BINI 10-K & 10-Q changes, risk factors and insider trading
Bollinger Innovations, Inc. · OTC · Motor Vehicles & Passenger Car Bodies · CIK 1499961 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risk Factor Summary”
New heading “We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future.”
New heading “Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.”
New heading “We will require substantial additional financing to execute our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our production operations”
New heading “We may not be able to raise additional funding nor generate or obtain sufficient cash flows to service all of our existing and future liabilities when they become due, and we may be forced to take other actions to satisfy our obligations, which may not be successful.”
New heading “We have defaulted on the payment of certain Convertible Notes and our failure to comply with the terms of Convertible Notes could result in an event of default that could materially adversely affect our business, financial condition and results of operations.”
New heading “Our liquidity issues that can force us to seek protection under the federal bankruptcy laws may impact our business and operations.”
New heading “Commercial vehicle sales depend on affordable interest rates and availability of credit for vehicle financing and a substantial increase in interest rates could materially and adversely affect our business, prospects, financial condition, results of operations, and cash flows.”
New heading “Sale or issuance of our common stock pursuant to the ELOC Purchase Agreement may cause dilution and the sale of the shares of common stock, or the perception that such sales may occur, could cause the price of our common stock to fall.”
New heading “We have a limited operating history, have not yet manufactured or sold a significant number of vehicles to customers, and have limited experience in high-volume manufacturing of commercial EVs, all of which makes evaluating our business and future prospects difficult for potential investors.”
New heading “We are dependent on certain principal suppliers and vendors in China for a significant portion of our vehicle components, and the inability of these vendors to deliver necessary components of our products according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these components, could have a material adverse effect on our financial condition and operating results.”
New heading “Because we are currently dependent upon a limited number of dealers/customers, the loss of a significant dealer could adversely affect our operating results.”
New heading “We may be negatively impacted by any early obsolescence of our vehicles.”
New heading “We have minimal experience servicing and repairing our vehicles. The inability to adequately service vehicles may adversely affect our business.”
New heading “Our business could be adversely impacted by the cancellation of our contracts involving the sale of commercial vehicles.”
New heading “We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in operating our manufacturing facilities.”
New heading “Changes in U.S. and international trade policies, including the export and import controls and laws, particularly with regard to China, may adversely impact our business and operating results.”
New heading “Our ability to utilize our net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.”
Removed heading “We will require substantial additional financing to effectuate our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development efforts or other operations.”
Removed heading “We had a limited operating history and have not yet manufactured or sold significant number of vehicles to customers. Many of our products are still on the development stage and we may never be able to mass-produce them.”
Removed heading “We may issue additional shares of common stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.”
Removed heading “We, our third party partners and our suppliers are subject to substantial regulation and unfavorable changes to, or failure by us, our third party partners or our suppliers to comply with, these regulations could substantially harm our business and operating results.”
Removed heading “We may experience significant delays in the design, manufacture, regulatory approval, launch and financing of our vehicles, which could harm our business and prospects.”
Removed heading “We may be unable to meet our projected construction timelines, costs and production ramps at our factories, or we may experience difficulties in generating and maintaining demand for products manufactured there.”
Removed heading “We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future. There is substantial doubt about our ability to continue as a going concern.”
Removed heading “Reservations for our passenger vehicles are cancellable.”
Largest changes
We have adoptedsee in full comparisoninformation securitycybersecurity policies and deployed measures to implementthethese policies, including, among others, encryption technologies, and plans to continue to deploy additional measures as we grow. However, advances in technology, an increased level of sophistication of attacks and threats, diversity of our products and services, an increased level of expertise of hackers,new discoveries in the fieldfailures ofcryptographyour policies and procedures, human error, or other factors can still result in acompromisecybersecurity incident, which could lead to interruptions to our business operations orbreach ofthemeasures that we use. If we are unable to protect our systems, and hence the information stored in our systems, fromunauthorized access, use, disclosure, disruption, modification or destruction,suchofproblemsour data orsecuritysystems.breachesCybersecuritycouldthreat actors also may attempt to exploit vulnerabilities in software and causea loss, give risedisruption to ourliabilitiesbusiness or that of our third party business partners who support our business. Like many other companies, we detect attempts by threat actors to gain access to our systems and networks on a frequent basis, and theownersfrequency of such attempts could increase in the future. We have experienced, and from time to time in the future may experience, a failure or interruption that results in the unavailability of certain information systems. Protecting against cybersecurity threats and experiencing any cybersecurity incidents may result in substantial harm to our business strategy, results of operations and financial condition, including major disruptions to business operations, loss of intellectual property, release of confidentialinformationinformation, malicious alteration orevencorruptionsubjectofusdata or systems, costs related tofinesremediation or the payment of ransom, andpenalties.litigation including individual claims or consumer class actions, commercial litigation, administrative, and civil or criminal investigations or actions, regulatory intervention and sanctions or fines, investigation and remediation costs and possible prolonged negative publicity. In addition, complying with various laws and regulations could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business.
Compliance with any additional laws and regulations could be expensive and may place restrictions on the conduct of our business and the manner in which we interact with our customers. Any failure to comply with applicablesee in full comparisonregulationslawscouldandalsoregulations,resultfailureintoregulatorymaintainenforcementouractionstechnologyagainstresources,us,manage new technologies such as generative AI tools, and misuse of or failure to secure personal information could also result in violation ofdata privacylaws and regulations, individual claims or consumer class actions, commercial litigation, investigations or proceedings against us by governmental entities or others, and damage to our reputation and credibility, and could have a negative impact on revenues and profits.
“We are currently evaluating strategic alternatives to address our liquidity issues, but we cannot assure you that any of our strategies will yield sufficient funds to meet our working capital or other liquidity needs, and any such alternative measures may be unsuccessful or may not permit us to meet scheduled obligations, which could cause us to default on our obligations. …”see in full comparison
“Our liquidity issues that can force us to seek protection under the federal bankruptcy laws may impact our business and operations.”see in full comparison
“We have defaulted on the payment of certain Convertible Notes and our failure to comply with the terms of Convertible Notes could result in an event of default that could materially adversely affect our business, financial condition and results of operations.”see in full comparison
“We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future. There is substantial doubt about our ability to continue as a going concern.”see in full comparison
Full comparison: every changed paragraph (159)
Risk Factor Summary
For a summary of risk factors, see our “Forward-Looking Statements and Risk Factor Summary” on page 2.
We have not been profitable since operations commenced, and we may never achieve or sustain profitability. In addition, we have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields such as the EV industry. Development and deployment of EV technology and vehicles is a highly speculative undertaking and involves a substantial degree of risk. We have not yetonly commercialized any of our proposed EV products orand generated any revenue from sales of such products.products on a very limited basis. We have devotedpreviously devoted, and may continue to devote, significant resources to research and developmentdevelopment, manufacturing and other expenses related to our ongoing operations.
We will require significant additional capital to continue operations and to execute current business strategy. Mullen cannot estimate with reasonable certainty the actual amounts necessary to successfully completecontinue the developmentdevelopment, manufacturing and commercialization of our proposed products and there is no certainty that we will be able to raise the necessary capital on reasonable terms or at all.
We are an early-stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future.
We will require substantial additional financing to effectuate our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development efforts or other operations.
For the years ended September 30, 2023 and 2022, we incurred net losses of $1,006.7 million and $740.3 million, respectively, and net cash used in operating activities was $179.2 million and $65.8 million, respectively. As of September 30, 2023, we had an accumulated deficit of $1,862.2 million. We will need significant capital to, among other things, conduct research and development, increase our production capacity, and expand our sales and service network. We expect to continue to incur substantial operating losses for the next several years as we advance our product development and commercialization efforts. No substantial revenue from operations will likely be available until, and unless, such efforts are successful.
