MULLEN AUTOMOTIVE INC

NOTE 1 –DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Mullen Automotive Inc., a Delaware corporation (“MAI”, “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 April 20 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 November 5, 2021.

Mullen is building and delivering the newest generation of Commercial Trucks. We also have a portfolio of high-performance Passenger vehicles in various stages of Product Development for launch in subsequent years.

Acquisition of controlling interest in Bollinger Motors, Inc. (seeNote 4) in September 2022 positioned Mullen into the medium duty truck classes 4-6, along with the Sport Utility and Pick Up Trucks EV segments. First Bollinger vehicles are expected to be sold in 2024.

The second acquisition (seeNote 4) was in October 2022, when the U.S. Bankruptcy Court approved the Company acquisition ELMS’ (Electric Last Mile Solutions) assets in an all-cash purchase. With this transaction, Mullen acquired ELMS’ manufacturing plant in Mishawaka Indiana and all the intellectual property needed to engineer and build Class 1 and Class 3 electric vehicles. These vehicles are intended for sale primarily on the US markets. First vehicles produced by this manufacturing plant have been delivered to customers during the year ended September 30, 2023.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Mullen Investment Properties LLC, a Mississippi corporation, Ottava Automotive, Inc., a California corporation, Mullen Real Estate, LLC, a Delaware corporation, as well as a 60%-owned subsidiary Bollinger Motors Inc., a Delaware corporation. Intercompany accounts and transactions have been eliminated, if any.

Noncontrolling interest presented in these consolidated financial statements relates to the portion of equity (net assets) in subsidiaries not 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.

The financial statements reflect the consolidated financial position and results of operations of Mullen, which have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”).

Reverse Stock Splits

In January 2023, the Company’s stockholders, in an effort for the Company to regain compliance with NASDAQ listing rules, approved a proposal to authorize the Board of the Company (the “Board”) to implement a reverse stock split of the

outstanding shares of the Company’s common stock at a ratio up to 1-for-25. Pursuant to such authority granted by the Company’s stockholders, the Board approved a reverse stock split of the Company’s common stock at a rate of 1-for-25 shares of common stock, which resulted in a reduction in the number of outstanding shares of common stock and a proportionate increase in the value of each share. The common stock began trading on a reverse split-adjusted basis on the NASDAQ on May 4, 2023.

In August 2023, the Company’s stockholders approved a proposal to authorize the Board to implement a second reverse stock split of the outstanding shares of the Company’s common stock at a ratio up to 1-for-100. Pursuant to such authority granted by the Company’s stockholders, the Board approved a reverse stock split of the Company’s common stock at a rate of 1-for-9 shares of common stock, which resulted in a reduction in the number of outstanding shares of common stock and a proportionate increase in the value of each share. The common stock began trading on a reverse split-adjusted basis on the NASDAQ on August 11, 2023.

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 of 1-for-2 to 1-for-100, as determined by the Board of the Company. The Board approved a 1-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 became 1 share of common stock.

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 have not 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’s 2022 Equity Incentive Plan as per decision of stockholders that approved an amendment to the Plan in August 2023, increasing the maximum aggregate number of shares of common stock and stock equivalents available for the grant of awards under the 2022 Plan by an additional 52,000,000 shares, which amount is not 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 fractional shares were rounded up to the nearest whole share. The number and par value of Series A Preferred Stock, Series C Preferred Stock and Series D Preferred Stock were not 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 (SeeNote 10 for 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 and $7,048 value of common stock decreased and additional paid-in-capital increased on September 30, 2022, and on October 1, 2021, respectively).

The impact of the reverse stock splits on the shares of common stock previously reported for the fiscal year ended September 30, 2022 was as follows:

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.

The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $155.7 million as of September 30, 2023. During the twelve months ended September 30, 2023, the Company used approximately $179.2 million of cash for operating activities. The net working capital on September 30, 2023 was positive and amounted to approximately $58.5 million, or approximately $133.3 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 year ended September 30, 2023, the Company has incurred a net loss of $1,006.7 million and, as of September 30, 2023, our accumulated deficit was $1,862.2 million.

These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include, but are not limited to, obtaining equity financing, issuing debt, or entering other financing arrangements, and restructuring of operations to grow revenues and decrease expenses. However, given the impact of the economic downturn on the U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. Therefore, there can be no assurance that our plans will be successful in alleviating the substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainties.

During the year ended September 30, 2023, the COVID-19 pandemic did not have a material impact on our operating results. The Company has not 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 is not 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.

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, but not 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 was no 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 are not readily apparent from other sources. The actual results may differ materially from these estimates.

Risks and Uncertainties

We operate within an industry that is subject to rapid technological change, intense competition, and 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. Any one 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 ASC 805 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 than twelve months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense. The Company completed the acquisition of Bollinger Motors Inc. on September 7, 2022 (seeNote 4*).

Cash and Cash Equivalents

Company management considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. There wereno cash equivalents as of September 30, 2023, and 2022, respectively.

Restricted Cash

Cash obtained from customer deposits is held by the Company and is restricted from use to fund operations. Refundable deposits were $429 thousand and $289 thousand for the years ended September 30, 2023, and 2022, respectively, and are presented as liabilities. On September 7, 2022, the Company deposited $30 million in an escrow account as part of the

Bollinger Motors Inc. acquisition – these funds have been released for the use of Bollinger Motors Inc. during the year ended September 30, 2023.

Prepaid Expenses and Other Current Assets

Prepaid expenses consist of various advance payments made for goods or services to be received in the future. These prepaid expenses include insurance and other contracted services requiring up-front payments.

Inventory

Cost of inventories is determined using the standard cost method, which approximates actual cost on a first-in first-out basis. This method includes direct materials, direct labor, and a proportionate share of manufacturing overhead costs based on normal capacity. As of September 30, 2023 there have been no significant direct labor or manufacturing overhead costs included in inventory. 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 goods sold during the period in which they occur.

On a quarterly basis, the Company reviews its inventory for excess quantities and obsolescence. This analysis takes into account 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 is not subsequently written up if market conditions improve. All such inventory write-downs are included as a component of cost of goods sold 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 do not 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 do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Company management continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, plant, and equipment may not be recoverable in accordance with the provisions of ASC 360,*“Property, Plant, and Equipment.”*When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash

flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Income Taxes

Income taxes are recorded in accordance with ASC 740*, Income Taxes*, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Uncertain tax positions taken or expected to be taken in a tax return are accounted for using the “more likely than not” threshold for financial statement recognition and measurement. There are transactions that occur during the ordinary course of business for which the ultimate tax determination may be uncertain. At September 30, 2023 and 2022, there were no material changes to either the nature or the amounts of the uncertain tax positions.

The Company’s income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law.

We maintain a full valuation allowance against the value of our deferred tax assets because based on the weight of evidence available at September 30, 2023 and 2022, it is more likely than not that deferred tax assets will not be realized.

Intangible Assets, net

Intangible assets consist of acquired and developed intellectual property. In accordance with ASC 350,*“Intangibles—Goodwill and Others,”*goodwill and other intangible assets with indefinite lives (including in-process research and development assets acquired in a business combination) are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

Intangible assets with determinate lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortizable intangible assets generally are amortized on a straight-line basis over periods up to 120 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 may have 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 is not reversed even if fair value exceeds carrying amount in subsequent periods.

Other Assets

Other assets are comprised primarily of prepayments and security deposits for property leases.

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 ASC 842,“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.

Contingencies and Commitments

The Company follows ASC 440 & ASC 450 to account for contingencies and commitments respectively. Certain conditions, as a result of past events, may exist as of the balance sheet date, which may result in a loss to the Company, but which will only be resolved when one 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 is not 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 generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Accrued Expenses

Accrued expenses are expenses that have been incurred but not yet paid and are classified within current liabilities on the consolidated balance sheets.

