024* and2023.

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The Series C Preferred Stock originally provided for a cumulative 15.0% per annum fixed dividend on the Series C Original Issue Price plus unpaid accrued and accumulated dividends. On* January 13, 2023,*the Company and holders of Series C Preferred Stock entered into a waiver agreement pursuant to which such holders irrevocably waived their right to receive any and all cumulative 15.0% per annum fixed dividends on such Preferred Stock, including all unpaid accrued and accumulated dividends.

The Series D Preferred Stock bears a 15.0% per annum fixed dividend accumulated and compounded monthly, payableno later than the5th day after the end of each month on the Series D Original Issue Price plus unpaid accrued and accumulated dividends. Dividends on the Series D Preferred Stock are payable prior to any dividends on any other series of Preferred Stock or the common stock. The amount of Series D Preferred Stock dividends accumulated as of* March 31, 2024* was approximately $0.4 million.

The Company* mayelect to pay dividends for any month with a payment-in-kind (“PIK”) election 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 for10* trading days in any period of20 consecutive trading days on the NASDAQ is equal to or greater than $27.5 million.

Liquidation, Dissolution, and Winding Up

In the event of any Liquidation Event, the holders of the Series D Preferred Stock 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 D Original Issue Price ($0.4379 per share in respect of the outstanding Series D Preferred Stock) plus declared but unpaid dividends (none declared but unpaid dividends on* March 31, 2024* and2023).

In the event of any Liquidation Event, the holders of the Series B Preferred Stock will be entitled to receive, after full execution of rights of the Series D Preferred Stock holders, and 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 (none declared but unpaid dividends on* March 31, 2024* and2023).

Upon the completion of a distribution pursuant to a Liquidation Event to the Series D Preferred Stock and Series B Preferred Stock, the holders of the Series C Preferred Stock will be entitled to receive, prior and in preference to any distribution of the proceeds to the holders of the Series A Preferred Stock or the common stock by reason of their ownership thereof, an amount per share equal to the Series C Original Issue Price ($8.84 per share) plus declared but unpaid dividends (none declared but unpaid dividends on* March 31, 2024* and2023).

Upon the completion of a distribution pursuant to a Liquidation Event to the Series D Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the holders of Series A Preferred Stock are entitled to receive, prior and in preference to any distribution of any proceeds to the holders of the common stock, by reason of their ownership thereof, $1.29 per share of each share of the Series A Preferred Stock, plus declared but unpaid dividends on such share (none declared but unpaid dividends on* March 31, 2024* and2023). “Liquidation Event” is as defined in the Certificate of Incorporation and, subject to certain exceptions, includes a sale or other disposition of all or substantially all of the Company’s assets, certain mergers, consolidations and transfers of securities, and any liquidation, dissolution or winding up of the Company.

Conversion

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into 0.0046 (giving effect to the reverse stock splits – seeNote1* – *Description of Business and Basis of Presentation) shares of fully paid and non-assessable shares of common stock (rounding up to the nearest share).

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Each share of Series B Preferred Stock and each share of Series C Preferred Stock are convertible at the option of the holder at any time into such number of shares of common stock as is determined by dividing the Issue Price by the relevant Conversion Price (in each case, subject to adjustment). As of* March 31, 2024*, there wereno shares of Series B Preferred Stock issued and outstanding. As of* March 31, 2024*, each share of Series C Preferred Stock is convertible into 0.000045 (giving effect to the reverse stock split – seeNote1* – *Description of Business and Basis of Presentation) shares of fully paid and nonassessable shares of common stock (rounding up to the nearest share).

Each share of Series C Preferred Stock will automatically be converted into shares of common stock at the applicable conversion rate at the time in effect immediately upon (A) the issuance of shares of common stock underlying the Series C Preferred Stock being registered pursuant to the Securities Act of1933 and such registration remaining effective, (B) the trading price for the Company’s common stock being more thantwo times the Series C Conversion Price for20 trading days in any period of30 consecutive trading days on the Nasdaq Capital Market, and (C) the average daily trading dollar volume of the Company’s common stock during such20 trading days is equal to or greater than $4.0 million.

The Series D Preferred Stock is convertible at the option of each holder at any time into the number of shares of common stock determined by dividing the Series D Original Issue Price (plus all unpaid accrued and accumulated dividends thereon, as applicable, whether ornot declared), by the Series D Conversion Price, subject to adjustment as set in the Certificate of Designation. As of* March 31, 2024*, each share of Series D is convertible into 0.000047 (giving effect to the reverse stock split – seeNote1* – *Description of Business and Basis of Presentation) shares of fully paid and nonassessable shares of common stock (rounding up to the nearest share).

Each share of Series D Preferred Stock will automatically be converted into shares of common stock at the applicable Conversion Rate at the time in effect immediately upon (A) the issuance of shares of common stock underlying the Series D Preferred Stock being registered pursuant to the Securities Act and such registration remaining effective, (B) the trading price for the Company’s common stock being more thantwo times the Series D Conversion Price for20 trading days in any period of30 consecutive trading days on the Nasdaq Capital Market, and (C) the average daily trading dollar volume of the Company’s common stock during such20 trading days is equal to or greater than $27.5 million.