We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business, and that once our cars are in production our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We will likely need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner, or on terms that are acceptable to us, or at all.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. In particular, recent disruptions in the financial markets and volatile economic conditions could affect our ability to raise capital. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through public or private equity offerings, the ownership interest of our stockholders will be diluted, and the terms of any new equity securities may have preferential rights over our common stock and further may restrict our ability to obtain additional financing even if needed to continue operations. Further, the ability to fund our needs through equity issuances, warrants or convertible debt is or may be limited by covenants in certain of our existing and future funding or other agreements. If we raise additional capital through debt financing, we would have increased debt service obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidates or operate as a business.
We had a limited operating history and have not yet manufactured or sold significant number of vehicles to customers. Many of our products are still on the development stage and we may never be able to mass-produce them.
We were originally formed on April 20, 2010, went public in November 2021 and have a limited operating history in the automobile industry, which is continuously evolving, and has generated minimal revenue to date. Our vehicles are in the development stage and significant deliveries of certain models started only in December 2023. We have limited experience as an organization in high-volume manufacturing of the planned electric commercial vehicles. In addition, as a result of our limited operating history, as well as the limited financing we have received, our management concluded that there was substantial doubt about our ability to continue as a going concern.
As we attempt to transition from research and development activities to commercial production and sales, it is difficult, if not impossible, to forecast our future results, and we have limited insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed to reach full-scale commercial production are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development activities to the large-scale manufacture and sale of vehicles. There can be no assurance that our estimates related to the costs and timing necessary to complete the design and engineering of our EVs and tool our facilities will prove accurate. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. For example, the tooling required within our facilities may be more expensive to produce than predicted, or have a shorter lifespan, resulting in additional replacement and maintenance costs, which could have a material adverse impact on our results of operations and financial condition. Similarly, we may experience higher raw material waste in the composite process than we expect, resulting in higher operating costs and hampering our ability to be profitable.
We cannot assure you that we or our partners will be able to develop efficient, automated, cost-efficient manufacturing capability and processes, and reliable sources of component supplies that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully mass market its electric commercial vehicles. Until such time as, and if, we obtain rights to a manufacturing site with sufficient manufacturing capability and process to meet our current business plan, we are unable to manufacture vehicles in sufficient quantities required for entrance into the marketplace. You should consider our business and prospects in light of the risks and significant challenges it faces as a new entrant into its industry, including, among other things, with respect to its ability to:
If we fail to adequately address any or all of these risks and challenges, its business may be materially and adversely affected.
In addition, there can be no assurance that fleet customers will embrace our products in significant numbers. Market conditions, many of which are outside of our control and subject to change, including general economic conditions, the availability and terms of financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for our electric commercial vehicles, and ultimately our success.
Our independent registered public accounting firm has included an emphasis of matter paragraph regarding our ability to continue as a going concern in its opinion on our September 30, 2024, consolidated financial statements due to our lack of revenues and insufficient capital for us to fund our operations.
Our operating and financial results forecast relies in large part upon assumptions and analyses developed by us. If these assumptions or analyses prove to be incorrect, our actual operating results may be materially different from our forecasted results.
Our operating and financial results forecast largely relies on management’s assumptions and analyses, which could be incorrect. Whether actual operating and financial results and business developments will be consistent with our expectations and assumptions as reflected in the forecast depends on a number of factors, many of which are outside our control, including, but not limited to:
Specifically, our operating results forecast is based on projected purchase prices, unit costs for materials, manufacturing, labor, packaging and logistics, warranty, sales, marketing and service, tariffs, and its projected number of orders for the vehicles with factors such as industry benchmarks taken into consideration. Any of these factors could turn out to be different than those anticipated. Unfavorable changes in any of these or other factors, which may be beyond our control, could materially and adversely affect its business, prospects, financial results and results of operations.
We will require substantial additional financing to execute our business plan, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our production operations
For the years ended September 30, 2024 and 2023, we incurred net losses of $505.8 million and $1,006.7 million, respectively, and net cash used in operating activities was $185.6 million and $179.2 million, respectively. As of September 30, 2024, we had an accumulated deficit of $2.3 billion. We will need significant capital to, among other things, continue any research and development, increase our production capacity, and expand our sales and service network. We expect to continue to incur substantial operating losses for the next several years as we advance our product development, manufacturing and commercialization efforts.
We expect ongoing capital expenditures in the foreseeable future as we grow our business volumes, including adding new models of our EV products, and that our level of capital expenditures will be significantly affected by user demand for our products and services. The fact that we have a limited operating history means we have limited historical data on the demand for our products and services. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. We will likely need to seek equity or debt financing to finance a portion of our capital expenditures. Such financing might not be available to us in a timely manner, or on terms that are acceptable to us, or at all.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. In particular, our current ineligibility to file a registration statement on Form S-3 due to our failure to timely file our Annual Report on Form 10-K for the year ended September 30, 2023 and our Annual Report on Form 10-K for the year ended September 30, 2024 and disruptions in the financial markets and volatile economic conditions could affect our ability to raise capital. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through public or private equity offerings, the ownership interest of our stockholders will be diluted, and the terms of any new equity securities may have preferential rights over our common stock and further may restrict our ability to obtain additional financing even if needed to continue operations. Further, the ability to fund our needs through equity issuances, warrants or convertible debt is or may be limited by covenants in certain of our existing and future funding or other agreements. If we raise additional capital through debt financing, we would have increased debt service obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidates or operate as a business.
We may not be able to raise additional funding nor generate or obtain sufficient cash flows to service all of our existing and future liabilities when they become due, and we may be forced to take other actions to satisfy our obligations, which may not be successful.
We may be unable to obtain alternative sources of financing in an amount sufficient to fund our existing and future liquidity needs. To date, we have yet to generate any significant revenue from our business operations. Our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, convertible preferred stock and common stock. We will need significant capital to, among other things, conduct research and development, increase our production capacity, and expand our sales and service network. Our ability to successfully expand our business will depend on many factors, including our working capital needs, the availability of equity or debt financing and, over time, our ability to generate cash flows from operations. During the twelve months ended September 30, 2024, the Company used approximately $185.6 million of cash for operating activities.
The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $10.7 million as of September 30, 2024. The net working capital was negative and reached $120.0 million. If we are unable to obtain funding or a refinancing or some restructuring of our obligations or other improvement in liquidity, we may not be able to service all our liabilities when they become due. The Company is actively pursuing additional funds and remains in discussions with potential financiers. As part of its cost-cutting measures, the Company plans to further reduce its workforce and streamline operations, including downsizing its physical locations. However, there is no guarantee that the Company will be able to restructure its liabilities and/or secure the necessary financing on favorable terms. If any of our significant obligations are accelerated, we may not be able to repay the obligations that become immediately due and will have severe liquidity restraints.
We are currently evaluating strategic alternatives to address our liquidity issues, but we cannot assure you that any of our strategies will yield sufficient funds to meet our working capital or other liquidity needs, and any such alternative measures may be unsuccessful or may not permit us to meet scheduled obligations, which could cause us to default on our obligations. As a result, we may seek bankruptcy court protection to continue our efforts to restructure our business and capital structure and may have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial statements.
We have defaulted on the payment of certain Convertible Notes and our failure to comply with the terms of Convertible Notes could result in an event of default that could materially adversely affect our business, financial condition and results of operations.
If there were an event of default under the Senior Convertible Notes that were issued pursuant to a Securities Purchase Agreement dated May 14, 2024, all amounts outstanding under the Convertible Notes could be due and payable immediately, which would have an adverse impact on our business, financial condition and results of operations. An event of default may occur should our assets or cash flow be insufficient to fully repay borrowings under the Convertible Notes, whether paid in the ordinary course or accelerated, or if we are unable to maintain compliance with relevant obligations thereunder, including financial and other covenants. Various risks and uncertainties may impact our ability to comply with our obligations under the Convertible Notes.