Revenue Recognition

The Company’s revenue includes revenue from the sale of electric vehicles and is accounted for in accordance with ASC 606,“Revenue from Contracts with Customers”. The Company applies a five-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 ASC 606. 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 the amount of consideration to which the Company expects to be entitled. For any amounts received (or receivable) for which the Company does not recognize revenue when it transfers products to customers, a refund liability is recognized (amounted to $652,200 as at September 30, 2023, none at September 30, 2022). 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.

Cost of Goods Sold

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.

General and Administrative Expenses

General and administrative (“G&A”) expenses include expenses 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 G&A expenses, other than trade show expenses which are deferred until occurrence of the future event, we expense advertising costs as incurred in accordance with ASC 720-35,*“Other Expenses – Advertising Cost.”*Advertising costs for the years ended September 30, 2023 and 2022 were $8,443,311 and $4,407,764, respectively.

Research and Development Costs

Per ASC 730,"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 Subtopic 718-10,“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 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 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 than 12 month 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.

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 ASC 820,“Fair value measurements”.

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 may exceed these federal limitations. However, we have not experienced any losses in such accounts and management believes we are not exposed to any significant credit risk on these accounts. The amounts in excess of insured limits as of September 30, 2023 and 2022 are $154.9 million and $53.3 million, respectively.

Accounting Pronouncements

The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements.

The following are accounting pronouncements that have been issued but are not yet effective for the Company’s consolidated financial statements:

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds the CECL impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is still evaluating but does not expect the application of this pronouncement to have a significant impact on its allowance for uncollectible amounts for accounts receivable.

In August 2020, the FASB issued ASU No. 2020-06,Debt—Debt with Conversion and Other Options (Subtopic 470-20), and Derivatives and Hedging—Contracts in an Entity’s Own Equity (Subtopic 815-40):Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in ASU No. 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 ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company does not expect its application to have a material impact on the Company’s consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04,Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40), which addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of ASU 2021-04 in 2022 had no effect on the Company’s financial position, results of operations and cash flows.

In November 2023, the FASB issued Accounting Standards Update 2023-07—*Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.*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 annual segment reporting disclosures based on new requirements.

Other accounting pronouncements issued but not yet effective are not believed by management to be relevant or to have a material impact on the Company’s present or future consolidated financial statements.

NOTE 4 – ACQUISITION OF SUBSIDIARIES AND CERTAIN ASSETS

Acquisition of Bollinger Motors, Inc.

On September 7, 2022, the Company acquired, through a series of purchase agreements,544,347 shares of common stock of Bollinger Motors, Inc. (“Bollinger Motors”), representing approximately 60% of the outstanding shares. This acquisition has provided the Company with opportunities to produce medium duty truck classes 4-6, along with the B1 Sport Utility and B2 Pick Up Trucks.

The following table summarizes the purchase price consideration to acquire Bollinger Motors:

Total consideration of $148.6 million paid to Bollinger Motors Inc. and Bollinger Motors Inc. shareholders included:

The Company has determined that the acquisition of Bollinger Motors constitutes a business acquisition as defined by ACS 805,Business Combinations. Accordingly, the assets acquired, and the liabilities assumed in the transaction were recorded at their acquisition date estimated fair value, while the transaction costs associated with the acquisition were expensed as incurred pursuant to the purchased method of accounting in accordance with ASC 805. The Company’s purchase price allocation was based on an evaluation of the appropriate fair values by independent appraiser. Fair values were determined based on the requirements of ASC820, Fair Measurements and Disclosure.

As a result of the acquisition, Mullen acquired controlling interest of Bollinger Motors. Acquired intellectual property, patents and non-compete agreements have finite lives and will be amortized using the straight-line method of the respective lives of each asset, acquired in-process research and development assets have indefinite lives and will be tested for

impairment at least annually (seeNote 6 Intangible assets). The following tables summarize the allocation of fair value of assets acquired and liabilities assumed.

Valuation Methodology

The fair value of in-process research and development assets was determined using the Multiperiod Excess Earnings Method. This method was applied to the core intellectual property of Bollinger Motors consisting of the designs and processes. Under this method, the Company determines free cash flows for a group of assets, and then adjusts it for a contributory charge for the use of other identifiable tangible and intangible assets. The present value of the resulting excess cash flows is adjusted for any tax benefits and the resulting amount represents the fair value of the intangible asset.

The fair value of the Company’s patents was determined using the Relief from Royalty Method. The method considers what a purchaser could afford, or would be willing to pay, for a license of similar intellectual property rights. The royalty stream is then capitalized reflecting the risk and return relationship of investing in the asset. The Company used 5% as an initial royalty rate, gradually decreasing it to 1% over 10 years in 2031 to reflect technological obsolescence.

The non-compete agreement was valued using a discounted cash flow with and without method. Under this method, estimated enterprise value is calculated with non-complete clauses and compared to the enterprise value in the absence of the clauses. Estimated enterprise value is determined as present value of future cash flows. The after-tax differential of enterprise value is adjusted for the probability, reflecting specific facts and circumstances.

As part of application of the above methods, the annual discount rate used to determine the present value of future cash flows varied between 40% and 42%.

Assumptions used in forecasting cash flows and determining the fair value for each of the identified intangible asset included consideration of the following:

Supplemental pro forma information

The following supplemental pro forma information summarizes the Company’s results of operations for the fiscal year ended September 30, 2022, as if the Company completed the acquisition as of the beginning of the annual reporting period beginning October 1, 2021.

Mullen Advanced Energy Operations LLC

On April 17, 2023, the Company entered into a binding Letter of Agreement with Lawrence Hardge, Global EV Technology, Inc., and EV Technology, LLC (collectively, “EVT”) to partner on a device known as a Battery Life Enhancing Technology. The parties formed a new corporation called Mullen Advanced Energy Operations (“MAEO”) to develop, manufacture, market, sell, lease, distribute, and service all products resulting from the technology. The Company holds a 51% equity interest in MAEO, and EVT holds a 49% equity interest. EVT was supposed to license the technology and intellectual property rights to MAEO and assign all rights to governmental and other contracts relating to the technology. The Company paid Mr. Hardge an upfront payment of $50,000 and an additional $5.0 million payment was due upon execution of definitive agreements and completion of IP assignment. On July 10, 2023, the Company issued a notice terminating the Agreement dated April 17, 2023. The termination notice, which was sent after numerous attempts by the Company to obtain adherence by EVT to the terms of the Agreement, references several breaches by EVT including (1) failing to execute documents evidencing an irrevocable, royalty free, worldwide exclusive license to the Technology and IP, in perpetuity, to MAEO, (2) refusing to conduct any tests of the Technology at a Mullen approved facility after the LOA, (3) repeatedly refusing to honor the terms of the Mutual Non-Disclosure Agreement signed April 14, 2023, and (4) failing to disclose all claims or threatened legal actions by any third parties related to the Technology. MAEO has not had significant transactions since formation.

Acquisition of ELMS assets

On October 13, 2022, the United States Bankruptcy Court for the District of Delaware issued an order approving the sale for approximately $105 million to Mullen of certain assets and assumption and assignment of contracts and related liabilities of Electric Last Mile, Inc. and Electric Last Mile Solutions, Inc. (collectively, “ELMS”) pursuant to the terms and conditions of the Asset Purchase Agreement dated September 16, 2022.

The ELMS asset acquisition closed on November 30, 2022, and is expected to accelerate the market introduction of our cargo van program and provide us with critical manufacturing capacity at a much lower investment than previously expected to supply the rest of our product portfolio.

ELMS assets include:

The following table details the allocation of purchase price by asset category for the ELMS asset purchase:

On November 9, 2022, the Company formed Mullen Indiana Real Estate LLC, a limited liability company in the State of Delaware, to hold the acquired real property located in Mishawaka, Indiana.

