MULLEN AUTOMOTIVE INC

Previous wording

The following discussion and analysis is intended to help the reader understand Mullen’s results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes included elsewhere in this Report.

Current wording

The following discussion and analysis are intended to help the reader understand Mullen’s results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes included elsewhere in this Report.

Previous wording

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

Current wording

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

Previous wording

We are a development stage company and have only recently started to generate notable revenues. As we expand production and commercialization of vehicles, we expect the majority of our revenue to be derived from sales of commercial vehicles.

Current wording

We are an early-stage company that has only recently started to generate notable revenues. As we expand vehicle production and commercialization, we expect the majority of our revenue to be derived from sales of commercial vehicles.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The costs of revenues primarily include vehicle components and parts, labor costs, and other relevant costs and expenses applicable to sales and revenues, such as provisions for estimated warranty expenses and an allowance to bring the value of inventories down to net realizable value.

Previous wording

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

Current wording

Research and development expenses decreased by $7.8 million, or 35%, from $22.1 million through the three months ended June 30, 2023, to $14.3 million through the three months ended June 30, 2024. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping, and other expenses related to preparation for the production of electric vehicles such as Mullen Five EV and Mullen One EV cargo van.

Previous wording

General and administrative expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, salaries, rent, repairs and maintenance, utilities and office expense, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses increased by approximately $0.5 million or 1% from approximately $47.4 million in the three months ended March 31, 2023, to approximately $47.9 million in the three months ended March 31, 2024, primarily due to decreases in compensation to employees and listing and regulatory fees, partially offset by increases in professional fees, utilities, depreciation expense, amortization expense, and advertising and promotions expenses.

Current wording

General and administrative expenses include all non-production expenses incurred in a given period. This includes professional fees, salaries, rent, repairs and maintenance, utilities and office expenses, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses, and other expenses. We expense advertising costs as incurred. General and administrative expenses increased by approximately $15.7 million, or 49%, from approximately $31.8 million in the three months ended June 30, 2023, to approximately $47.5 million in the three months ended June 30, 2024, primarily due to decreases in compensation to employees, partially offset by increases in professional fees, employee benefits, utilities, depreciation expense, and advertising and promotions expenses.

Previous wording

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

Current wording

The net loss attributable to common stockholders (after preferred dividends) was approximately $96.0 million, or $7.91 net loss per share, for the three months ended June 30, 2024, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $308.9 million, or $1,114.23 loss per share, for the three months ended June 30, 2023 (giving effect to reverse stock splits, see below).

Previous wording

Research and development expenses increased by $11.1 million, or 38% from approximately $29.1 million through the six months ended March 31, 2023, to approximately $40.2 million through the six months ended March 31, 2024. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping costs and other expenses related to preparation to mass-production of electric vehicles such as Mullen Five EV, Mullen One EV cargo van, etc.

Current wording

Research and development expenses increased by $3.3 million, or 6%, from approximately $51.2 million through the nine months ended June 30, 2023 to approximately $54.5 million through the nine months ended June 30, 2024. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping costs, and other expenses related to preparation for the production of electric vehicles such as Mullen Five EV, Mullen One EV cargo van, etc.

Previous wording

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

Current wording

General and administrative expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, employee compensation and benefits, rent, repairs and maintenance, utilities and office expenses, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses, and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $5.6 million, or 4%, from approximately $144.2 million in the nine months ended June 30, 2023, to approximately $138.6 million in the nine months ended June 30, 2024, primarily due to decreases in professional fees and compensation to employees, partially offset by increases in advertising and promotions expenses, employee benefits, and depreciation expense.

Previous wording

The net loss for the three months ended March 31, 2024 included impairment charges totaling $105.5 million, mainly due to present uncertainty of availability of future funding required to support the business and decrease of Company's market capitalization. These write-downs include Bollinger's goodwill of $28.8 million, intangible assets of Bollinger ($58.3 million) and ELMS ($15.1 million), and the write-down of right-of-use assets of $3.2 million.