As of September 30, 2024, we had an aggregate amount of approximately $20.3 million of Senior Convertible Notes that were issued pursuant to a Securities Purchase Agreement dated May 14, 2024. As of September 30, 2024, the Convertible Notes were in cross-default as the Company had not paid a part of the notes that matured during September 2024. As a result, the interest rate on the Convertible Notes increased from 15% to 20%. Although the investors could request immediate payment in cash, the investors did not demand payment. In December 2024, a settlement agreement between the Company and holders of the Convertible Notes was approved by a court, and, as of the date of this Report, almost full amount of the Convertible Notes, including accumulated interest, has been converted to shares of common stock under Section 3(a)(10) of the Securities Act of 1933.
Our inability to comply with any of the provisions of the Convertible Notes could result in a default, which would permit the holders declare the principal amount and accrued interest immediately due and payable and exercise any or all of its rights, powers, or remedies under the Convertible Notes or applicable law or available in equity. Plus, as security for payment of the amounts due and payable under the Convertible Notes, the Company granted a continuing security interest in all of its right, title and interest in, its assets, whether owned, existing, acquired or arising and wherever located. If we are unable to repay outstanding borrowings when due, the holders also have the right to proceed against the collateral. The occurrence of any of these events could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Our liquidity issues that can force us to seek protection under the federal bankruptcy laws may impact our business and operations.
Due to the uncertainty about our ability to obtain sufficient cash to service current and future liabilities, there is risk that, among other things:
Seeking bankruptcy court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. For as long as a bankruptcy proceeding continued, our senior management would be required to spend a significant amount of time and effort dealing with the reorganization instead of focusing on our business operations. Bankruptcy court protection also could make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, during the period of time we are involved in a bankruptcy proceeding, our customers and suppliers might lose confidence in our ability to reorganize our business successfully and could seek to establish alternative commercial relationships. The occurrence of certain of these events has already negatively affected our business and may have a material adverse effect on our business, results of operations and financial condition.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Our management has concluded that our internal control over financial reporting was not effective as of September 30, 2024 due to material weaknesses, such as certain policies and procedures that are not all formalized in a written procedure format that is up to date, absence of formalized review of key controls processes and/or insufficiently formalized documentation evidencing, certain design deficiencies in management and analytical review of controls associated with the financial close process, lack of in-house accounting expertise, and lack of disclosure controls and procedures to ensure the Company properly presents certain related party disclosures. Management is working to remediate our current material weaknesses and prevent potential future material weaknesses by implementing procedures such as, hiring additional qualified accounting and financial reporting personnel, and further reviewing and enhancing our accounting processes, which are further described under “Item 9A. Controls and Procedures” of this Report. We may not be able to fully remediate any future material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. If we are not able to maintain effective internal control over financial reporting, our financial statements and related disclosures may be inaccurate, which could have materially adverse effects on our business and our stock price. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
Commercial vehicle sales depend on affordable interest rates and availability of credit for vehicle financing and a substantial increase in interest rates could materially and adversely affect our business, prospects, financial condition, results of operations, and cash flows.
As interest rates have risen, market rates for new vehicle financing have also risen, which may make our vehicles less affordable to customers or steer customers to less expensive vehicles. Additionally, if financial service providers tighten lending standards or restrict their lending to certain classes of credit, customers may not desire or be able to obtain financing to purchase our vehicles or may reduce the number of vehicles they otherwise would have purchased. As a result, a continuing relatively high interest rate environment or tightening of lending standards could have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
In connection with our acquisitions and other business combinations, including our acquisition of Bollinger Motors,Motors in 2022, applicable accounting standards require the net tangible and intangible assets of the acquired business to be recorded on our consolidated balance sheet at their fair values as of the date of acquisition and any excess in the purchase price paid by us over the fair value of net tangible and intangible assets of any acquired business to be recorded as goodwill. Goodwill and indefinite-lived intangible assets are not amortized,amortized but are tested at least annually for impairment or more frequently as events and circumstances dictate. Goodwill is tested for impairment at the reporting unit level, which is generally an operating segment or underlying business component. Indefinite-lived intangible assets are tested for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate. Finite-lived intangible assets other than goodwill considered long-lived assets for impairment testing purposes, are tested for impairment as events and circumstances dictate, and are required to be amortized over their estimated useful lives and this amortization expense may be significant to our ongoing financial results.
If we determine that the anticipated future cash flows from our reporting units, indefinite-lived intangible assets or asset groups, or long-lived asset groups may be less than their respective carrying values, our goodwill, indefinite-lived intangible assets, and/or long-lived assets may be deemed to be impaired. If this occurs, applicable accounting rules may require us to write down the value of the goodwill, indefinite-lived intangible assets, and/or long-lived assets on our balance sheet to reflect the extent of any such impairment. Any such write-down of goodwill, indefinite-lived intangible assets, and/or long-lived assets would generally be recognized as a non-cash expense in our Consolidatedfinancial Statements of Earningsstatements for the accounting period during which any such write downwrite-down occurs. ForImpairment example, for the fiscal year ended September 30, 2023, we incurred non-cash write-downs of certain assets. Welosses recorded $64.0during million of Bollinger goodwill impairment forthe twelve months ended September 30, 2023,2024 primarily dueamounted to unfavorable$119.2 marketmillion, conditionswhile andimpairment losses recorded during the declinetwelve ofmonths marketended priceSeptember of30, our2023 common stock. We also recorded $14.8 million write-downs of property, plant and equipment and other non-current assets and we recorded $5.9 million in intangible asset write-downs dueamounted to unfavorable$84.6 market conditions and decline of the market price of our common stock.million.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the near future. We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition, cash requirements, contractual restrictions, business prospects and other business and economic factors affecting us at such time as the Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.investment
Our common stock is listed on the Nasdaq Capital Markets. To maintain thatcontinued listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closingminimum bid price beof at least $1.00$1 per share.share as set forth in in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Although the Company regained compliance, during 2022, 2023 and 2024, we received notices from the Nasdaq Listing Qualifications staff (“Staff”) that the Company no longer satisfied the Bid Price Rule.
In September 2022, we received a letter from the Staff that, for the previous 30-consecutive business day period, the Company no longer satisfied the Bid Price Rule. Upon approval by the Company’s stockholders, in May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock, and in August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. After not regaining compliance during a 180-day compliance period, which was extended for another 180-day period, we requested a hearing before the Nasdaq Listing Qualifications Panel (“Panel”) to request a further extension of time and present our plan to regain compliance with the Bid Price Rule. The Panel granted the Company an extension and, after receiving stockholder approval, on December 21, 2023, the Company effectuated a 1-for-100 reverse split of its outstanding shares of common stock. On January 24, 2024, the Company announced that it received formal notice from the Staff that it had regained compliance with the Bid Price Rule.
More recently, on September 16, 2024, we received another formal notice from the Staff of Nasdaq that, based upon the closing bid price for our common stock, for the previous 30-consecutive business day period, the Company no longer satisfied the Bid Price Rule. The Staff further indicated that, based upon the Company’s implementation of one or more reverse stock splits within the past two years at a cumulative ratio of 250 shares or more to one in contravention of Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company’s securities were subject to delisting unless the Company timely requested a hearing before the Panel, which the Company did. After receiving stockholder approval, on September 17, 2024, the Company implemented a 1-for-100 reverse split of its outstanding shares of common stock. On October 16, 2024, the Company received formal notice from Nasdaq confirming that it had regained compliance with the Bid Price Rule and the previously scheduled Nasdaq hearing was canceled.
On September 7, 2022, we were notified by NASDAQ Listing Qualifications Staff about bid price deficiency. During the year ended September 30, 2023, upon approval by the Company’s stockholders, we have completed several reverse stock splits in order to maintain compliance with NASDAQ listing rules. In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock.