NOTE 5 – INVENTORY

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

The cost of inventories is determined using a standard cost method, which approximates the first-in, first-out (FIFO) method. This includes direct materials, direct labor, and relevant manufacturing overhead costs. Variances between standard and actual costs are recognized in the cost of goods sold during the period in which they occur.

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. During the year ended September 30, 2023, a charge of $1 million was recorded to write the inventories down to NRV.

During the year ended September 30, 2023, approximately $1 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 gross amount of $92,834,832 and net carrying amount of $28,846,832 as at September 30, 2023 (and $92,834,832 gross and net carrying amount as at September 30, 2022) pertains to the Bollinger Motors acquisition on September 7, 2022 (seeNote 4 for more details).

Goodwill is not amortized and is tested for impairment annually, or more frequently if there are indicators of impairment. Every reporting period the Company assesses qualitative factors (such as macroeconomic conditions, industry and market considerations, financial performance of the Company, entity-specific events etc.) to determine whether it is necessary to perform the quantitative goodwill impairment test. Upon the quantitative goodwill impairment test, impairment may arise to the extent carrying amount of a reporting unit that includes goodwill (i.e. Bollinger production unit, seeNote 21 – Segment information) exceeds its fair value.

As a result of the impairment test performed on September 1, 2023 by management with the assistance of independent third-party valuation professionals, the Company has recognized impairment loss in amount of $63,988,000. We used a combination of the market and income approach to determine fair value. Full amount of the loss has been recognized in the consolidated statement of operations, and the part of the loss that relates to noncontrolling interest in the subsidiary ($25,595,200) has decreased noncontrolling interest in equity section of the consolidated balance sheets. The goodwill impairment was caused mainly by unfavorable capital market conditions, i.e., prolonged decrease in the Company’s market capitalization, including a significant decline in stock price and a budgeted performance misses compared to the budgets prepared on acquisition date.

The quantitative goodwill impairment tests were based on determining the fair value of the Bollinger Motors reporting units based on management judgments and assumptions using the discounted cash flows under the income approach classified in Level 3 of the fair value hierarchy and comparable company market valuation classified in Level 2 of the fair value hierarchy approaches. If the carrying value of a reporting unit exceeds its fair value, the Company will measure any goodwill impairment loss as the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The valuation approaches are subject to key judgments and assumptions that are sensitive to change such as judgments and assumptions about appropriate sales growth rates, operating margins, discount rate, and comparable company market multiples. When developing these key judgments and assumptions, the Company considers economic, operational and market conditions that could impact the fair value of the reporting unit. However, estimates are inherently uncertain and represent only management’s reasonable expectations regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will likely differ in some respects from actual future results.

Other intangible assets

Intangible assets are stated at cost, net of accumulated amortization. Patents and other identifiable intellectual property purchased as part of the Bollinger Motors acquisition in September 2022 have been initially recognized at fair value.

Intangible assets with indefinite useful lives are not amortized but instead tested for impairment. 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 8.97 years. The straight-line method of amortization represents management’s best estimate of the distribution of the economic value of the intangible assets.

Due to unfavorable market conditions and decline of the market prices of the Company’s common stock, we have tested long-lived assets for recoverability. Based on the test performed on September 1, 2023 by independent professional appraisers, the assets of the Bollinger's segment (seeNote 21 - Segment information), including indefinite-lived in-process research and development assets, acquired in September 2022, were not impaired, except for impairment of goodwill (see above). Fair value of indefinite-lived in-process research and development (classified in Level 3 of the fair value hierarchy) was estimated based on multi-period excess earnings method, a valuation technique that estimates the value of an intangible asset by quantifying the amount of residual or “excess” earnings generated by the subject asset, and discounting them to a present value equivalent. Significant judgments inherent in this analysis include assumptions about appropriate sales growth rates, profitability levels, discount rates and the amount of expected future cash flows. The judgments and assumptions used in the estimate of fair value are generally consistent with the projections and assumptions that are used in operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions. The determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to evaluate the fair value of the in-process research and development assets.

An impairment loss in amount of $5,873,000 has been recognized in respect of the intangible assets of the ELMS/Legacy Mullen segment (primarily engineering designs and website design and development). Their accumulated depreciation in amount of $4,318,850 has been derecognized in correspondence with initial cost to present the new cost basis of these assets in accordance with ASC 350-30. Fair value of the engineering designs (classified in Level 3 of the fair value hierarchy) was estimated based on cost approach, which involves evaluation of the costs required to replace or recreate the subject intangible assets. Significant judgments inherent in this analysis include the accuracy of the historical cost data, obsolescence factor, probability of success related to the commercialization of the reporting segment that utilizes the engineering designs.

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

For the years ended September 30, 2023 and 2022, amortization of the intangible assets was $6,526,911 and $1,476,457 respectively.

NOTE 7 – DEBT

Short and Long-Term Debt

Short-term debt is defined as debt with principal maturities of one year or less, long-term debt has maturities greater than one year.

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

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

Scheduled Debt Maturities

The following are scheduled debt maturities as at September 30, 2023:

Notes and Advances

In November 2022, we issued convertible instruments with detachable warrants, resulting in the recognition of a debt discount, which is amortized to interest expense over the term of the relevant instrument. Debt discount on convertible notes with detachable warrants in the amount of $150,000,000 (see below) was presented in the statement of operations as "Other financing costs - initial recognition of derivative liabilities" and in the cash flow statement – in the line item “Initial recognition of derivative liabilities”.

The Company issued shares of common stock to certain creditors for the conversion of convertible notes, satisfaction of debt payments, and in settlement of indebtedness. For the year ended September 30, 2023, the carrying amount of indebtedness that was settled via issuance of shares of our common stock was $167,070,343 (this relates mainly to convertible notes issued in lieu of preferred stock and relevant interest, see below).

NuBridge Commercial Lending LLC Promissory Note

On March 7, 2022, the Company’s wholly owned subsidiary, Mullen Investment Properties, LLC, entered into a Promissory Note (the “Promissory Note”) with NuBridge Commercial Lending LLC for a principal amount of $5 million. The Promissory Note bears interest at a fixed rate of 8.99% per annum and the principal amount is due March 1, 2024. Collateral for the loan includes the title to the Company’s property at 1 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 is being amortized over the term of the Promissory note. As of September 30, 2023, the remaining unamortized debt discount was $270,188.

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 any accrued interest, was converted into 2,758 shares of common stock.

Convertible Notes

On November 14, 2022, the Company entered into Amendment No. 3 (“Amendment No. 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.

Amendment No. 3 further provided that the remaining $90 million of the commitment amount will be paid in the first half of 2023 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, seeNote 1), 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 April and June 2023, seeNote 8 Warrants and Other Derivative Liabilities and Fair Value Measurements.

On November 15, 2022, the Company issued the unsecured convertible Notes aggregating $150,000,000 in lieu of Series D Preferred Stock. The Notes bear 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, 2022 at the lower of: (i) $0.303 ($6,818 after reverse stock splits, seeNote 1); 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 many five-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 thewarrants 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 the first quarter of the year ended September 30, 2022. 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 by not 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. SeeNote 8 Warrants and Other Derivative Liabilities and Fair Value Measurements with regards to warrants issued upon conversion of these Notes.

As of September 30, 2023 and 2022, accrued interest on outstanding notes payable was $1,548,723 and $1,374,925, respectively.

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

ASC 825-10 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. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

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.

Financial Instruments at Carrying Value That Approximated Fair Value

Certain financial instruments that are not 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 within 30 to 90 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 4 – Acquisition of subsidiaries,Note 14 - Property, Plant, and Equipment andNote 6 – Intangible assets for further information. All these valuations are based on Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of these assets or liabilities*.*

Financial Liabilities Measured at Fair Value on a Recurring Basis

During the year ended September 30, 2023, 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 ASC 480 because the variable number of shares to be issued upon cashless exercise (which was deemed to be the predominant exercise option) is based predominantly on a fixed monetary value.