Voting Rights

The holders of shares of common stock and Series A, Series B and Series C Preferred Stock 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 Stock, Series B Preferred Stock, or Series C Preferred Stock, 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 Stock and Series C Preferred Stock has right toone vote for each share of common stock into which such Series B Preferred Stock and/or Series C Preferred Stock, as applicable, could be converted. Each holder of Series A Preferred has the right to 1,000 votes per share held of record by such holder (this right will terminate on* November 5, 2024).*

The holders of Series D Preferred Stock haveno voting rights except for protective voting rights (one vote for each share) in such cases as approval of a liquidation event, authorization of issue of securities having a preference over or parity with the Series D Preferred Stock with respect to dividends, liquidation, redemption or voting, entering a merger or consolidation, etc.

Series AA Preferred Stock

The Series AA Certificate of Designation, filed in* November 2022,provided that the Series AA Preferred Stock would have 57,778 votes (giving effect to reverse stock splits, seeNote1 – *Description of Business and Basis of Presentation) per share of Series AA Preferred Stock and would vote together with the outstanding shares of the Company’s common stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock as a single class exclusively with respect to any proposal to adopt an amendment to the Company’s Second Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. The Preferred Stock otherwise hadno voting rights except as otherwise required by the General Corporation Law of the State of Delaware.

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The Series AA Preferred Stock wasnot convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Series AA Preferred Stock hadno rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Series AA Preferred Stock wasnot entitled to receive dividends of any kind. On* November 14, 2022,the Company entered into a Subscription and Investment Representation Agreement with David Michery, its Chief Executive Officer, pursuant to which the Company issued and soldone* share of the Company’s Series AA Preferred Stock for $25,000 in cash. In* January 2023,the outstanding share of Series AA Preferred Stock was redeemed for $25,000, upon the approval by the Company’s stockholders of an amendment to the Certificate of Incorporation to implement a reverse stock split (seeNote1 – *Description of Business and Basis of Presentation) and the Company filed a certificate of cancellation of the Series AA Preferred Stock.

NOTE 10 –** LOSS PER SHARE**

Earnings per common share (“EPS”) is computed by dividing net income allocated to common stockholders by the weighted-average shares of common stock outstanding. Diluted EPS is computed by dividing income allocated to common stockholders plus dividends on dilutive convertible preferred stock and preferred stock that can be tendered to exercise warrants, by the weighted-average shares of common stock outstanding plus amounts representing the dilutive effect of outstanding warrants and the dilution resulting from the conversion of convertible preferred stock, if applicable.

For thethree andsix months ended* March 31, 2024and2023*, outstanding warrants, convertible debt and shares of Preferred Stock were excluded from the diluted share count because the result would have been antidilutive under the “if-converted method.”

The following table presents the reconciliation of net loss attributable to common stockholders to net loss used in computing basic and diluted net income per share of common stock (giving effect to the reverse stock splits – seeNote 1 - Description of Business and Basis of Presentation):

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NOTE 11 –** SHARE-BASED COMPENSATION**

The Company has incentive plans that are a part of annual discretionary share-based compensation program. The plans include consultants and employees, directors and officers. The Company has been issuing new shares of common stock under the share-based compensation programs, and cash hasnot been used to settle equity instruments granted under share-based payment arrangements.

Employees of the Company

Employees of the Company, including officers, are entitled to a number of shares of common stock specified in relevant offer letters and employment contracts and subject to the approval of our Board of Directors Compensation Committee. The total expense of share awards to employees represents the grant date fair value of relevant number of shares to be issued and is recognized, in correspondence with additional paid-in capital, ratably over the service period. The majority of awards to employees are equity-classified. The liability that relates to liability classified stock-based compensation contracts with employees amounts to $50,000 on* March 31, 2024*. The Company has also accrued a liability (presented within "Accrued expenses and other current liabilities" in the consolidated balance sheets) in an amount of $1.4 million (or 270,392 shares of common stock at market price on* March 31, 2024*) to compensate employees for delay with the issuance of common stock per relevant offer letters and employment contracts.

Consultants

From time to time the Company also issues share-based compensation to external consultants providing consulting, marketing, R&D, legal and other services. The number of shares specified within individual agreements, or a monetary value of those shares, if applicable, is negotiated by our Chief Executive Officer and approved by Compensation Committee of the Board of Directors. These costs are generally presented as professional fees within general and administrative, and certain qualifying costs* maybe presented as part of research and development expenses ($0.4 million over thesix* months ended* March 31, 2024*).

A part of these share-based awards is classified as equity and accounted for similar to stock-based compensation to employees. Another part of the Company’s share-based awards to consultants is classified as liabilities: mainly if a number of shares a consultant is entitled to is predominantly based on monetary value fixed in the contract. An accrued part of liability in this case is revaluated each period based on the part of the services performed and market price of the shares of common stock of the Company, until sufficient number of shares is issued. The liability to consultants as of* March 31, 2024* amounted to $1.3 million. The Company generally practices prepayment for future services of the consultants by unrestricted shares of common stock – in this case a prepaid asset is recognized on the balance sheet and is amortized over the period the consultant is delivering their services to the Company. These prepaid costs amounted to $4.2 million as of* March 31, 2024*.