Current wording

The net loss for the nine months ended June 30, 2024 included impairment charges totaling $105.5 million, mainly due to present uncertainty of availability of future funding required to support the business and decrease of Company's market capitalization. These write-downs include Bollinger's goodwill of $28.8 million, intangible assets of Bollinger ($58.5 million) and ELMS ($15.1 million), and the write-down of right-of-use assets of $3.2 million.

Previous wording

The derivative liability mark-to-market revaluation during the three months ended March 31, 2024 resulted in $3.6 million income versus loss of $48.4 million during the three months ended March 31, 2023. These changes are due to the fact that no additional warrants were issued during the three months ended March 31, 2024 and the monetary value of relevant obligations has significantly decreased in comparison to the three months ended March 31, 2023 (seeNotes 7 - Debt and 8- Warrants and Other Derivative Liabilities and Fair Value Measurements to the financial statements).

Current wording

Similarly, the derivative liability revaluation loss has decreased by $88.7 million from $89.5 million to $0.8 million. These changes are due to the fact that less warrants were issued and outstanding during the nine months ended June 30, 2024 and the monetary value of relevant obligations has significantly decreased in comparison to the nine months ended June 30, 2023 (seeNotes 7- Debt and 8 -Warrants and Other Derivative Liabilities and Fair Value Measurements to the financial statements).

Previous wording

The net loss attributable to common stockholders (after preferred dividends) was approximately $193.9 million, or $35.83 net loss per share, for the six months ended March 31, 2024, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $483.8 million, or $6,378.47 loss per share, for the six months ended March 31, 2023 (giving effect to reverse stock splits, see below).

Current wording

The net loss attributable to common stockholders (after preferred dividends) was approximately $289.9 million, or $37.92 net loss per share, for the nine months ended June 30, 2024, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $792.7 million, or $5,544.35 loss per share, for the nine months ended June 30, 2023 (giving effect to reverse stock splits, see below).

Previous wording

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

Current wording

We completed three reverse stock splits during the calendar year ending December 31, 2023 to regain compliance with NASDAQ Listing Rule 5550(a)(2). In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. In December 2023, we completed a 1-for-100 reverse stock split of our outstanding shares 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 Rule 5550(a)(2). On March 6, 2024, the Company received formal notice from Nasdaq confirming that it has regained compliance with the annual shareholder meeting requirement set forth in Nasdaq Listing Rule 5620(a).

Previous wording

To date, we have yet to generate any significant revenue from our business operations. We have funded our capital expenditure and working capital requirements through the sale of equity securities, as further discussed below. Our ability to successfully expand our business will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations.

Current wording

To date, we have yet to generate any significant revenue from our business operations. We have funded our capital expenditure and working capital requirements by selling equity securities, as further discussed below. Our ability to successfully expand our business will depend on many factors, including our working capital needs, the availability of equity or debt financing, and, over time, our ability to generate cash flows from operations.

Previous wording

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

Current wording

The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $4.0 million as of June 30, 2024. During the nine months ended June 30, 2024, the Company used approximately $145.2 million of cash for operating activities. The net working capital deficit on June 30, 2024 amounted to approximately $59.0 million, or $10.4 million, after excluding derivative and warrant liabilities, Series E Preferred Stock liability, ELOC commitment fees, and liabilities to issue stock that are supposed to be settled by issuing common stock without using cash. For the nine months ended June 30, 2024, the Company incurred a net loss of $327.0 million, and as of June 30, 2024, our accumulated deficit was $2,143.3 million. This creates substantial doubt about the Company's ability to continue as a going concern, as its cash on hand may be insufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of the filing of this Form 10-Q.

Previous wording

If the Company does not secure adequate funding to fulfill its current liabilities, it anticipates seeking bankruptcy protection in various jurisdictions within 30 days of publishing these financial statements. The Company anticipates that its available funds will be insufficient to cover its obligations for at least the next twelve months from the date this Form 10-Q was filed. Consequently, there is significant uncertainty regarding the Company's ability to continue operating. The Company is actively pursuing additional funds (seeNote 21 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 is no guarantee that the Company will be able to restructure its debts and/or secure the necessary financing on favorable terms.