The initial financial costs recorded upon the issuance of the Preferred C Warrants during the year ended September 30, 2022 was $429,883,573. This amount is comprised of $137,090,205 preferred stock discount (amortized immediately as the preferred stock does not have a stated term of life) and $292,793,368 finance costs (calculated as the difference between fair value of warrant liabilities recognized and the preferred stock discount).

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.

On February 10, 2022, the terms of the Preferred C Warrants were amended, resulting in a change to the calculated derived dollar amount. The effect of these changes in the amount of $32,735,345 has been accounted for as deemed dividends on preferred stock and decreased additional paid-in capital of the Company.

During the year ended September 30, 2022,1,864 (giving effect to the reverse stock splits, seeNote 1) Preferred C Warrants were exercised on a cashless basis resulting in the issuance of 23,698 shares of common stock, with a total fair market value of $554,371,539 at the date of exercise.

During the quarter ended December 31, 2022,132 Preferred C Warrants that remained outstanding as at September 30, 2022 were fully exercised.

Preferred D Warrants

In accordance with Series D SPA 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 initial investment in 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, seeNote 1).

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 2022 and 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.

During April 2023, we exercised our investment rights under the Series D SPA and requested 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 the second 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 have been exercised by the pool of investors in June 2023 and 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, for one the investors), 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 2023 upon 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 and their exercise (on a cash or cashless basis) is available to investors for a period of approximately 5 years.

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 for 2 days before the exercise, and (i) 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 (level 2), 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 was marked-to-market value and the resulting gain or loss was recorded in consolidated statement of operations as a “Gain / (loss) on derivative liability revaluation”.

All the warrants mentioned in this section provide that if the Company issues or sells, enters into a definitive, binding agreement pursuant to which he Company is required to issue or sell or is deemed, pursuant to the provisions of the warrants, to have issued or sold, any shares of common stock for a price per share lower than the exercise price then in effect, 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 were not 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 Amendment No. 3 to the Series D SPA (seeNote 7) 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 in February 2023, and upon authorization of increase of common stock available for issuance by stockholders of the Company in January 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 (seeNote 19for 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, seeNote 1) 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 September 30, 2023 up to and including September 30, 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 have not 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 $124,133. 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 (level 3) in the table below.

Breakdown of items recorded at fair value on a recurring basis in consolidated balance sheets by levels of observable and unobservable inputs as of September 30, 2023 and on September 30, 2022 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 September 30, 2023, the Company had 5,000,000,000 shares of common stock authorized with $0.001 par value per share.

As described in detail in theNote 1 above, during the year ended September 30, 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 did not affect authorized common stock or preferred stock. The Company had 2,871,707 and 37,043 shares of common stock (post reverse stock splits)issued andoutstanding on September 30, 2023 and September 30, 2022, respectively.

On July 6, 2023, the Board of the Company authorized a stock buyback program, pursuant to which the Company could, until December 31, 2023, purchase up to $25 million in shares of its outstanding common stock. The shares may be repurchased, from time to time, in the open market or in privately negotiated transactions depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The authorization of the stock buyback program did not obligate the Company to purchase any shares and may be terminated or amended by the Board at any time prior to its expiration date. Up to September 30, 2023, the Company has purchased through a broker from unrelated parties, on an open market,57,000 shares of common stock at prices ($99.7 and $98.5 giving effect to 1:100 reverse stock split effectuated in December 2023) that approximated closing market price on the relevant dates. The shares of common stock purchased according to this stock buyback program have been immediately retired.

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 are not entitled to receive dividends unless declared by our Board. To date, no dividends were 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 but not 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 may determine the rights, preferences, and terms of our authorized but unissued shares of Preferred Stock. On September 30, 2023, the Company had 500,000,000 shares of Preferred Stock authorized with $0.001 par value per share. The reverse stock splits (seeNote 1 above) did not 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, with transactions over the last two years presented below:

Redemption Rights

The shares of Preferred Stock are not subject to mandatory redemption.

The Series C 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:

Year 1: No Redemption

Year 2: Redemption at 120%of the Redemption Price

Year 3: Redemption at 115%of the Redemption Price

Year 4: Redemption at 110%of the Redemption Price

Year 5: Redemption at 105%of the Redemption Price

Year 6 and thereafter: Redemption at 100%of the Redemption Price

The Series C and Series D Preferred Stock are also redeemable by the Company at any time for a 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 or not 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 for 20 trading days in any period of 30 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 during years ended September 30, 2023, and 2022.

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. As a result, an adjustment to the additional paid-in capital of the Company has been recognized during the year ended September 30, 2023.

The Series D Preferred Stock bears a 15.0% per annum fixed dividend accumulated and compounded monthly, payable no later than the 5 th 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 at September 30, 2023 was approximately $0.4 million.

The Company may elect 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 for 10 trading days in any period of 20 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 September 30, 2023 and 2022).

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 September 30, 2023 and 2022).

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 September 30, 2023 and 2022).

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 September 30, 2023 and 2022). “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 0.0044 (giving effect to the reverse stock splits – seeNote 1) shares of fully paid and non-assessable shares of common stock (rounding up to the nearest share).

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 September 30, 2023, there wereno shares of Series B Preferred Stock issued andoutstanding. As of September 30, 2023, each share of Series C Preferred Stock is convertible into 0.000044 (giving effect to the reverse stock split – seeNote 1) 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 of 1933 and such registration remaining effective, (B)

the trading price for the Company’s common stock being more thantwo times the Series C Conversion Price for 20 trading days in any period of 30 consecutive trading days on the Nasdaq Capital Market, and (C) the average daily trading dollar volume of the Company’s common stock during such 20 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 or not declared), by the Series D Conversion Price, subject to adjustment as set in the Certificate of Designation. As of September 30, 2023, each share of Series D is convertible into 0.000044 (giving effect to the reverse stock split – seeNote 1) 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 for 20 trading days in any period of 30 consecutive trading days on the Nasdaq Capital Market, and (C) the average daily trading dollar volume of the Company’s common stock during such 20 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 and Series C Preferred 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 have no voting rights except for protective voting rights (one vote for each share of common stock into which such Series D Preferred Stock could be converted) 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.

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 the fiscal years ended September 30, 2023 and 2022, 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):

NOTE 11 –SHARE- BASED COMPENSATION

The Company has share 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 has not been used to settle equity instruments granted under share-based payment arrangements.

The remaining number of shares reserved for awards equity instruments under the Equity Incentives Plan to both employees and consultants on September 30, 2023 is 42,234,250 shares of common stock.

Employees of the Company

Employees of the Company, including officers, are entitled to a number of shares of common stock specified in relevant 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, along with additional paid-in capital, ratably over the service period. Awards to the majority of employees vest on the first or the second employment anniversary of the employee - the weighted average vesting period is 14 months.

Total remaining unrecognized compensation costs related to nonvested awards to these employees amount to $0.2 million. The weighted-average period over which these costs are expected to be recognized is 6 months. The liability that relates to liability classified stock-based compensation contracts amounts to $75,000 on September 30, 2023.

Several members of management and officers are entitled to the same number of common stock specified in their employment contracts on every anniversary as long as they continue to serve. The grant fair value in this case is also based on the employment date. Therefore, these annual stock-based compensation costs are fixed throughout the employment period of each employee, unless modified subsequently. Total stock-based compensation costs of this type amounted to $6.0 million in the year ended September 30, 2023, and will amount to $5.8 million in each subsequent year unless entitled employees change or their contracts are modified.

(*) Information is presented for a 12-month period, see comments above.