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CEO Award Incentive Plans

The Company entered into a CEO Performance Stock Award Agreement, approved by the Board and by stockholders in2022 (“2022 PSA Agreement”) and a CEO Performance Stock Award Agreement, approved by the Board and by stockholders in2023 (“2023 PSA Agreement”). Under these plans, the Chief Executive Officer is entitled to share-based awards generally calculated as 1-3% of then outstanding number of shares of common stock, issuable upon achievement of specific financial and operational targets (milestones) that are supposed to significantly increase value of the Company.

The costs (income) recognized within the line item "CEO share based performance award liability revaluation" in the table above represent both actual issuances of common stock under PSA Agreements and revaluation of these provisions for future probable awards. This share-based compensation is accrued over the service term when it is probable that the milestone will be achieved. The liability to issue stock (presented within non-current liabilities if the achievement is expected later than12 months after the balance sheet date) is revalued on every balance sheet date based on the length of the service period, current market price of the common stock, and on the number of shares of common stock outstanding – until the shares have been issued, or until fulfilling of the milestone requirements isno longer probable.

As of* March 31, 2024*, the accrual for future awards under2022 PSA Agreement amounted to approximately $0.3 million. Out of all remaining2022 PSA Agreement awards, the only awards that are considered probable are capital benchmarks that provide for a 1% of outstanding common stock on every*$100* million the Company raises.

As of* March 31, 2024*, the accrual for future awards under2023 PSA Agreement amounted to approximately $2.8 million. A part of this provision in the amount of $0.5 million has been recognized within non-current liabilities as the achievement is expected later than12 months after the balance sheet date. Out of all remaining2023 PSA Agreement awards, all awards are considered probable by the Company, except for Vehicle Completion Milestone (i) (USA certification and homologation of Class Three Van – expired by end of* December 2023),*and except for Accelerated Development Milestone which has been achieved (Mullen has acquired a facility with existing equipment that allows the Company to expedite scaling of battery pack production in the USA).

NOTE 12 –** ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES**

NOTE 13 - LIABILITY TO ISSUE STOCK

The liability to issue stock on* March 31, 2024* (current liability in amount of $7.8 million and non-current liability in amount of $0.5 million) represents CEO incentive award provision to be settled in shares of common stock upon achievement of specific targets (current liability in amount of $2.6 million and non-current liability in amount of $0.5 million), and shares to be issued to certain investors upon warrants exercise in process (876,192 shares or $3.7 million), as well as certain liability-classified contracts with consultants (current liability in amount of $1.3 million) and other parties (current liability in amount of $0.2 million). The liability on* September 30, 2023* mainly related to CEO incentive award provision, seeNote 11 - Share Based Compensation for more details.

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NOTE 14 –** PROPERTY, PLANT, AND EQUIPMENT, NET**

Property, plant, and equipment consists of the following:

During the last quarter of fiscal year ended* September 1, 2023,due to unfavorable market conditions, decline of the market prices of the Company’s common stock, and budgeted performance misses compared to the budgets prepared previously, we have tested long-lived asset for recoverability. The test was performed on September 1, 2023by management with the assistance of independentthird*-party valuation professionals, using both discounted cash flow method and guideline public company method. The fair value of the property, plant, and equipment of the ELMS/Legacy Mullen segment (classified in Level3 of the fair value hierarchy) was determined on a standalone basis utilizing the cost and market approaches to value. The assets of the Bollinger's segment (seeNote4* - Segment information*) werenot impaired, except for impairment of goodwill (seeNote6* - Goodwill and Other Intangible Assets*). An impairment loss in amount of $13,519,492 has been recognized in respect of the property, plant, and equipment of the ELMS/Legacy Mullen segment: primarily construction-in-progress, and machinery and equipment. No additional impairment has been recognized in respect of property, plant, and equipment during thesix months ended* March 31, 2024*.

Depreciation expense related to property, plant, and equipment for thethree andsix months ended* March 31, 2024* was $8,656,212 and $11,680,295, respectively ($2,947,555 and $5,351,737 for thethree andsix months ended* March 31, 2023*, respectively).

NOTE 15 –** PREPAID EXPENSES AND PREPAID INVENTORY**

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NOTE 16 –** OPERATING EXPENSES**

General and administrative expenses consist of the following:

The main portion of the Professional fees relate to stock-based compensation, seeNote 11 - Share Based Compensation for additional information.

Research and Development

Research and development expenses for thesix months ended* March 31, 2024and2023* were $40,193,493 and $29,100,980, respectively. Research and development expenses for thethree months ended* March 31, 2024and March 31, 2023* were $24,023,526 and $20,478,971, respectively. Costs are expensed as incurred. 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.

NOTE 17 –** LEASES**

We have entered into various operating lease agreements for certain offices, manufacturing and warehouse facilities, and land. Operating leases led to recognition of right-of-use assets, and current and noncurrent portion of lease liabilities. These right-of-use assets also include any lease payments made and initial direct costs incurred at lease commencement and exclude 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 have 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.

On* November 1, 2023,the Company entered a 5-year lease agreement for premises of approximately 122,000 sq. ft. in Fullerton, California, designated for light manufacturing and distribution of electric vehicle batteries. Base rent is $2,992 thousand for thefirst* year (and increases approximately 4% every year) and additional operating expenses are approximately $715 thousand in thefirst year with subsequent annual recalculation. Security deposit payable to the landlord is approximately $1 million.