On September 7, 2022, the Company received a letter (the “Deficiency Notice”) from the Nasdaq Listing Qualifications staff (“Staff”) notifying the Company that the bid price of the Company’s common stock had closed below $1.00 per share for 30 consecutive business days and, as a result, the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), which sets forth the minimum bid price requirement for continued listing on the Nasdaq Capital Market (the “Bid Price Rule”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had 180 calendar days to regain compliance with the Bid Price Rule (the “Minimum Bid Price Rule Compliance Period”) and, on March 7, 2023, the Staff provided an extension of 180 days, or until September 5, 2023. On September 6, 2023, the Company received another letter from the Staff indicating that the Company did not meet the Staff’s September 5, 2023 deadline to regain compliance with the Bid Price Rule due to the Company’s failure to maintain a minimum bid price of $1.00.
On September 6, 2023, the Company requested a hearing (the “Hearing”) before the Nasdaq Listing Qualifications Panel (“Panel”) to request a further extension of time and present its plan to regain compliance with the Bid Price Rule. The requested Hearing stayed any delisting or suspension action pending the issuance of the Panel decision and the expiration of any additional extension period granted by the Panel following the Hearing. The request for a hearing was granted and held on October 19, 2023. On October 25, 2023, the Nasdaq Hearing Panel granted the Company an extension until January 22, 2024, to demonstrate compliance with Listing Rule 5550(a)(2) to allow continued listing requirement of The Nasdaq Capital Market.
Furthermore, whileWhile Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the Bid Price Rule, Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, Nasdaq may determine that it is not in the public interest to maintain our listing, even if we regain compliance with the Bid Price Rule as a result of the reverse stock split. In addition, Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that any listed company that fails to meet the Bid Price Rule after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for a Minimum Bid Price Rule Compliance Period. As a result, since the Company had effected an one-for-twenty-five (1-for-25) reverse stock split of its common stock on May 4, 2023, an one-for-nine (1-for-9) reverse stock split of its common stock on August 11, 20232023, andan another one-for-one hundred (1-for-100) reverse stock split of its common stock on December 21, 2023, and another 1-for-100 reverse stock split on September 17, 2024, if we subsequently fail to satisfy the Bid Price Rule, Nasdaq will begin the process of delisting our common stock without providing a Minimum Bid Price Rule Compliance Period. However, the Company is still eligible to request a hearing before the Nasdaq Panel to present its plan for regaining and sustaining compliance with the Bid Price Rule.
If our common stock ceaseceases to be listed for trading on the Nasdaq Capital Market, we would expect that our common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group. If Nasdaq were to delist our common stock, it would be more difficult for our stockholders to dispose of our common stock or warrants and more difficult to obtain accurate price quotations on our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock or warrants are not listed on a national securities exchange. The OTC Markets (the “OTC Mkts”) are generally regarded as a less efficient trading market than the NASDAQ Capital or Global Markets or the New York Stock Exchange.
Our common stock may be subject to “penny stock” rules (generally defined as non-exchange traded stock with a per-share price below $5.00) in the future. While our common stock is currently not considered “penny stock” since they are listed on the NasdaqCM, if we are unable to maintain that listing and our common stock are no longer listed on the NasdaqCM, unless we maintain a per-share price above $5.00,$5.00 or are able to satisfy any another condition, our common stock will become “penny stock.” These rules impose additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” For example, broker-dealers must determine the appropriateness for non-qualifying persons of investments in penny stocks. Broker-dealers must also provide, prior to a transaction in a penny stock not otherwise exempt from the rules, a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, disclose the compensation of the broker-dealer and its salesperson in the transaction, furnish monthly account statements showing the market value of each penny stock held in the customer’s account, provide a special written determination that the penny stock is a suitable investment for the purchaser, and receive the purchaser’s written agreement to the transaction. Legal remedies available to an investor in “penny stocks” may include the following:
Legal remedies available to an investor in “penny stocks” may include the following:
OurWe may issue additional shares of common stock, including under our equity incentive plan and our commitments to issue shares of common stock or securities that are convertible into shares of common stock may cause significant dilution to stockholders.stockholders and present other risks.
We may issue a substantial number of additional shares of common stock.
On May 14, 2024, we entered into a Securities Purchase Agreement with certain investors, pursuant to which we issued an aggregate principal amount of $52.6 million of 5% Original Issue Discount Senior Secured Notes convertible into shares of common stock (the “Notes”) and five-year warrants exercisable for shares of common stock (the “Warrants”). Furthermore, for the period ending on July 9, 2025, the investors have the right, but not the obligation, to purchase an additional $52.6 million of Notes and related Warrants on the same terms and conditions as provided in the Securities Purchase Agreement. The outstanding principal and accrued but unpaid interest on the Notes may be converted by the holder into shares of Common Stock at the lower of (i) $549.00, (ii) 95% of the closing sale price of the common stock on the date that the Initial Registration Statement is declared effective, or (iii) 95% of the lowest daily volume weighted average price in the five trading days prior to such conversion date, provided, that the conversion price will not be less than $1.16 per share, not subject to adjustment. The Warrants are exercisable for 200% of the shares of Common Stock underlying the Notes at an exercise price equal to $549.10 and may also be exercised on a cashless basis pursuant to their terms. Finally, on December 12, 2024, the Company and certain investors entered into an Additional Investment Rights Agreement whereby for a one-year period ending on December 12, 2025, such investors have the right, but not the obligation, to purchase from the Company additional Notes in an aggregate principal amount of approximately $4.6 million, and related Warrants, on the same terms and conditions as provided in the Securities Purchase Agreement, including the Registration Rights Agreement dated as of May 14, 2024. For further information, see Note 7 - Debts and Note 8 - Warrants and other derivative liabilities and fair value measurements to the Company’s consolidated financial statements included elsewhere in this Report.
As part of the consideration to investors on investments made in June 2023, we have issued warrants that provide for a variable number of shares of common stock upon cashless exercise. As disclosed further in the notes to the consolidated financial statements, as at September 30, 2023, the remaining 382,436 Preferred D warrants (recognized as liability in the consolidated balance sheets) were exercisable into 1,438,009 shares of common stock and their exercise (on a cash or cashless basis) is available to investors for a period of approximately 5 years. The number of shares of common stock to be issued upon exercise of these warrants will increase correspondingly to decrease of market price of the shares of common stock (and decrease correspondingly to increase of market price of the shares of common stock).
TheIn addition to the Company’s equity incentive plan, the Company has also adopted the 2022 CEO Award Incentive Plan 2022,Plan, approved by the Board and by stockholders in 2022, and the 2023 CEO Award Incentive Plan 2023,Plan, approved by the Board and by stockholders in 2023. 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. Total shares of common stock to be issued under the Plans will depend on probability of the milestone achievement and on the number of shares of common stock outstanding on the day a milestone is achieved. See further details inunder the“Executive itemCompensation” of Part III, Item 11 and Note 11 in the notes to the Company’s consolidated financial statements.statements included elsewhere in this Report.
The issuance of additional shares of common stock or issuance of shares of common stock upon the conversion of Notes and exercise of the Warrants or upon sales pursuant to the ELOC Purchase Agreement,
The additional shares issued upon exercise of these warrants and upon achieving the milestones under these Incentive Plans will significantly dilute the percentage ownership interest of holders of our common stock, dilute the book value per share of our common stock and increase the number of our publicly traded shares, which will depress the market price of our common stock.
After the balance sheet date and until January 15, 2023, the Company has issued 3,012,986 shares of common stock, mainly upon exercise of 279,404 Preferred D Warrants (see Note 8) and issuance of shares under the stock-based compensation plan.