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 weighted average term of such contracts is 5 months. The number of shares specified within the individual agreements, or a monetary value of those shares, if applicable, is usually negotiated by our Chief Executive Officer and approved by the Board.

These costs are generally presented as professional fees within general and administrative, and certain qualifying costs may be presented as part of research and development expenses ($5.0 million in the year ended September 30, 2023, andnone in the year ended September 30, 2022).

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 market price of the shares of common stock of the Company, until sufficient number of shares is issued. There wasno liability to consultants as at September 30, 2023. 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. The amount of these prepaid costs amounted to $5.1 million as at September 30, 2023 and this amount represents the total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan to non-employees. The weighted-average period over which these costs are expected to be recognized after the balance sheet date is 6 months.

CEO Award Incentive Plans

The Company adopted the CEO Performance Stock Award Agreement, approved by the Board and by stockholders in 2022 (“2022 PSA Agreement”) and CEO Performance Stock Award Agreement, approved by the Board and by stockholders in 2023 (“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.

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 than 12 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 is no longer probable.

The milestones per 2022 PSA Agreement:

September 30, 2023); (iv) Producing a drivable prototype of its Mullen 5 vehicle for consumers to test by end of October 2023; and (v) Producing a drivable prototype of its Mullen 5 RS High Performance vehicle for consumers to test by end of January 2023 (expired by September 30, 2023).

On October 3, 2022, the Company delivered its Class One Van to Hotwire Communications, a South Florida-based telecommunications company and Internet Service Provider for a pilot program under the captured fleet exemption.

On August 20, 2023, a drivable porotype of the Mullen 5 vehicle was part of the Mullen road tour and available for consumers to test drive.

On June 7, 2022, the Company entered into a Securities Purchase Agreement which, along with subsequent amendments, allowed the Company to raise more than $400 million to date through the issuance of preferred stock, prefunded warrants and common stock in lieu of preferred stock and other warrants. As at September 30, 2022, reaching the next 2 financial milestones (raising more than $500 and $600 million) was also considered probable.

On June 27, 2022, the Company joined the Russell 2000 and 3000 Indexes.

On September 1, 2022, the Company announced that it a signed partnership with Watergen Inc. to develop and equip Mullen’s portfolio of electric vehicles with technology that will produce fresh drinking water from the air for in-vehicle consumer and commercial application. On October 12, 2022, the Company entered into the Distributorship Agreement whereby Watergen will be integrating its unique atmospheric water generating and dehumidifying technology into the Company’s vehicles and granting exclusivity to the Company for the integration design developed specifically for its vehicles.

On November 8, 2022, the Company entered into an agreement into an agreement to appoint Newgate Motor Group as the marketing, sales, distribution and servicing agent for the Mullen I-GO in Ireland and the United Kingdom.

On December 12, 2022, the Company entered into a Dealer Agreement with Randy Marion Isuzu, a large USA dealer, to purchase and distribute the Company’s vehicles.

The milestones per 2023 PSA Agreement:

(In accordance with management’s assessment, all milestones per 2023 PSA Agreement as at September 30, 2023 are considered probable and one (Accelerated Development Milestone) has been achieved).

On September 6, 2023, the Company acquired the battery production assets of Romeo Power including intellectual property, machinery and equipment that allows the Company to expedite scaling of battery pack production in the USA.

CEO Performance Award Table

As at September 30, 2023, the accrual for future awards under 2022 PSA Agreement amounted to approximately $2.6 million (including $1.7 million award for the milestone that has been achieved but the shares have not been issued on the year end yet). Out of all remaining 2022 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.

The accrual for future awards under the 2023 PSA Agreement as at September 30, 2023 amounted to approximately $8.7 million representing the earned part of all awards considered probable (including $2.2 million award for the milestone that has been achieved but the shares have not been issued on the year end yet). A part of this provision, in the amount of $1.8 million has been recognized within non-current liabilities as the achievement is expected later than 12 months after the balance sheet date.

The costs recognized within the line item "Directors, Officers and Employees share-based compensation" in the table above represent both actual issuances of common stock under the PSA Agreements (16,689 shares with fair value of $40.4 million) and this provision for future achieved and probable awards.

Total remaining compensation cost related to nonvested share-based compensation milestones granted under the Plans will depend on probability of the milestones achievement, market price of the shares at the day before the issuance date, and on the number of shares of common stock outstanding on the day a milestone is achieved. If market price and the number of shares of common stock outstanding on September 30, 2023 remain constant and all milestones considered probable are actually achieved, these remaining compensation cost would amount to $31.3 million; the weighted-average period over which these costs are expected to be recognized after the balance sheet date is 14 months.

The remaining number of shares authorized for awards under the PSA Agreements on September 30, 2023 was 293,861 shares of common stock (giving effect to the reverse stock splits, seeNote 1).

NOTE 12 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 13 -** **LIABILITY TO ISSUE STOCK

The liability on September 30, 2023 (current liability in amount of $9.9 million and non-current liability in amount of $1.8 million) primarily represents CEO incentive award provision to be settled in shares of common stock upon achievement of specific targets, seeNote 11 - Share Based Compensation for more details. The liability on September 30, 2022 represents an obligation to issue shares of common stock to one of the investors that could not be timely issued due to the insufficient number of authorized shares available.

NOTE 14 – PROPERTY, PLANT, AND EQUIPMENT, NET

Property, plant, and equipment, net consists of the following:

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, 2023 by independent professional appraisers 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 Level 3 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 (seeNote 21 - Segment information) were not impaired, except for impairment of goodwill (seeNote 6 - Goodwill and 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, and show room assets. Their accumulated depreciation in amount of $5,969,367 has been derecognized in correspondence with initial cost to present the new cost basis of these assets in accordance with ASC 360.

Depreciation expense related to property, plant, and equipment for the years ended September 30, 2023 and 2022 was $8,023,596 and $379,256, respectively.

NOTE 15 – OTHER NON-CURRENT ASSETS

As discussed in theNote 14 above, we have tested long-lived asset for recoverability on September 1, 2023. As a result, the non-current assets with carrying amount of $1,250,508 have been fully impaired. Depreciation of these assets during the year ended September 30, 2023 and 2022 amounted to $1,762,415 and $587,684, respectively.

NOTE 16 – OPERATING EXPENSES

General and Administrative Expenses consist of the following:

The main portions of the Professional fees and Compensation to employees relate to stock-based compensation issued to non-employees and employees, respectively, seeNote 11 - Share Based Compensation for additional information.

Research and Development

Research and Development expenses as of September 30, 2023 and 2022, were $77,387,336 and $21,650,840, 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 corporate aircraft. Operating leases led to recognition of right-of-use assets, and current and noncurrent portion of lease liabilities, as appropriate. 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 orterminate 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. We calculate the present value of future lease payments based on the index or at the lease commencement date for new leases.

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

Operating Lease Commitments

Our leases primarily consist of land, land and building, or equipment leases. Our lease obligations are based upon contractual minimum rates. Most leases provide that we pay taxes, maintenance, insurance and operating expenses applicable to the premises. The initial term for most real property leases is typically 1 to 3 years, with renewal options of 1 to 5 years, and may include rent escalation clauses.

The following table reflects maturities of operating lease liabilities at September 30, 2023:

NOTE 18 – INCOME TAXES

The Company and its less than 100% owned subsidiaries are filing separate tax returns and we calculate the provision for income taxes by using a “separate return” method. Sec 174 deduction and R&D credits are calculated using consolidated tax return rules and allocated among its members.

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

The components of loss before income taxes are $1,017,647,310 and $740,323,152, for the years ended September 30, 2023 and 2022, respectively.