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The table below presents information regarding our lease assets and liabilities.

For thethree andsix months ended* March 31, 2024*, we recognized impairment of right-of-use assets in amount of $3.2 million, see alsoNote6* - Goodwill and Other Intangible Assets.*

The following table reflects maturities of operating lease liabilities at* March 31, 2024*:

NOTE 18 –** INCOME TAXES**

The Company and its less than100% owned subsidiaries are filing separate tax returns and we calculate the provision for income taxes by using a “separate return” method. Section174 deduction and R&D credits are calculated using consolidated tax return rules and are allocated among its members. Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

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We maintain a full valuation allowance against the value of our U.S. and state net deferred tax assets because recoverability of the tax assets doesnot meet the “more likely thannot” requirement as of* March 31, 2024* and* September 30, 2023*.

NOTE 19 –** CONTINGENCIES AND CLAIMS**

ASC450.20 governs the disclosure and recognition of loss contingencies, including potential losses from litigation, regulation, 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 whenone or more future events occur or fail to occur.” ASC450 requires accrual for a loss contingency when it is probable thatone or more future events will occur confirming the fact of loss and the amount of the loss can be reasonably estimated. Under this standard an event is probable when it is likely to occur.

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 recognize accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and disclose 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 tonot be misleading. As required by ASC450 we donot record liabilities when the likelihood isnot probable, or when the likelihood is probable, but the amount cannot be reasonably estimated. 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.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. We evaluate, at least quarterly, developments in our legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate. For the matters we disclose that donot include an estimate of the amount of loss or range of losses, such an estimate isnot possible or is immaterial, and we* maybe unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies. Until the final resolution of such matters, if any of our estimates and assumptions change or prove to have been incorrect, we may*experience losses in excess of the amounts recorded, which could have a material effect on our business, consolidated financial position, results of operations, or cash flows.

Information with respect to our legal proceedings is contained inNote19* – Contingencies and Claims* of the Notes to Consolidated Financial Statements of our Annual Report on Form10-K for the year ended* September 30, 2023*. Other than as set forth herein, there areno additional updates to the legal proceedings involving the Company and/or its subsidiaries.

Qiantu Motor (Suzhou) Ltd.

This matter arises out of a contract dispute between Mullen and Qiantu Motor (Suzhou) Ltd. (“Qiantu”) related to the engineering, design, support, and homologation of Qiantu’sK50 vehicle by Mullen. On* July 1, 2020,the court ordered this matter to arbitration. It was submitted to the American Arbitration Association on February 9, 2021,for arbitration in Denver, Colorado. On March 14, 2023,*the parties entered into a Settlement Agreement providing for full settlement of all pending litigation between Mullen and Qiantu. Mullen continues its analysis of the homologation costs and the parties continue to negotiate licensing rights to the European territories.

No loss provision has been accrued in respect of this matter as of* March 31, 2024*, as the Company can reasonably estimate neither probability of additional losses (other than those paid), nor their magnitude (if any), based on all information presently available to management.

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International Business Machines (“IBM”)

On* May 7, 2019,*International Business Machines (‘IBM”) filed a claim against Mullen Technologies, Inc., in the Supreme Court of the State of New York. This matter arises out of a contract dispute between Mullen and IBM related to a joint development and technology license agreement, patent license agreement, and a logo trademark agreement.

The Company has recognized the amounts paid ($5.9 million) as losses on settlement in the year ended* September 30, 2022*and doesnot expect any additional losses to be reasonably possible.

TOA Trading LLC Litigation

On* April 8, 2022,*TOA Trading LLC and Munshibari LLC (“Plaintiffs”), filed a complaint against the Company and Mullen Technologies, Inc. in the United States District Court for the Southern District of Florida. Plaintiffs bring claims for breach of contract, or alternatively, unjust enrichment, related to an unpaid alleged finder’s fee in connection with a merger, and seek damages, pre- and post-judgment interest, as well as an award of reasonable fees and expenses.

The Company has accrued expected settlement expense as of* March 31, 2024*.

DBI Lease Buyback Servicing LLC, Drawbridge Investments LLC

On* March 2, 2023,*DBI and Drawbridge Investments LLC (collectively, “Drawbridge”) filed a complaint in the Commercial Division of the Supreme Court of the State of New York, County of New York against Mullen. The complaint arises out of a letter agreement providing DBI with a right to purchase up to $25 million worth of a to be issued Series E Convertible Preferred Stock and warrants and asserts claims for: (1) specific performance of the alleged agreement; (2) money damages (in an amount exceeding $100 million) arising out of Mullen’s alleged breach of the alleged agreement; and (3) declaratory judgment setting forth Drawbridge’s rights and Mullen’s obligations under the alleged agreement.

On* December 5, 2023,as part of the settlement, Drawbridge withdrew its appeal to Mullen’s Motion to Dismiss, which was granted by the court on August 25, 2023,with prejudice. Based on the contract signed by the parties, the Company paid $1.95 million as of March 31, 2024* in full and complete satisfaction of the claims.