Our commitment to issue shares of common stock pursuant to the terms of our Preferredpreferred Stock,stock, Notes and the Warrants,Warrants and stock-based compensation arrangements could encourage short sales by third parties which could contribute to the future decline of stock price.
Our commitment to issue shares of common stock pursuant to the terms of Preferredour Stock,preferred stock, Notes and the Warrants,Warrants and stock-based compensation arrangements has the potential to cause significant downward pressure on the price of our common stock. In such an environment, short sellers may exacerbate any decline of our stock price. If there are significant short sales of our common stock, the share price of our common stock may decline more than it would in an environment without such activity. This may cause other holders of our common stock to sell their shares. If there are many more shares of our common stock on the market for sale than the market will absorb, the price of our shares of common stock will likely decline.
Management's Discussion & Analysis (MD&A)
New heading “a) Cost of Goods Sold (COGS)”
New heading “b) Inventory Adjustments to Net Realizable Value”
New heading “Other financing costs”
New heading “Waived/(accrued) accumulated preferred dividends and other capital transactions with preferred stock owners”
New heading “Net realizable value of inventory”
Removed heading “In connection with the Merger Agreement (as defined below), and as disclosed in our Current Report on Form 8-K filed with the SEC on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 2022. As a result, and unless otherwise indicated, references to our fiscal year 2023 and prior years mean the fiscal year ended on September 30 of such year.”
Removed heading “New lease contracts”
Removed heading “Non-convertible secured promissory note”
Removed heading “Scheduled Debt Maturities”
Removed heading “Critical accounting estimates for goodwill and indefinite-lived intangibles assets impairment tests”
Largest changes
“The Company believes that its available liquidity will not be sufficient to meet its current obligations for a period of at least twelve months from the date of the filing of this Annual Report on Form 10-K. Accordingly, the Company has concluded there is substantial doubt about its ability to continue as a going concern. Without additional funding, the Company may be unable to continue operations and could be required to seek bankruptcy protection within 30 days of the issuance of these financial statements.”see in full comparison
“Critical accounting estimates for goodwill and indefinite-lived intangibles assets impairment tests”see in full comparison
“In connection with the Merger Agreement (as defined below), and as disclosed in our Current Report on Form 8-K filed with the SEC on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 2022. As a result, and unless otherwise indicated, references to our fiscal year 2023 and prior years mean the fiscal year ended on September 30 of such year.”see in full comparison
“(2) As of September 30, 2024, the Company's senior convertible notes (totaling $20.3 million) and accumulated interest (approximately $0.3 million) were in cross-default due to the non-payment of $0.2 million that matured in September 2024. As a result, the entire principal balance became due immediately, allowing investors to demand full repayment. Additionally, the interest rate increased from 15% to 20%. However, investors have not requested immediate cash payment of the notes or accrued interest. …”see in full comparison
“Fair value determinations require significant judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of the reporting units and in-process research and development assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, contributory asset charges, and other market factors. …”see in full comparison
“As a result of impairment tests performed by management during the twelve months ended September 30, 2024 in respect of Mullen Commercial segment, impairment was recognized for part of right-of-use assets in the amount of $10.2 million, as well as for engineering design intangible assets with a carrying amount of $15.1 million, and construction-in-progress for $4.2 million. Also, the Company has recorded impairment of goodwill in amount of $1.2 million pertaining to acquisition of retail business (see Note 4 - Business acquisitions). …”see in full comparison
Full comparison: every changed paragraph (81)
In connection with the Merger Agreement (as defined below), and as disclosed in our Current Report on Form 8-K filed with the SEC on November 12, 2021, our fiscal year end has changed from December 31 to September 30, effective for our fiscal year ended September 30, 2022. As a result, and unless otherwise indicated, references to our fiscal year 2023 and prior years mean the fiscal year ended on September 30 of such year.
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Ottava Automotive, Inc., a California corporation, Mullen Indiana Real Estate, LLC., a Delaware corporation, Mullen Investment Properties LLC, a Mississippi corporation, OttavaMullen Automotive,Advanced Inc.,Energy Operations LLC, a California corporation,corporation Mullen Real Estate, LLC,and a Delawaremajority corporation,ownership as well as a 60%-owned subsidiaryin Bollinger MotorsMotors, Inc.,incorporated ain Delaware corporation.Delaware. Intercompany accounts and transactions have been eliminated, if any. 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.
We are an early-stage company and have recently begun generating notable revenues, with vehicle production and deliveries commencing in fiscal year 2023 (Mullen THREE and, later, Mullen ONE in the last calendar quarter of 2023). In September 2024, our Bollinger segment delivered the first B4 vehicles to customers.
We are a development stage company and have only recently started to generate notable revenues. Vehicle production and deliveries began in June 2023. As we expand production and commercialization of vehicles, we expect the majority of our revenue to be derived from sales of commercial vehicles. We are planning to ramp up production and reach sufficient revenue levels in subsequent periods – primarily from sales of Commercial Delivery Vehicles (Class 1 – 6). As we continue to develop our product line, we expect additional revenue streams in the future, also from the sales of Sport Utility Vehicles ("SUVs") and the flexible leasing of our electric vehicles ("EVs").
In accordance with accounting standards, weWe recognize revenue from the sale of electric vehicles upon the transfer of control to athe dealer/customer. In general, theNormally, control is transferredtransfers at the point of delivery towhen the dealer/customer buthas certainpossession of the vehicle and bears the risks and rewards of ownership. However, a contract with one of our dealers includes return provision, allowing unsold vehicles to be returned after one year; and contracts with two of our dealers contain ainclude return provision,provisions, stating that they may returnallowing unsold vehicles afterto 1be year.returned Sinceupon thecontract Companytermination. doesFor notthese havearrangements, sufficientdue relevantto statisticslimited ofhistorical returnsdata yet,on returns, we defer revenue recognition until the dealer sells the vehicles haveto beenend sold by such dealercustomers, or until there is sufficient evidence to justify a reasonablereasonably estimate forthe consideration to which thewe Company expectsexpect to be entitled. PaymentsThis fromapproach customersaligns arewith generallyour expectedcommitment to beconservative receivedrevenue withinrecognition 30practices daysand afterensures delivery.compliance with accounting standards.
Cost of Goods Soldrevenues
The cost of revenues for the year ended September 30, 2024, totaled $16.9 million, comprising:
a) Cost of Goods Sold (COGS)
COGS amounted to $1.3 million, including $0.2 million from the Mullen Commercial segment and $1.1 million from the Bollinger segment. These costs encompass vehicle components and parts, labor costs, amortized tooling costs, and other production-related expenses, as well as estimated warranty provisions. The $1.1 million COGS for the Bollinger segment consist of approximately $0.6 million in standard costs and $0.5 million in cost variances.
b) Inventory Adjustments to Net Realizable Value
A non-cash write-down of $15.6 million was recognized for the Mullen Commercial segment, primarily due to excess raw materials and slower-moving inventory. The determination of net realizable value (NRV) involves significant judgment, and actual results may materially differ from estimates. For further details, refer to “Critical Accounting Policies and Estimates” below.
The costs of goods sold primarily include vehicle components and parts, labor costs, amortized tooling costs, provisions for estimated warranty expenses, and other relevant costs associated with the production of these vehicles.
Research and development expenses increaseddecreased by approximately $55.7$2.5 million or 257%3% from approximately $21.7$77.4 million through the twelve months ended September 30, 2023, to approximately $74.9 million through the twelve months ended September 30, 2022, to approximately $77.4 million through the twelve months ended September 30, 2023.2024. Research and Developmentdevelopment costs are expensed as incurred. To date, our research and development expenses have consisted primarily of engineering and consulting services in connection with the development and design of our EVs. As we ramp up for commercial operations, we expect research and development expenses to increase as we continue to invest in new vehicle model design and development of technology.