The Company's total provision (benefit) for income taxes consists of the following for the years ended September 30, 2023 and 2022, respectively:

The following table represents accumulated income tax NOL (net operating loss) carryforwards for the years ended September 30, 2023 and 2022, respectively:

The reconciliation of our effective tax rate to the statutory federal rate of 21% for the years ended September 30, 2023 and 2022 is as follows:

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

Significant components of the Company's net deferred tax assets as of September 30, 2023 and 2022, respectively, are as follows:

We maintain a full valuation allowance against the value of our deferred tax assets because based on the weight of evidence available at September 30, 2023 and 2022, it is more likely than not that deferred tax assets will not be realized.

We follow the guidance for accounting for uncertainty in income taxes in accordance with FASB ASC 740, which clarifies uncertainty in income taxes recognized in an enterprise's financial statements. The standard also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken, or expected to be taken, in an income tax return. Only tax positions that meet the more likely than not recognition threshold may be recognized. In addition, the standard provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company's tax years for 2014 through 2023 are still subject to examination by the tax authorities.

NOTE 19 – CONTINGENCIES AND CLAIMS

ASC 450.20 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 when one or more future events occur or fail to occur.” ASC 450 requires accrual for a loss contingency when it is probable that one or more future events will occur confirming the fact of loss and the amount of the loss can be reasonably estimated. 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 to not be misleading. As required by ASC 450 we do not record liabilities when the likelihood is not 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 do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be 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.

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’s K50 vehicle by Mullen.

On March 14, 2023, the parties entered into a Settlement Agreement providing for full settlement of all pending litigation between Mullen and Qiantu. The parties also released all claims against each other arising from or in connection with the matters and claims that were subject to the legal proceedings. Pursuant to the Settlement Agreement, (1) the parties agreed to enter into an IP Agreement (as defined and described below) and (2) in connection with the settlement of the Legal Proceedings and for the privilege of entering into the IP Agreement, the Mullen paid $6 million to Qiantu.

In connection with the execution of the Settlement Agreement, on March 14, 2023, Mullen entered into an Intellectual Property and Distribution Agreement ( “IP Agreement”) with Qiantu, andtwo of Qiantu’s affiliates (collectively “Qiantu”). Pursuant to the IP Agreement, Qiantu granted Mullen 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 (including Canada, Mexico, and the United States of America) and South America for a period offive (5) years, which period does not start until Mullen has successfully homologated vehicles based on terms of the IP Agreement (“Five Year Period”). During the Five-Year Period, Mullen is also obligated to purchase a certain number of vehicle kits every year from Qiantu. These rights shall be obtained and the commitment shall only be effective upon Mullen’s assessment of feasibility and profitability of the project within 150 days as provided for by the IP Agreement.

As consideration for Mullen’s entry into the IP Agreement, (1) Mullen issued to Qiantu USA warrants to purchase up to 3,334 shares of Mullen’s common stock (the “Qiantu Warrants”) as described below; (2) Mullen additionally paid Qiantu $2,000,000 for deliverable items under the IP Agreement; and (3) in exchange, Mullen will pay Qiantu a royalty fee of $1,200 for each homologated vehicle sold in North America and South America during the term of the IP Agreement. The Qiantu Warrants were issued upon execution of the IP Agreement and are exercisable at Qiantu USA’s discretion commencing at any time from September 30, 2023 up to and including September 30, 2024 at 110% of the market price of Mullen’s common stock at the close of trading on the earlier of (a) when Mullen completes its obligations to its Series D Preferred Stock investors; or (b) June 15, 2023 (for more information on these warrants, seeNote 8).

As Mullen continues analysis of the homologation costs, Mullen believes it would be in its best interest to also acquire licensing rights in additional territories. In that regard, Mullen is currently in negotiations with Qiantu for the licensing rights to the European territory.

No loss contingencies have been accrued in respect of this matter as at September 30, 2023, other than those paid (see above) as the Company can reasonably estimate neither probability of additional losses, nor their magnitude (if any), based on all available information presently known to management.

International Business Machines (“IBM”)

This claim was filed in the Supreme Court of the State of New York on May 7, 2019. 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. On November 9, 2021, the court, pursuant to an inquest order, awarded damages in favor of IBM and on December 1, 2021, the court entered a judgment in favor of IBM in the amount of $5,617,192. On February 2, 2022, IBM filed a Motion to Amend the Judgment it had obtained to add Mullen Automotive and Ottava as Judgment Debtors. Mullen filed an Appeal on April 8, 2022. A settlement was reached in which Mullen paid the full amount of the Judgment with interest, for a total of approximately $5,900,000, but maintained its Appeal rights. IBM then filed a Motion to Dismiss the Appeal based on Mullen’s payment of the Judgment. Mullen filed an Opposition to the same on July 18, 2022, and the hearing of the matter was set for July 25, 2022. The Court took the same under submission, and a decision has still not been issued. The Appeal remains pending.

The Company has recognized the amounts paid ($5.9 million) as losses on settlement in the year ended September 30, 2022 and does not expect any additional losses to be reasonably possible.

TOA Trading LLC Litigation

This claim arises out of an alleged breach of contract related to an unpaid finder’s fee. On April 11, 2022, TOA Trading LLC and Munshibari LLC (“Plaintiffs”), filed a complaint against Mullen in the United States District Court for the Southern District of Florida. The Plaintiffs estimated the damages to be $15 million. On May 18, 2022, Mullen filed a Motion to Dismiss or in the Alternative, Transfer Venue. Plaintiffs filed their opposition on June 1, 2022 and Mullen filed

its reply on June 8, 2022. The court took the Motion to Dismiss or in the Alternative, Transfer Venue under submission. Plaintiffs filed a Notification of Ninety Days Expiring on February 1, 2023 notifying the court that Mullen’s Motion to Dismiss or in the Alternative, Transfer Venue had been fully briefed for a period of time exceeding 90 days. On March 22, 2023, the Court issued a ruling denying Mullen’s Motion to Dismiss or in the Alternative, Transfer Venue. Accordingly, Mullen filed its Answer to Plaintiffs’ complaint on April 7, 2023. The Parties have completed written and oral discovery. Court mandated mediation took place on September 7, 2023, and was not successful. Mullen filed a Motion for Summary Judgment (“MSJ”) on October 6, 2023. The MSJ was fully submitted on November 3, 2023. Trial is set for February 12, 2024.

Based on the early stage of the litigation, no loss contingencies have been accrued in respect of this matter as at September 30, 2023 as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all available information presently known to management.

DBI Lease Buyback Servicing LLC, Drawbridge Investments LLC

In June 2022, Mullen entered into a letter agreement with DBI Lease Buyback Servicing LLC (“DBI”) wherein it agreed to provide DBI with a right to purchase up to $25 million worth of a to-be-issued Series E Convertible Preferred Stock and warrants. The option and its terms have not been finalized.

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 asserted three claims arising out of an alleged Series E option agreement by which Drawbridge allegedly would be able to purchase to-be-created Series E preferred shares and obtain warrants for Mullen’s common stock in exchange for, inter alia, a $3.5 million discount on a promissory note held by Drawbridge. Specifically, Drawbridge 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.

Drawbridge commenced the action by Order to Show Cause (“OSC”) whereby it, inter alia, sought a temporary restraining order (“TRO”) (a) enjoining Mullen from (i) increasing the number of designated shares for any outstanding stock and (ii) issuing new preferred stock; and (b) requiring Mullen to maintain at least 500,000,000 in authorized common stock (post reverse splits). On March 14, 2023, the Court vacated the TRO and entered an Order on March 15, 2023 whereby the TRO was vacated and denied. At the April 18, 2023 hearing for the preliminary injunctive relief sought by Drawbridge in the OSC and after reviewing Mullen’s opposition and hearing oral argument from both sides, the Court reserved decision on Drawbridge’s motion. Mullen moved to dismiss the complaint, with prejudice, on May 9, 2023. The Motion to Dismiss (“MTD”) was fully submitted on or about June 27, 2023. By Order dated August 25, 2023 and entered on August 29, 2023, the Court granted Mullen’s MTD and denied Drawbridge’s motion for a preliminary injunction.