The GEM Group

On* September 21, 2021,the GEM Group filed an arbitration demand and statement of claim with the American Arbitration Association against Mullen seeking declaratory relief and damages. This matter arises out of an alleged breach of a securities purchase agreement dated November 13, 2020.On November 17, 2023,the arbitrator issued the Partial Final Award on Liability finding that Mullen and Mullen Technologies, Inc. (“MTI”) had repudiated and breached the securities purchase agreement and a related agreement (the “GEM Agreements”). On January 29, 2024,*the parties completed the briefing on the issues of damages and allocation. To date,no award on damages has been issued.

On* August 3, 2023,the Arbitrator ordered Mullen to deposit $7,000,000 into an interest-bearing escrow account with a commercial bank or brokerage firm. On January 24, 2024,the arbitrator ordered Mullen to deposit an additional $24,114,921 into escrow on or before March 9, 2024.The GEM Group has moved in the United States District Court to confirm thatsecond* interim order. To date, that motion isnot fully briefed.

On or about On* December 28, 2023,Mullen and MTI filed a complaint against the GEM Group and Christopher F. Brown in the United States District Court for the Southern District of New York alleging, among other things, that the GEM Group and Mr. Brown engaged in an unlawful securities transaction under the federal securities laws by entering into the GEM Agreements while the GEM Group was operating as an unregistered dealer. The complaint seeks an order declaring, among other things, that the GEM Agreements are voidab initio*. On* April 8, 2024,*the District Court stayed that action.

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The Company has accrued $7 million as a probable settlement expense as of* March 31, 2024*. The Company can reasonably estimate neither probability of additional losses, nor their magnitude (if any), based on all information presently available to management.

Mullen Stockholder Litigation

Margaret Schaub v. Mullen Automotive Inc.

On* May 5, 2022,Plaintiff Margaret Schaub, a purported stockholder, filed a putative class action complaint in the United States District Court Central District of California against the Company, as well as its Chief Executive Officer, David Michery, and the Chief Executive Officer of a predecessor entity, Oleg Firer (the “Schaub Lawsuit”). This lawsuit was brought by Schaub both individually and on behalf of a putative class of the Company’s shareholders, claiming false or misleading statements regarding the Company’s business partnerships, technology, and manufacturing capabilities, and alleging violations of Sections10*(b) and20(a) of the Securities Exchange Act of1934 (“Exchange Act”) and Rule10b-5 promulgated thereunder. An amended complaint was filed on* September 23, 2022,*asserting claims against the Company, Mullen Technologies, Inc., and Mr. Michery. The Schaub Lawsuit seeks to certify a putative class of shareholders, and seeks monetary damages, as well as an award of reasonable fees and expenses.

The Company has accrued expected settlement expense as of* March 31, 2024*.

Trinon Coleman v. David Michery et al.

On* December 8, 2023,*Trinon Coleman, a purported stockholder, filed a shareholder derivative action in the Court of Chancery for the State of Delaware, purportedly in the right and for the benefit of the Company as a nominal defendant, against Mr. Michery, and Company directors Mr. Puckett, Ms. Winter, Mr. Betor, Mr. Miltner, and Mr. New (the “Coleman Lawsuit”). This lawsuit asserts claims for breach of fiduciary duty, insider trading, and unjust enrichment primarily in connection with the issues and claims asserted in the Schaub Lawsuit. The Coleman Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and seeks monetary damages and an award of reasonable fees and expenses.

No loss provision has been accrued in respect of this matter as of* March 31, 2024*, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all information presently available to management.

David Gru v. Mullen Automotive Inc.

On* May 12, 2022,David Gru, a purported stockholder, filed a putative class action lawsuit in the United States District Court for the Central District of California against the Company, Mr. Michery, and Mr. Firer (the “Gru Lawsuit”). This lawsuit was brought by Gru both individually and on behalf of a putative class of Mullen’s shareholders, claiming false or misleading statements regarding Mullen’s business partnerships, technology, and manufacturing capabilities, and alleging violations of Sections10*(b) and20(a) of the Exchange Act and Rule10b-5. The Gru Lawsuit sought to declare the action to be a class action, and sought monetary damages, pre-judgment and post-judgment interest, as well as an award of reasonable fees and expenses. On* August 4, 2022,*the Court consolidated this action into the Schaub Lawsuit, and ordered this action administratively closed.

Jeff Witt v. Mullen Automotive Inc.

On* August 1, 2022,Jeff Witt and Joseph Birbigalia, purported stockholders, filed a shareholder derivative action in the United States District Court for the Central District of California, purportedly in the right and for the benefit of the Company as a nominal defendant, and Mr. Michery, Mr. Firer, and current or former Company directors Ignacio Novoa, Mary Winter, Kent Puckett, Mark Betor, William Miltner and Jonathan New (the “Witt Lawsuit”). The Witt Lawsuit asserts claims for breach of fiduciary duty, unjust enrichment, abuse of control, waste of corporate assets, and violation of Section14* of the Exchange Act primarily in connection with the issues and claims asserted in the Schaub Lawsuit. The Witt Lawsuit seeks monetary damages, as well as an award of reasonable fees and expenses.

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No loss provision has been accrued in respect of this matter as of* March 31, 2024*, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all information presently available to management.

Hany Morsy v. David Michery, et al.