Current wording

If the Company does not secure adequate funding to fulfill its current liabilities, it anticipates seeking bankruptcy protection in various jurisdictions within 30 days of publishing these financial statements. The Company anticipates that its available funds will be insufficient to cover its obligations for at least the next twelve months from the date this Form 10-Q was filed. Consequently, there is significant uncertainty regarding the Company's ability to continue operating. The Company is actively pursuing additional funds (seeNote - 21 Subsequent Events). However, there is no guarantee that the Company will be able to restructure its debts and/or secure the necessary financing on favorable terms.

Previous wording

To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, convertible preferred stock and common stock. Debt comprises an insignificant component of our funding needs.

Current wording

To date, our current working capital and development needs have been primarily funded through the issuance of convertible notes with warrants, convertible preferred stock with warrants, and common stock.

Previous wording

The short-term debt classification primarily is based upon loans due within twelve-months from the balance sheet date, in addition to loans that have matured and remain unpaid. Management plans to renegotiate matured loans with creditors for favorable terms, such as reduce interest rate, extend maturities, or both; however, there is no guarantee favorable terms will be reached. Until negotiations with creditors are resolved, these matured loans remain outstanding and will be classified within short-term debt on the balance sheet. Interest and fees on loans are being accounted for within accrued interest.

Current wording

The short-term debt includes loans due within twelve months from the balance sheet date, in addition to loans that have matured and remain unpaid. Management plans to renegotiate matured loans with creditors for favorable terms, such as reducing interest rates, extending maturities, or both; however, there is no guarantee favorable terms will be reached. Until negotiations with creditors are resolved, these matured loans remain outstanding and will be classified as short-term debt on the balance sheet. Interest and fees on loans are being accounted for within accrued interest.

Previous wording

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

Current wording

The following is a summary of our indebtedness as of June 30, 2024:

Previous wording

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

Current wording

The following table provides a summary of our cash flow data for the nine months ended June 30, 2024 and 2023:

Previous wording

Our cash flow used in operating activities to date has been primarily comprised of costs related to research and development, payroll and other general and administrative activities. Net cash used in operating activities was $108.5 million in the six months ended March 31, 2024, a 61% increase from $67.6 million net cash used during the six months ended March 31, 2023.

Current wording

Our cash flow used in operating activities to date has been primarily comprised of costs related to research and development, payroll and other general and administrative activities. Net cash used in operating activities was $145.2 million in the nine months ended June 30, 2024, a 28% increase from $113.6 million net cash used during the nine months ended June 30, 2023.

Previous wording

Our cash flows used in investing activities, to date, have been comprised mainly of purchases of equipment.

Current wording

To date, our cash flows used in investing activities have been comprised mainly of equipment purchases.

Previous wording

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

Current wording

Net cash used in investing activities was $14.1 million in the nine months ended June 30, 2024, an 87% decrease from $107.4 million used in investing activities during the nine months ended June 30, 2023. The primary factor of the change was the acquisition of ELMS assets during the three months ended December 31, 2022.

Previous wording

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

Current wording

Net cash provided by financing activities was $7.5 million for the nine months ended June 30, 2024, as compared to $364.1 million net cash obtained from financing activities for the nine months ended June 30, 2023, when we issued convertible notes in lieu of preferred shares. During the nine months ended June 30, 2024, we issued senior secured convertible notes and warrants in return for $12.5 million cash and fully settled a mortgage loan of $4.9 million.

Previous wording

The following tables summarizes our contractual obligations and other commitments for cash expenditures as of March 31, 2024, and the years in which these obligations are due:

Current wording

The following tables summarize our contractual obligations and other commitments for cash expenditures as of June 30, 2024, and the years in which these obligations are due:

Previous wording

Our financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, our management is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Management considers an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described inNote 3 to the consolidated financial statements.