On December 5, 2023, as part of the settlement, Drawbridge withdrew its appeal with prejudice. Based on the contract signed by the parties, the Company accrued $1.95 million as of September 30, 2023 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 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 June 7, 2023, the arbitrator held oral argument on issues related to liability. The arbitrator has not yet issued his decision on issues related to liability. Briefing and oral argument on issues of damages, if necessary, will be scheduled after the arbitrator issues its decision on liability.

On June 13, 2023, the GEM Group requested permission to file a motion for interim relief based on its belief that Mullen may not be able to satisfy its obligations should the arbitrator ultimately rule in the GEM Group’s favor. Despite Mullen’s objections, the arbitrator authorized the GEM Group to file an application. On July 12, 2023, the GEM Group filed an Application for Interim Award of Relief. Mullen filed its response on July 19, 2023. On August 3, 2023, the Arbitrator issued his Decision and Order on Application for Interim Measures requiring Mullen to deposit $7,000,000 into an interest-bearing escrow account with a commercial bank or brokerage firm. The arbitrator also ordered that all interest earned on the escrow account shall become the property of the party determined in the arbitration to be entitled to the principal and that the amounts held in escrow shall be released only upon further order of the arbitrator, a court or other tribunal of competent jurisdiction, or by agreement of the parties. On December 15, 2023, the GEM Group filed a motion seeking to have an additional $29,114,921.00 of cash placed in escrow considering the issuance of the Partial Award. Mullen filed an opposition to that request on December 29, 2023. To date, the arbitrator has not issued a decision on the GEM Group’s request.

The Company has accrued $7 million as a probable settlement expense as of September 30, 2023. Based on the early stage of the litigation, it is not possible to reasonably estimate if exposure exceeds the amounts accrued.

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 Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder. 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.

On August 4, 2022, the Court issued an order consolidating the Schaub Lawsuit with the later-filed Gru Lawsuit (discussed below), and appointing lead plaintiff and lead counsel.

On September 23, 2022, Lead Plaintiff filed her Consolidated Amended Class Action Complaint (“Amended Complaint”) against the Company, Mr. Michery, and the Company’s predecessor, Mullen Technologies, Inc., premised on the same purported violations of the Exchange Act and Rule 10b-5, seeking to certify a putative class of shareholders, and seeking an award of monetary damages, as well as reasonable fees and expenses. Defendants filed their motion to dismiss the Amended Complaint on November 22, 2022. On September 28, 2023, the Court granted Defendants’ motion to dismiss, in part, and denied the motion to dismiss, in part.

No loss contingencies have been accrued in respect of this matter as at September 30, 2023, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all available information presently known to management.

Trinon Coleman v. David Michery et al.

On December 8, 2023, Trinon Coleman, a purported stockholder, filed a derivative action in the Court of Chancery for the State of Delaware against the Company as a nominal defendant, 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 contingencies have been accrued in respect of this matter as at September 30, 2023, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all available information presently known 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 Mullen Automotive Inc. (“Mullen”), 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 Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-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 derivative action in the United States District Court for the Central District of California against the Company as a nominal defendant, 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 Section 14 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.

On November 8, 2022, the Court consolidated this matter and the Morsy Lawsuit (see below) into one case, and on November 30, 2022 stayed the consolidated derivative action pending (1) dismissal of the consolidated securities class action (the Schaub Lawsuit discussed above), or (2) the filing of an answer in the consolidated securities class action and notice by any party that they no longer consent to the voluntary stay of this consolidated derivative action. The case currently remains stayed.

No loss contingencies have been accrued in respect of this matter as at September 30, 2023, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all available information presently known to management.

Hany Morsy v. David Michery, et al.

On September 30, 2022, Hany Morsy, a purported stockholder, filed a derivative action in the United States District Court for the Central District of California against the Company as a nominal defendant, 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 Section 14 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) into one case, and stayed the consolidated action (as discussed 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 Section 10(b) of the Exchange Act and Rule 10b-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. Mr. Michery filed a Motion to Dismiss (“MTD”) the Caris Lawsuit on June 20, 2023.

On July 21, 2023, Plaintiff filed a document entitled “Conclusion” and another entitled “Memorandum Summary.” The court, on July 25, 2023, entered an order in response to Plaintiff’s “Conclusion” advising that the document did not constitute a sufficient filing because it was not in the proper format, did not include a certificate of service, was not signed, and was not responsive to the MTD. The court additionally, expanded Plaintiff’s deadline to respond to the MTD from July 21, 2023 to August 8, 2023 and deferred its ruling on the MTD as a result of the extended filing deadline.

On July 26, 2023, Plaintiff filed a document entitled “Plaintiff’s Demand” requesting certain relief from the court. The court, on July 28, 2023, issued an order denying “Plaintiff’s Demand”, advising that no action will be taken on Plaintiff’s July 21, 2023 “Memorandum Summary”, and further deferring a ruling on the MTD. Plaintiff filed his response to the MTD on August 3, 2023. No reply is permitted in this court. To date, the court has not issued an order with respect to the MTD.

No loss contingencies have been accrued in respect of this matter as at September 30, 2023, as the Company can reasonably estimate neither probability of the loss, nor their magnitude (if any), based on all available information presently known to management.

NOTE 20 – RELATED PARTY TRANSACTIONS

Correction of Related Party Disclosures

Subsequent to the issuance of the Company’s consolidated financial statements for fiscal year ended September 30, 2022, management was informed by the Company’s current independent auditor that it needed to provide additional disclosures pertaining to its advances to Mullen Technologies, Inc. (“MTI”) of approximately $1.2 million for fiscal year ended September 30, 2022, which were made under the Transition Services Agreement dated May 12, 2021 between the Company and MTI (the “TSA”).

First, Note 19 to the consolidated financial statements for the year ended September 30, 2022 should have disclosed that the Company’s CEO was also the CEO, Board Chairman and controlling owner of MTI. As of September 30, 2022, approximately $1.2 million of the receivable from related party MTI was past due and outstanding.

Second, Note 19 to the consolidated financial statements for fiscal year ended September 30, 2022, misdescribed the Company’s services to MTI as “management and accounting services at cost”. The proper disclosure should have been described as the processing and disbursement of payroll and related costs for 11 employees that provided services only to MTI, as well as the payment of rent for a facility utilized by MTI’s business during the fiscal year ended September 30, 2022. Pursuant to Article III of the TSA, MTI is obligated to pay monthly to the Company certain allocated costs, without mark-up, and covered taxes related to the services provided; however, such payments were not made to the Company during the year ended September 30, 2022. In addition, late monthly payments accrue interest at a rate per annum equal to

the lower of the prime rate plus 1% or the maximum rate under applicable law. Interest on the unpaid receivable balance from related party MTI of approximately $0.1 million was not accrued and was not included in the September 30, 2022 balance of the receivable of approximately $1.2 million.

In accordance with Staff Accounting bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the errors to its related party disclosures regarding its advance receivable from MTI and determined that the related impact did not materially misstate its previously issued consolidated financial statements and related notes for fiscal year ended September 30, 2022. Although the Company concluded that the errors described above were not material to its previously issued financial statements, the Company has determined it is appropriate to correct the related party disclosures in the comparative disclosures below in this Note 20 to the consolidated financial statements for the fiscal years ended September 30, 2023 and 2022.

Related Party Note 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 during the fiscal years ended September 30, 2023 and 2022.