On* September 30, 2022,Hany Morsy, a purported stockholder, filed a shareholder derivative action in the United States District Court for the Central District of California, purportedly in the right and for the benefit of the Company as a nominal defendant, against Mr. Michery, Mr. Firer, former Company officer and director, Jerry Alban, and Company directors Mr. Novoa, Ms. Winter, Mr. Puckett, Mr. Betor, Mr. Miltner, and Mr. New (the “Morsy Lawsuit”). This lawsuit asserts claims for breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and violation of Section14* of the Exchange Act primarily in connection with the issues and claims asserted in the Schaub Lawsuit. The Morsy Lawsuit seeks to direct the Company to improve its corporate governance and internal procedures, and also seeks monetary damages, pre-judgment and post-judgment interest, restitution, and an award of reasonable fees and expenses. On* November 8, 2022,*the Court consolidated this matter and the Witt Lawsuit (see above).

Chosten Caris v. David Michery

On* April 27, 2023,Chosten Caris, a purported stockholder, filed a complaint against Mr. Michery in the Eighth Judicial Circuit in and for Alachua County, Florida (the “Caris Lawsuit”). This lawsuit purports to seek damages for claims arising under Section10*(b) of the Exchange Act and Rule10b-5 promulgated thereunder. The Caris Lawsuit also seeks punitive damages. On* May 17, 2023,*Mr. Michery removed the Caris Lawsuit to the United States District Court for the Northern District of Florida.

No loss provision has been accrued in respect of this matter as of* March 31, 2024*, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all information presently available to management.

Martis v. Michery et al.

On* March 14, 2024,Marius Martis, a purported stockholder, filed a shareholder derivative action in the United States District Court for the District of New Jersey, purportedly in the right and for the benefit of the Company as a nominal defendant, against Mr. Michery, Company directors Ms. Winter, Mr. Betor, and Mr. Puckett, as well asthird*-parties Oleg Firer, Jon Najarian, John Roland, Todd Raarup, Argus Merchant Services, LLC and RBL Capital Group LLC (the “Martis Lawsuit”). This lawsuit purports to seek damages for claims relating to the Net Element, Inc. (“Net Element”) merger and Net Element’s divestiture of a payment processing business, arising under Sections10(b),14(a),20, 21D and29(b) of the Exchange Act, as well as claims for breach of fiduciary duty. The Martis Lawsuit seeks rescission, as well as monetary damages and an award of reasonable fees and expenses.

No loss provision has been accrued in respect of this matter as of* March 31, 2024*, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all information presently available to management.

Other contingencies

Accrued debt settlement

As discussed in theNote7* - Debt*, on* December 18, 2023,Mullen entered into a Debt Agreement to issue a non-convertible secured promissory note with a principal amount of $50 million, purchased for $32 million, reflecting an $18 million original issue discount. The $18 million original issue discount was considered a settlement cost related to a dispute over financings that occurred during the fiscal year ended September 30, 2023.The $18 million settlement cost has been accrued as of September 30, 2023* and is included as accrued expenses and other liabilities at* March 31, 2024* and* September 30, 2023*.

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NOTE 20 –** RELATED PARTY TRANSACTIONS**

Related Party Receivable

Prior to its spinoff as a separate entity and the closing of the Merger on* November 5, 2021,the Company operated as a division of MTI, an entity in which the Company’s CEO had a controlling financial interest and of which he was CEO and Chairman. After the spinoff transaction and Merger on November 5, 2021,the Company processed and disbursed payroll and related compensation benefits for11* employees that provided services only to MTI and rent costs for facilities utilized by MTI pursuant to a Transition Services Agreement (“TSA”). The terms of the TSA required MTI to repay monthly the amounts advanced by the Company, with penalties calculated at the lower of theprime rate plus 1% or the maximum rate under applicable law charged on the unpaid amounts. The terms of the TSA didnot provide for any other payment processing service fee from MTI to the Company except the interest fee on overdue advance balances.

On* March 31, 2023,the Company converted approximately $1.4 million of these advances to MTI to a note receivable from MTI. The note bore interest at 10% per year and would mature on March 31, 2025with a default rate of 15% per annum. By the end of the2023* fiscal year, the note principal had been increased by additional $0.4 million. The Company incurred approximately $2.5 million and $2.1 million of disbursements on behalf of MTI, and charged penalties and interest in amount of approximately $238 thousand and $179 thousand, by* December 31, 2023and September 30, 2023,respectively. Remaining advances, note and interest receivable as of September 30, 2023* were presented within non-current assets of the consolidated balance sheets.

On* January 16, 2024,*the Company terminated the Transition Services Agreement between the Company and Mullen Technologies, Inc., and received cash payment in full settlement of all amounts outstanding (including outstanding notes receivable, advances and related interest and penalties) of approximately $2.7 million.

Director Provided Services

For thesix months ended* March 31, 2024*, our non-employee directors have earned compensation for service on our Board of Directors and Committees of our Board of Directors in amount of $224,500 in cash and $387,411 in shares of common stock. In addition, the following non-employee directors were engaged in certain other consulting contracts with the Company:

William Miltner

William Miltner is a litigation attorney who provides legal services to Mullen Automotive and its subsidiaries. Mr. Miltner also is an elected Director for the Company. For thesix months ended* March 31, 2024*, Mr. Miltner was entitled to $706,051 for services rendered. Mr. Miltner has been providing legal services to us since2020.

Mary Winter

Mary Winter, Corporate Secretary and Director, is compensated for Corporate Secretary responsibilities, in the amount of $5,000 per month. For thesix months ended* March 31, 2024*, Ms. Winter is entitled to $30,000 in consulting fees.