General and administrative (“G&A”) expenses include all non-production expenses incurred by us in any given period. This includes expenses such as professional fees, salaries, rent, repairs and maintenance, utilities and office expense, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses increaseddecreased by approximately $140.5$33.9 million or 187%16% from approximately $75.3 million in the twelve months ended September 30, 2022, to approximately $215.8 million in the twelve months ended September 30, 2023, to approximately $181.9 million in the twelve months ended September 30, 2024, primarily due to increasesdecrease in marketing, listing and regulatory fees, office expenses, settlements and penalties, and payrollin relatedstock-based compensation to CEO under Performance stock awards agreements (including CEO share based performance award liability revaluation - see Note 11 - Share-based compensation of the financial statements for more information), although certain expenses withincreased, thelike growth of personneladvertising and resources.promotion, professional fees, depreciation, etc.
Interest expense decreasedincreased by approximately $22.0$44.4 million or 81% from approximately $26.9 million through the twelve months ended September 30, 2022, to approximately $5.0 million through the twelve months ended September 30, 2023, to $49.4 million through the twelve months ended September 30, 2024, primarily due to aamortization decreaseof original issue discount of convertible notes issued and partially converted by the Company in convertiblethe debtsecond that has been fully converted in Q1 and Q2half of the 2023 fiscal year.year ending September 30, 2024.
Due to unfavorable market conditions and decline of the market prices of the Company’s common stock, we have tested long-lived assetassets for recoverability. As a result of the impairment testtests performed onduring the year ended September 1,30, 2023 by independent professional appraisers,2024, the Company has recognized impairment losses in amount of $84,631,000$119.2 million that related to goodwillgoodwill, (Bollingerproperty, segment),plant, and equipment, intangible assets, and right-of-use assets - an increase of $34.6 million from the last year, when impairment of goodwill, property, plant, and equipment, and intangible assets (ELMS/Mullenreached segment).$84.6 million. See more details in the section below.
Other financing costs
Financing costs other than "Interest expense" included losses on initial recognition of derivative liabilities, ELOC commitment fee, losses on initial recognition of warrants and gain/(loss) on derivative liability revaluation: $69.8 million during the year ended September 30, 2024, and $622.5 million during the fiscal year ended September 30, 2023, a decrease of 89% or $552.7 million. These losses have decreased in comparison to the previous year mainly due to decrease in financing. The main part of these losses is caused when the Company issues warrants recognized at fair value as liabilities in addition to preferred stock or other equity instruments in lieu of preferred stock and notes (see further details in the Note 8 and Note 7 of the consolidated financial statements).
Waived/(accrued) accumulated preferred dividends and other capital transactions with preferred stock owners
The accumulated preferred dividends and other capital transactions with preferred stock owners amounted to $13.9 million loss in the fiscal year ended September 30, 2023 and were represented primarily by fair value of common stock issued to avoid fractional shares on reverse stock splits - $5.2 million (see Note 1 - Description of business and basis of presentation) and $8.6 million of financial result from exchange of Series C P/S for Series E P/S (see Note 9, Series E Preferred Stock section). In the previous fiscal year ended September 30, 2023, the amount was positive ($7.4 million) due to the fact that holders of Series C Preferred stock waived accumulated dividends.
The net loss attributable to common stockholders (after transactions accounted for as preferred dividends) was $964.9$471.0 million, or $1,574.14$1,425.61 net loss per share, for the twelve months ended September 30, 2023,2024, as compared to a net loss attributable to common stockholders (after transactions accounted for as preferred dividends) of $780.0$964.9 million, or $63,085.26$157,405.25 loss per share, for the twelve months ended September 30, 2022.2023.
Our Common Stock is listed on the Nasdaq Capital Market. To maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share. Effective September 17, 2024, the Company implemented a reverse stock split at a ratio of 1-for-100 shares in order to satisfy this requirement. The reverse stock split did not change the authorized number of shares or the par value of the Common Stock nor modify any voting rights of the Common Stock. No fractional shares were issued in connection with the September 2024 reverse stock split and each fractional share resulting from the reverse stock split were rounded up to the next whole share. On October 16, 2024, the Company received formal notice from Nasdaq confirming that it had regained compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2).
In addition to the reverse stock split implemented in September 2024, the Company previously effected a 1-for-25 reverse stock split on May 4, 2023, a 1-for-9 reverse stock split on August 11, 2023, and a 1-for-100 reverse stock split on December 21, 2023. The Company retroactively adjusted its historical financial statements to reflect the reverse stock splits.
During the calendar year ended December 31, 2023 we have completed 3 reverse stock splits. In May 2023, we completed a 1-for-25 reverse split of our outstanding shares of common stock. In August 2023, we completed a 1-for-9 reverse split of our outstanding shares of common stock. The last 1-for-100 reverse stock split was effectuated in December 2023.
The 1-for-25 reverse stock split was reflected in our unaudited condensed consolidated financial statements for the six months ended March 31, 2023 and 2022. The 1-for-25 and 1-for-9 reverse splits were reflected in our unaudited condensed consolidated financial statements for the nine months ended June 30, 2023 and 2022. The last 1-for-100 reverse stock split effected on December 21, 2023 has been recognized in our consolidated financial statements for the year ended September 30, 2023 (comparatives for the year ended September 30, 2022 have also been retroactively adjusted).
As a result of these reverse splits, our issued and outstanding common stock decreased from 833,468,180 shares to 37,043 shares as of September 30, 2022, and from 7,048,387 shares to 313 shares as of September 30, 2021.
The Nasdaq Hearings Panel, on October 26, 2023, allowed Mullen Automotive to continue its listing on The Nasdaq Capital Market, subject to certain conditions, including maintaining a minimum stock price and holding an annual shareholder meeting.
The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $155.7$10.7 million as of September 30, 2023.2024. During the twelve months ended September 30, 2023,2024, the Company used approximately $179.2$185.6 million of cash for operating activities. The net working capital on September 30, 20232024 was positivenegative and amounted to approximately $58.5$120.0 million, or approximately $133.3$38.5 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, 2023,2024, the Company has incurred a net loss of $1,006.7$505.8 million and, as of September 30, 2023,2024, our accumulated deficit iswas $1,862.2$2.3 million.billion.
The Company believes that its available liquidity will not be sufficient to meet its current obligations for a period of at least twelve months from the date of the filing of this Annual Report on Form 10-K. Accordingly, the Company has concluded there is substantial doubt about its ability to continue as a going concern. Without additional funding, the Company may be unable to continue operations and could be required to seek bankruptcy protection within 30 days of the issuance of these financial statements.
Management is pursuing several strategies to address liquidity concerns, including:
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.
Despite these efforts, there can beis no assurance that ourthese plansinitiatives will be successfulsuccessful. If the Company cannot secure additional funding in alleviating the substantialimmediate doubtterm, aboutit ourmay abilitybe required to continuecurtail asoperations asignificantly goingor concern.seek bankruptcy protection. These consolidated financial statements do not include any adjustments to the carrying amounts of assets or liabilities that mightmay result from the outcome of thisthese uncertainty, such as the potential need to liquidate assets, restructure operations, or make other significant changes to the business model.uncertainties.
To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, convertible preferred stock and common stock. Debt comprises an insignificant component of our funding needs.
The short-term debt classification primarily is based upon loans due within twelve-months from the balance sheet date, in addition to loans that have matured and remain unpaid.
The following is a summary of our debt as of September 30, 2024:
(1) In October 2024, the Company reached an agreement with holders of all matured notes and loan advances (see table above) in amount of $2.7 million, as well as accumulated interest in amount of approximately $1.8 million, that the liabilities would be settled by issuance of shares of common stock of the Company worth of $3 million. The liability has been fully settled by December 2024 by issuing shares of common stock in several installments.