Subsequent to the spinoff transaction and Merger on November 5, 2021, the Company processed and disbursed payroll and related compensation benefits for 11 employees that provided services only to MTI and rent costs for facilities utilized by MTI pursuant to the TSA. The terms of the TSA require MTI to repay monthly the amounts advanced by the Company, with the lower of the prime rate plus 1% or the maximum rate under applicable law charged on the unpaid amounts. The terms of the TSA do not provide for any other payment processing service fee from MTI to the Company except the interest fee on overdue advance balances. The Company incurred approximately $1.2 million and $0.9 million of disbursements on behalf of MTI during the years ended September 30, 2022 and 2023, respectively. No amounts have been collected for the funds advanced through September 30, 2023.

On March 31, 2023, the Company converted approximately $1.4 million of these advances to MTI to a note receivable from MTI. The note bears interest at 10% per year and matures on March 31, 2025 with a default rate of 15% per annum. By the end of the 2023 fiscal year, the note principal has been increased by additional $0.4 million. Remaining advances, note and interest receivable as at September 30 2023 and 2022 are presented within non-current assets of the consolidated balance sheets.

The following table summarizes the activity for the Company’s advances receivable from related party MTI:

On January 16, 2023, the Company terminated the TSA with MTI, and received payment in full from MTI in settlement of all then receivable amounts outstanding (refer toNote 22 - Subsequent events).

Director Provided Services

For the fiscal year ended September 30, 2023, our non-employee directors have earned compensation for service on our Board of Directors and Committees of our Board of Directors in amount of $287,000 in cash and $487,500 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, beginning his term in August 2021. For the fiscal year ending September 30, 2023, Mr. Miltner received $1,058,105 for services rendered. Mr. Miltner has been providing legal services to us since 2020.

Mary Winter

On October 26, 2021, the Company entered into a consulting agreement with Mary Winter, Corporate Secretary and Director, to compensate for Corporate Secretary Services and director responsibilities for the period from October 1, 2021 to September 30, 2023, in the amount of $60,000 annually or $5,000 per month. As of September 30, 2023, Ms. Winter has received $60,000 in consulting payments.

NOTE 21 – 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 located in the United States of America. All revenue presented in these consolidated financial statements relates to contracts with customers located in the United States of America.

NOTE 22 – SUBSEQUENT EVENTS

Company management has evaluated subsequent events through January 16, 2023, which is the date these financial statements were available to be issued. Except as discussed below, management has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements:

New lease contracts

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 the first year (and increases approximately 4% every year) and additional operating expenses are approximately $715 thousand in the first year with subsequent annual recalculation. Security deposit payable to the landlord is approximately $1 million.

Continued NASDAQ listing

On October 26, 2023, Mullen received approval from the Nasdaq Hearings Panel to continue its listing on The Nasdaq Capital Market. This decision is subject to two conditions:

Amendment to Bylaws and Other Events

Mullen revised its bylaws, effective November 30, 2023. The updated bylaws, now incorporating earlier amendments, make changes to stockholder nomination procedures. Notably, the timeframe for stockholder notices before annual meetings is now between 90 and 120 days. Additionally, any stockholder seeking to nominate directors must adhere to new SEC proxy rules, including using differently colored proxy cards than the company. Furthermore, the Company has scheduled its 2024 Annual Meeting for February 29, 2024, to be held virtually. This meeting will also count as the annual meeting for 2023, in response to a requirement from Nasdaq's Listing Qualifications Department. These changes reflect the Company’s efforts to streamline its governance and compliance processes, ensuring clearer guidelines for stockholder participation and aligning with regulatory requirements.

Lawsuits on manipulation of the share price of the Company’s securities

The Company has filed a spoofing complaint on Dec. 6, 2023, in the United States District Court for the Southern District of New York alleging that UBS Securities, LLC, IMC Financial Markets and Clear Street Markets, LLC engaged in a market manipulation scheme using spoofing to manipulate the market price of Mullen share. In connection with the decision to file the spoofing complaint, the Company has voluntarily dismissed the lawsuit originally filed on Aug. 29, 2023, in the United States District Court for the Southern District of New York against certain broker-dealers, alleging a scheme to manipulate the share price of the Company’s securities focusing on short-selling claims. That case covered a limited period of three months and did not provide the Company with a sufficient opportunity to justify the cost that would be incurred in pursuing the claims in that litigation. The Company conducted a cost-benefit analysis of both cases and concluded that it would be a prudent exercise of business judgment to pursue the larger spoofing litigation rather than the short-selling litigation.

Prospectus supplement

On November 1, 2023, Mullen filed a prospectus supplement with the U.S. Securities and Exchange Commission. This supplement updates the Company's prospectus dated February 14, 2023, and is part of the registration statement filed on the same date. It pertains to the registration of 1,030,097 shares of common stock (giving effect to reverse stock split, see above), related to remaining warrants held by certain selling stockholders. These warrants are part of the Company's existing securities purchase agreement, which has been amended several times since its initial date on June 7, 2022 (seeNote 8).

Significant stock issuances after the balance sheet date

After the balance sheet date, the Company issued 3,012,986 shares of common stock, mainly upon exercise of 279,404 Preferred D Warrants (seeNote 8) and issuance of shares under the stock-based compensation plans.

Certification of products

In November 2023, the Mullen ONE received a certificate of conformity from the Environmental Protection Agency on Nov. 2, 2023, permitting sales in the majority of U.S. states. In December 2023, the Mullen ONE received certification from the California Air Resources Board (“CARB”) as a zero-emission vehicle in the state of California permitting sales in remaining15 states and the District of Columbia that follow CARB regulations. Having received credentials from both CARB and the EPA, Mullen can now sell the Mullen ONE in every state throughout the U.S. Additionally, the certification gives the Mullen ONE eligibility for critical state EV incentive programs. The CARB certification takes on even more significance with CARB’s recent Advanced Clean Truck regulation, which will require that all local delivery and government fleets must be zero emissions by 2036. The Company began manufacturing Mullen ONE cargo vans at Tunica Assembly plant on November 1, 2023.

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 does not include conversion rights, stock, warrants, or other securities, aims to raise capital for the Company's manufacturing operations. The issuance of this non-convertible Note is scheduled for the first trading day when all closing conditions are met. By January 15, 2024, the loan has not been received.

The Note will incur 10% annual interest, escalating to 18% post-Event of Default. It matures three months post-issuance. The Note's terms allow for accelerated repayment upon default, requiring the Company to pay the principal, accrued interest, and other due amounts. The Note is 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 mandates prepayment of the principal from net proceeds of any subsequent financing.

Repayment of related party receivables

On January 16, 2023, the Company terminated the Transition Services Agreement between the Company and Mullen Technologies, Inc., and received payment in full settlement of all amounts outstanding (including outstanding notes receivable, advances and related interest) of approximately $2.7 million (refer toNote 20 – Related party transactions).

Reverse stock split

At the Special Meeting reconvened on December 18, 2023, the stockholders approved a proposal to authorize a reverse stock split of the Company’s common stock at a ratio within the range of 1-for-2 to 1-for-100, as determined by the Board of the Company. The Board approved a one-for-one hundred (1-for-100) reverse stock split ratio and, on December 20, 2023, the Company filed a Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation to effect a one-for-one hundred (1-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 became 1 share of common stock.

The reverse stock split has not changed the authorized number of shares or the par value of the common stock nor modified any voting rights of the common stock. Also, at the effective Time, the number of shares of common stock issuable 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 split. 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 1-for-100 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 split. Furthermore, pursuant to the terms of the amendment to the Company’s 2022 Equity Incentive Plan, which was approved by the stockholders at the Company’s annual meeting held on August 3, 2023, the shares of common stock available for issuance under the 2022 Equity Incentive Plan were not adjusted as a result of the reverse stock split.

No fractional shares were issued in connection with the reverse stock split. 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, additional 321,036 shares were issued for the benefit of shareholders that would otherwise obtain fractional shares.