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NOTE 21 –** SUBSEQUENT EVENTS**

Company management has evaluated subsequent events through* May 14, 2024*, which is the date these financial statements were available to be issued. Except as discussed below, management has determined that there wereno subsequent events which required recognition, adjustment to or disclosure in the financial statements.

HVIP program approval

In* April 2024,California Air Resources Board has approved the Company’s all-electric Class3* low cab forward, the2024 Mullen THREE, for the Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project (“HVIP”). The HVIP program plays a crucial role in the deployment ofzero-emission technologies and accelerates commercialization by providing point-of-sale vouchers to make advanced vehicles more affordable. Under HVIP, the2024 Mullen THREE EV truck, with a suggested MSRP of $68,500, now qualifies for up to $45,000 cash voucher. When combined with the available $7,500 federal tax credit, the net effective cost of the Mullen THREE could be less than $17,000.

Debt Agreement termination

On* December 18, 2023,Mullen entered into a Debt Agreement to issue a non-convertible secured promissory note (the “Note”) with a principal amount of $50 million, purchased for $32 million, reflecting an $18 million original issue discount. The issuance of this non-convertible Note was supposed to happen on thefirst* trading day when all closing conditions are met. The Note contemplated 10% annual interest, escalating to 18% post-Event of Default. It would maturethree months post-issuance. The Note's terms allowed for accelerated repayment upon default, requiring the Company to pay the principal, accrued interest, and other due amounts. The Note was supposed to be secured by the Company’s assets and imposes restrictions on the Company, limiting additional debt, asset liens, stock repurchases, outstanding debt repayment, and affiliate transactions, except for specified exceptions. It mandated prepayment of the principal from net proceeds of any subsequent financing. The funds contemplated by the Debt Agreement havenot been received and, on* May 7, 2024,*the Debt Agreement has been terminated.

Liabilities settlement agreement

The Company entered into a Settlement Agreement with Silverback Capital Corporation ("SCC") on* May 9, 2024,to resolve outstanding overdue liabilities with different vendors totaling $4,623,655. Under the terms of the agreement, the Company will issue freely tradable common stock shares to SCC, known as "Settlement Shares." The agreement is contingent on court approval following a fairness hearing under Section3*(a)(10) of the Securities Act of1933. The number of shares issued will be determined based on the stock's trading price during a specified valuation period, with provisions for adjustment based on corporate actions or market conditions. The agreement, enforceable upon court approval, aims to fully settle the specified liabilities without cash outflow.

Stock issuances after the balance sheet date and exercise of remaining warrants

After the balance sheet date and by* May 13, 2024,the Company issued 3,438,154 shares of common stock, mainly under the contracts with consultants, and upon exercise of remaining Preferred D Warrants (seeNote8 – Warrants and Other Derivative Liabilities and Fair Value Measurements*). By the date these financial statements were available to be issued, there wereno more Preferred D Warrants outstanding.

Stockholder Rights Agreement

On* May 1, 2024,the Company entered into a Rights Agreement with Continental Stock Transfer & Trust Company, as rights agent, and the Board of Directors declared a dividend ofone* preferred share purchase right (a “Right”) for each share of Common Stock and each outstanding share of Preferred Stock Company payable to holders of record as of the close of business on* May 13, 2024.Each Right entitles the registered holder to purchaseone ten*-thousandth of a share of Series A-1 Junior Participating Preferred Stock (“A-1 Preferred Stock”) of the Company at a price of*$30.00* perone ten thousandth of a share of A-1 Preferred Stock, subject to adjustment (the “Exercise Price”). The Rights arenot exercisable until the Distribution Date (as defined below). The description and terms of the Rights are set forth in the Rights Agreement.

The Rights willnot be exercisable until the earlier often days after a public announcement by us that a person or group has acquired10% of more of the shares of Common Stock (an "Acquiring Person") andten business days (or a later date determined by our board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an Acquiring Person (the earlier of such dates being herein referred to as the “Distribution Date”). At any time after a person becomes an Acquiring Person, the Board of Directors* may,at its option, exchange all or any part of the then outstanding and exercisable Rights for shares of Common Stock at an exchange ratio ofone* share of Common Stock for each Right, subject to adjustment as specified in the Rights Agreement. Notwithstanding the foregoing, the Board of Directors generally willnot be empowered to effect such exchange at any time after any person becomes the beneficial owner of50% or more of the Common Stock of the Company. The Rights will expire on* May 1, 2025,unless previously redeemed or exchanged by the Company. The Rights Agreement is designed to enable all Company stockholders to realize the long-term value of their investment and is intended to protect Mullen and its stockholders from efforts by a single stockholder or group to obtain control of the Company without paying a control premium, see below for further details. The Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders mayconsider favorable. Certain exemptions mayapply to an Acquiring person. The Rights will cause substantial dilution to a person or group that attempts to acquire us on termsnot* approved by the Board of Directors.