(2) As of September 30, 2024, the Company's senior convertible notes (totaling $20.3 million) and accumulated interest (approximately $0.3 million) were in cross-default due to the non-payment of $0.2 million that matured in September 2024. As a result, the entire principal balance became due immediately, allowing investors to demand full repayment. Additionally, the interest rate increased from 15% to 20%. However, investors have not requested immediate cash payment of the notes or accrued interest. In December 2024, the court has approved a settlement agreement between the Company and holders of the Senior convertible notes, and, by the date these financial statements are available to be issued, almost full amount of the Senior convertible notes and accumulated interest has been converted to shares of common stock under Section 3(a)(10) of the Securities Act of 1933.
The following is the overview of changes in our indebtedness during the year ended September 30, 2024:
The short-term debt classification primarily is based upon loans due within twelve-months from the balance sheet date, in addition to loans that have matured and remain unpaid. Management plans to renegotiate matured loans with creditors for favorable terms, such as reduce interest rate, extend maturities, or both; however, there is no guarantee favorable terms will be reached. Until negotiations with creditors are resolved, these matured loans remain outstanding and will be classified within short-term debt on the balance sheet. Interest and fees on loans are being accounted for within accrued interest.
The following is the overview of changes in our indebtedness during the year ended September 30, 2023:
Our cash flow used in operating activities to date has been primarily comprised of costs related to starting production, research and development, payroll and other general and administrative activities. As we continue to ramp up hiring ahead of starting commercial operations,manufacturing and sales, we expect our cash used in operating activities to increasedecrease significantlyover beforetime as we continue to reduce operating expenses and start to generate any material cash flow from our business.commercial vehicle sales. Net cash used in operating activities was $185.6 million in the twelve months ended September 30, 2024, a 4% increase from $179.2 million net cash used during the twelve months ended September 30, 2023.
Net cash used in operating activities was $179.2 million in the twelve months ended September 30, 2023, a 172% increase from $65.8 million net cash used during the twelve months ended September 30, 2022.
Our cash flows used in investing activities, to date, have been comprised mainly of purchases of equipment. We expect these costs to increase substantiallydecrease in the near future as we ramphave ramped up production activity aheadduring of2024. commencingNet commercialcash operations.used in investing activities was $16.1 million in the year ended September 30, 2024, an 85% decrease from $107.9 million used in investing activities the year ended September 30, 2023.
Net cash used in investing activities was $107.9 million in the year ended September 30, 2023, a 129% increase from $47.1 million used in investing activities the year ended September 30, 2022. The primary factor in the increased cash outflows was the ELMS assets acquisition.
Through September 30, 2023, we have financed our operations primarily through the issuance of convertible notes and equity securities.
Through September 30, 2024, we have financed our operations primarily through the issuance of convertible notes and warrants. Net cash provided by financing activities was $358.4$56.8 million for the year ended September 30, 2023 primarily due to issuance of preferred shares and other convertible instruments in lieu of preferred shares,2024, as compared to $197.3$358.4 million net cash provided by financing activities for the year ended September 30, 2022.2023.
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.
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.
Scheduled Debt Maturities
The following are scheduled debt maturities as of September 30, 2023:
Our financial statements have been prepared in accordance withby U.S. GAAP. In the preparation of these financial statements, our management is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Management considers an accounting judgment, estimateestimate, or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimatesestimates, and assumptions could have a material impact on the consolidated financial statements. Our significant accounting policies are described in Note 3 to the consolidated financial statements. Management believes none of the accounting estimates are considered critical for the preparation of these consolidated financial statements.
In preparation of these financial statements, management applied critical estimates and assumptions while performing impairment testtests for goodwill and other long-lived assets. We identified Bollingerassets and ELMS/Legacywhile Mullendetermining (refernet torealizable Note 21 - Segment information) as our reporting units for the purposesvalue of assessing impairments.inventory.
Critical accounting estimates for goodwill and indefinite-lived intangibles assets impairment tests
Our goodwill and indefinite-lived intangible assets, which primarily consist of in-process research and development assets and patents, pertain to the Bollinger acquisition on September 7, 2022 (refer to Note 4 for more details).
Fair value determinations require significant judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of the reporting units and in-process research and development assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax considerations, discount rates, long-term growth rates, contributory asset charges, and other market factors. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, or income tax rates, change, or if management’s expectations or plans otherwise change, including updates to our long-term operating plans, then our reporting units or in-process research and development assets might become impaired in the future. Additionally, any decisions to divest certain non-strategic assets could in the future lead to goodwill or in-process research and development assets impairments.
We utilize the discounted cash flow method under the income approach to estimate the fair value of our reporting units. Some of the more significant assumptions inherent in estimating the fair value include the estimated future annual net cash flows for the reporting units (including net sales, cost of products sold, sales, general, and administrative costs (“SG&A”), depreciation and amortization, working capital, and capital expenditures), income tax rates, long-term growth rates, and a discount rate that appropriately reflects the risks inherent in each future cash flow stream. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product line growth rates, management’s plans, and comparable company market multiples.
We utilize the excess earnings method under the income approach to estimate the fair value of our in-process research and development assets. Some of the more significant assumptions inherent in estimating the fair values include the estimated future annual net cash flows for the in-process research and development assets (including net sales, cost of products sold, and SG&A), contributory asset charges, income tax considerations, economic depreciation rate, a discount rate that reflects the level of risk associated with the future earnings attributable to the in-process research and development assets, and management’s intent to invest in the in-process research and development assets indefinitely. We selected the assumptions used in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated product line growth rates, management’s plans, and comparable company market multiples.
What changed in the latest 10-Q
Risk Factors
New heading “We may not be able to maintain compliance with the continued listing requirements of the Nasdaq Capital Market.”
New heading “During the past two years, the Company has effected several reverse stock splits and may effect additional reverse stock splits in the future, which may decrease the liquidity of the shares of our common stock and may have a dilutive effect on the ownership of existing stockholders.”
New heading “If we are unable to successfully transition our manufacturing operations to our Tunica, Mississippi, facility, our production schedules and operating results could be adversely affected.”
Removed heading “Bollinger has been placed in receivership, which means the Company could lose its entire investment.”
Largest changes
“On May 7, 2025, in connection with the complaint filed by Robert Bollinger alleging breach of contract by Bollinger Motors under an Amended and Restated Secured Promissory Note for $10.0 million dated October 24, 2024, the U,S, District Court for the Eastern District of Michigan (the “Court”) entered an order (the “Receivership Order”) placing Bollinger into receivership. …”see in full comparison
“During the past two years, the Company has effected several reverse stock splits and may effect additional reverse stock splits in the future, which may decrease the liquidity of the shares of our common stock and may have a dilutive effect on the ownership of existing stockholders.”see in full comparison
“In addition, on February 25, 2025, we received a written notice from the Staff notifying us that for the last 30 consecutive business days prior to the date of the notice, our Market Value of Listed Securities (“MVLS”) was less than the $35.0 million minimum required for continued listing on The Nasdaq Capital Market, as required by Nasdaq Listing Rule 5550(b)(2) (the “MVLS Listing Rule”). …”see in full comparison
“If our common stock ceases to be listed for trading on the Nasdaq Capital Market, we would expect that our common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group (the “OTC Mkts”). If Nasdaq were to delist our common stock, it would be more difficult for our stockholders to dispose of our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. …”see in full comparison
“Although the OTC Mkts do not have any listing requirements, to be eligible for quotation on the OTC Mkts, issuers must remain current in their filings with the SEC or applicable regulatory authority. If we are not able to pay the expenses associated with our reporting obligations, we will not be able to apply for quotation on the OTC Board. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. …”see in full comparison
“To maintain listing on the Nasdaq Capital Market, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share. Plus, if a company’s security has a closing bid price of $0.10 or less for 10 consecutive trading days, the Listing Qualifications department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) will issue a delisting determination. Since 2023, we have experienced periods during which our Common Stock has traded below $1.00.”see in full comparison
Full comparison: every changed paragraph (20)
Risk factors are discussed in Part I, Item 1A. “Risk Factors” in our 2024 Annual Report, and could materially affect our business, financial condition,condition or future results of operation. ThereExcept as set forth below, there have been no material changes or additions to our risk factors discussed in our 2024 Annual Report which could materially affect our business, financial condition,condition or future results of operations,operations. otherThe thanrisk factors set forth below should be read together with the following:risk factors discussed in Part I, Item 1A. “Risk Factors” in our 2024 Annual Report.