Current wording

Our financial statements have been prepared by U.S. GAAP. In the preparation of these financial statements, our management is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Management considers an accounting judgment, estimate, or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described inNote 3 to the consolidated financial statements.

Previous wording

In preparation of these financial statements, management applied critical estimates and assumptions while performing impairment test for goodwill and other noncurrent assets. We identified Bollinger and ELMS/Legacy Mullen (refer toNote 4 - Segment information) as our reporting units for the purposes of assessing impairments.

Current wording

In preparing these financial statements, management applied critical estimates and assumptions while performing impairment tests for goodwill and other noncurrent assets. We identified Bollinger and ELMS/Legacy Mullen (refer to*Note 4—*Segment information) as our reporting units for the purposes of assessing impairments.

Previous wording

We review our noncurrent asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Such conditions could include significant adverse changes in the business climate, current period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. Recoverability of noncurrent asset groups to be held and used is measured by a comparison of the carrying amount of the asset group to future undiscounted net cash flows expected to be generated by the asset group. If the asset group is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Due to a prolonged decrease in our market capitalization, including a significant decline in stock price and budgeted performance targets not achieved as compared to acquisition date budgets, we assessed noncurrent assets for impairment.

Current wording

We review our noncurrent asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Such conditions could include significant adverse changes in the business climate, current period operating or cash flow losses, significant declines in forecasted operations, or a current expectation that an asset group will be disposed of before the end of its useful life. The recoverability of noncurrent asset groups to be held and used is measured by a comparison of the carrying amount of the asset group to future undiscounted net cash flows expected to be generated by the asset group. Suppose the asset group is considered to be impaired. In that case, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Due to a prolonged decrease in our market capitalization, including a significant decline in stock price and budgeted performance targets not achieved as compared to acquisition date budgets, we assessed noncurrent assets for impairment.

Previous wording

Our goodwill and indefinite-lived in-process research and development assets, as well as patents, pertain to the Bollinger acquisition on September 7, 2022. As a result of impairment test performed on March 31, 2024 by management, impairment was recognized in the financial statements for the three and six months ended March 31, 2024: including $28,846,832 for goodwill, $58,304,612 for indefinite-lived in-process research and development assets, as well as $1,354,413 for right-of-use assets.

Current wording

Our goodwill and indefinite-lived in-process research and development assets, as well as patents, pertain to the Bollinger acquisition on September 7, 2022. As a result of impairment tests performed by management during the nine months ended June 30, 2024, impairment was recognized in the financial statements: including $28.8 million for goodwill, $58.5 million for indefinite-lived in-process research and development assets, as well as $1.3 million for right-of-use assets. No additional material impairment was recognized during the last three months ended June 30, 2024. The impairment has been recognized primarily due to the present uncertainty of the availability of future funding required to support this segment and the decrease in the Company's market capitalization.

Previous wording

As a result of impairment test performed on March 31, 2024 by management, impairment was also recognized in respect of part of right-of-use assets in amount of $1,813,195, as well as engineering design intangible assets with carrying amount of $15,142,455, which belong to the ELMS/Mullen segment.

Current wording

As a result of impairment tests performed by management during the nine months ended June 30, 2024, impairment was also recognized in respect of part of right-of-use assets in the amount of $1.9 million, as well as engineering design intangible assets with a carrying amount of $15.1 million which belong to the ELMS/Mullen segment. No additional material impairment was recognized during the last three months ended June 30, 2024. The primary reasons for the impairment of these assets were sales slower than expected and a decrease in the Company's market capitalization.

Previous wording

Estimating the fair value of the reporting units and certain assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, contributory asset charges, and other market factors. Assumptions used in impairment assessments are made at a point in time and therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment assessment date. Fair value determinations require significant judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.

Current wording

Estimating the fair value of the reporting units and certain assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, contributory asset charges, and other market factors. Assumptions used in impairment assessments are made at a point in time. Therefore, they are subject to change based on the facts and circumstances present at each annual and interim impairment assessment date. Fair value determinations require significant judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.