Foreign Trade Zone status for Tunica Manufacturing Plant

The Company has been granted Foreign Trade Zone (FTZ) status for its commercial vehicle manufacturing and assembly facility in Tunica, MS, by the U.S. Department of Commerce. An FTZ is a secure area in the U.S. where foreign and domestic goods are treated as being outside U.S. Customs territory for duty and tariff purposes. This designation allows the Company to defer significant amount of import duty payments overFY2024 andFY2025. For vehicles intended for export, the Company will be fully exempt from duties, offering potential savings of up to20% across both EV cargo vans and trucks. The FTZ approval is expected to provide benefits such as improved cash flow, enhances global competitiveness, reduces taxes, and provides logistical flexibility.

$50 Million Note and Warrant Financing

On* May 14, 2024,the Company entered into a Securities Purchase Agreement with certain accredited investors for the sale of Senior Secured Convertible Notes and Warrants. The initial aggregate principal amount payable upon execution of the Securities Purchase Agreement is $13.2 million, or $12.5 million including the 5% original issue discount. Investors are also obligated to purchase an additional principal amount of $39.5 million, or$37.5* million including the 5% original issue discount, of Notes and related Warrants if (i) the Company has sufficient authorized shares of Common Stock available to cover250% of the shares of Common Stock underlying the conversion of the Notes and exercise of the Warrants, (ii) the Common Stock has average daily trading volume of*$3* million in the previousten (10) trading days, (iii) a registration statement covering the shares of Common Stock underlying the conversion of the Notes and exercise of the Warrants has been declared effective, (iv) the Company has obtained stockholder approval of the issuance of the Notes and Warrants in compliance with Nasdaq Listing Rule5635(d), and (v) the Company is in compliance with the continued listing standards of The Nasdaq Capital Market. Each investor* mayterminate its obligation to purchase additional amounts under the Securities Purchase Agreement if the Funding Conditions, as well as other closing conditions, havenot* occurred for a period ofthree months or longer.

The Convertible Notes accrue interest at 15%, include a 5% Original Issue Discount, and mature infour months from the date of issuance. Upon any event of default, the interest rate automatically increases to 20% per annum. The Company granted a continuing security interest in all of its right, title and interest in, its assets, whether owned, existing, acquired or arising and wherever located. The outstanding principal and accrued but unpaid interest on the Notes* maybe converted by the holder into shares of Common Stock at the lower of (i) $5.49, (ii)95% of the closing sale price of the Common Stock on the date that the Company’s registration statement on Form S-1 is declared effective, or (iii)95% of the lowest daily volume weighted average price in thefive* (5) trading days prior to such conversion date, provided that the conversion price willnot be less than $1.16 per share.

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In connection with the issuance of the Notes, the holder also received5-year warrants exercisable for 200% of the shares of Common Stock underlying such Notes at an exercise price equal to 105% of closing sale price of the Common Stock on execution date, subject to further adjustment. The Warrants are also exercisable on a cashless basis, according to a predefined Black Scholes Value and the lower of thetwo Closing Bid Prices of the Common Stock in thetwo days prior the time of such exercise (but in any eventnot less than*$0.10*). If the Company meets the funding conditions, and the VWAP for each trading day during the10 trading day period immediately preceding the date on which the Company elects to exercise this option is250% above the exercise price, the Company will have the right to require the investors to exercise the Warrants for cash.

The Company has agreed to file a registration statement and will seek, pursuant to Nasdaq rules, shareholder approval of the issuance of the shares of common stock issuable upon conversion of the Convertible Notes and exercise of the Warrants via a proxy statement. In the event that the Company fails to file a registration statement by the filing deadline, a registration statement isnot declared effective on or prior to a deadline, and in other cases, precluding investors from selling their shares, the Company has agreed (unless the shares of Common Stock are freely tradable pursuant to Rule144) to make payments to each investor as liquidated damages in an amount equal to 1.5% of such investor’s total committed purchase price and an additional 1.5% on every30 day anniversary, with a maximum of12 payments. Such payments will bear interest at the rate of 10% per month (prorated for partial months) until paid in full and* may*be paid in shares of Common Stock at the option of the Company.

The Company is also be restricted from issuing additional securities to other parties for a certain period of time. The Notes and Warrants arenot convertible by a holder to the extent that (i) the holder or any of its affiliates would beneficially own in excess of9.9% of the Common Stock or (ii) the aggregate number of shares of Common Stock issued in connection with the conversion of all Notes and Warrants, at any time exceeds19.9% of the total number of shares of Common Stock outstanding or of the voting power of the Common Stock outstanding as of the date of execution of the Securities Purchase Agreement, unless the Company obtains stockholder approval in compliance with Nasdaq Listing Rule5635(d) (the “Exchange Cap”).

Pursuant to the Securities Purchase Agreement, the investors* mayexercise withinone* year an additional investment right under identical terms.

First Tranche of $50 Million Financing Payable on Execution

On* May 14, 2024,*investors executed the Financing agreement (see above) and agreed to fund the Company $12.5 million upon execution.

$100 Million Financing Arrangement through Senior Secured Notes and Warrants

The Company also signed a commitment letter agreement with an investor for a total investment of $100 million through the issuance of Senior Secured Convertible Notes and Warrants. The Convertible Notes will be issued ineight tranches of $12.5 million over13 months. The investors will receive a $4 million non-refundable commitment fee, payable in registered common stock. Other conditions are similar to those described above for the*$52.6* million Financing Arrangement. The completion of this transaction remains contingent upon mutual consent and the execution of final documentation by both parties.

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