We may not be able to maintain compliance with the continued listing requirements of the Nasdaq Capital Market.
To maintain listing on the Nasdaq Capital Market, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share. Plus, if a company’s security has a closing bid price of $0.10 or less for 10 consecutive trading days, the Listing Qualifications department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) will issue a delisting determination. Since 2023, we have experienced periods during which our Common Stock has traded below $1.00.
During 2023 and 2024, we received formal notices from the Nasdaq Staff that, based upon the closing bid price for our Common Stock, for the previous 30-consecutive business day period, the Company no longer satisfied the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). Since May 2023, the Company has effected the following eight reverse stock splits in order to maintain or regain compliance with the Bid Price Rule: a 1-for-250 reverse stock split on August 4, 2025, a 1-for-100 reverse stock split on June 2, 2025; a 1-for-100 reverse stock split on April 11, 2025; a 1-for-60 reverse stock split on February 18, 2025; a 1-for-100 reverse stock split on September 17, 2024; a 1-for-25 reverse stock split on May 4, 2023; a 1-for-9 reverse stock split on August 11, 2023 and a 1-for-100 reverse stock split on December 21, 2023. Plus, if needed, the Company may effectuate additional reverse stock splits.
Nasdaq Listing Rule 5810(c)(3)(A)(iv) states that if any listed company fails to meet the Bid Price Rule after effecting one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for a Bid Price Rule compliance period. On September 16, 2024, in connection with a notice that the Company no longer satisfied the Bid Price Rule, the Staff further indicated that, based upon the Company’s implementation of one or more reverse stock splits within the past two years at a cumulative ratio of 250 shares or more to one in contravention of Nasdaq Listing Rule 5810(c)(3)(A)(iv). On September 17, 2024, the Company implemented a 1-for-100 reverse stock split, and on October 16, 2024, the Company announced that it had received formal notice from Nasdaq confirming the Company had regained compliance with the Bid Price Rule.
While Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the Bid Price Rule, Nasdaq has stated that a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq. Accordingly, if in the future the Company is not in compliance with the Bid Price Rule and effectuates another reverse stock split, Nasdaq may determine that it is not in the public interest to maintain our listing, even if we regain compliance with the Bid Price Rule.
On January 15, 2025, the Company received an expected notice from the Staff stating that the Company was no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC, because the Company had not yet filed its Annual Report on Form 10-K for the fiscal year ended September 30, 2024. The Company filed Form 10-K on January 24, 2025.
In addition, on February 25, 2025, we received a written notice from the Staff notifying us that for the last 30 consecutive business days prior to the date of the notice, our Market Value of Listed Securities (“MVLS”) was less than the $35.0 million minimum required for continued listing on The Nasdaq Capital Market, as required by Nasdaq Listing Rule 5550(b)(2) (the “MVLS Listing Rule”). Additionally, as of the date of the notice, we also did not meet either of the alternative Nasdaq continued listing standards under the Nasdaq Listing Rules: stockholders’ equity of at least $2.5 million or net income of $500,000 from continuing operations in the most recently completed fiscal year or in two of the three most recently completed fiscal years. The Company has until August 25, 2025 to regain compliance with the MVLS Listing Rule. In order to regain compliance with the MVLS Listing Rule, the Company’s MVLS must meet or exceed $35.0 million for a minimum of ten consecutive business days during the 180-day compliance period after which the Staff will provide us written confirmation of compliance and the matter will be closed. In the event we do not regain compliance with the MVLS Listing Rule, the Staff will provide notice that our securities will be subject to delisting, at which time, we may appeal the delisting determination to a Nasdaq hearings panel. There can be no assurance that we will regain compliance with the MVLS Listing Rule or otherwise maintain compliance with any of the other Nasdaq listing requirements.
If our common stock ceases to be listed for trading on the Nasdaq Capital Market, we would expect that our common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group (the “OTC Mkts”). If Nasdaq were to delist our common stock, it would be more difficult for our stockholders to dispose of our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock or warrants are not listed on a national securities exchange. The OTC Markets are generally regarded as a less efficient trading market than The Nasdaq Capital Market or Global Market or the New York Stock Exchange.
Although the OTC Mkts do not have any listing requirements, to be eligible for quotation on the OTC Mkts, issuers must remain current in their filings with the SEC or applicable regulatory authority. If we are not able to pay the expenses associated with our reporting obligations, we will not be able to apply for quotation on the OTC Board. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. If we are delisted to the OTC Mkts and no market is ever developed for our Common Stock or warrants, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all.
During the past two years, the Company has effected several reverse stock splits and may effect additional reverse stock splits in the future, which may decrease the liquidity of the shares of our common stock and may have a dilutive effect on the ownership of existing stockholders.
Since May 2023, the Company has effected the following eight reverse stock splits in order to maintain or regain compliance with the Bid Price Rule: a 1-for-250 reverse stock split on August 4, 2025; a 1-for-100 reverse stock split on June 2, 2025; a 1-for-100 reverse stock split on April 11, 2025; a 1-for-60 reverse stock split on February 18, 2025; a 1-for-100 reverse stock split on September 17, 2024; a 1-for-25 reverse stock split on May 4, 2023; a 1-for-9 reverse stock split on August 11, 2023 and a 1-for-100 reverse stock split on December 21, 2023. Plus, if needed, the Company may effectuate additional reverse stock splits. The primary purpose for a future reverse stock split, should the Company choose to effect it, would be to increase the per share market price of its Common Stock to satisfy the Bid Price Rule and maintain listing The Nasdaq Capital Market.
The liquidity of the shares of our Common Stock may be affected adversely by a reverse stock split given the reduced number of shares that will be outstanding following the reverse stock split, especially if the market price of our Common Stock does not increase as a result of the reverse stock split. In addition, a reverse stock split may increase the number of shareholders who own odd lots (less than 100 shares) of our Common Stock, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our Common Stock, we cannot assure you that a reverse stock split will increase the market price of our Common Stock by a multiple of the reverse stock split ratio, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock will continue to be based, in part, on our performance and other factors unrelated to the number of shares outstanding. A reverse stock split will reduce the number of outstanding shares of our Common Stock without reducing the number of shares of available but unissued Common Stock, which will also have the effect of increasing the number of shares of Common Stock available for issuance. The issuance of additional shares of our Common Stock may have a dilutive effect on the ownership of existing stockholders. The current economic environment in which we operate, the debt we carry, along with otherwise volatile equity market conditions, could limit our ability to raise new equity capital in the future.
In addition, a reverse stock split will reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of a reverse stock split.
If we are unable to successfully transition our manufacturing operations to our Tunica, Mississippi, facility, our production schedules and operating results could be adversely affected.
If we are unable to successfully transition manufacturing operations for Bollinger Motors from our third-party outsourced manufacturer in Michigan to our Tunica, Mississippi, facility, we may not achieve desired efficiencies, and our ability to deliver products to our customers could be disrupted. We are relocating machinery, equipment, and inventory from our Michigan-based outsourced manufacturing partner to our commercial manufacturing center in Tunica, Mississippi. Bollinger Commercial products are already set up for production but are currently idle. This transition involves complex logistics, installation, and integration of manufacturing processes into the Tunica facility. If we encounter unforeseen challenges such as equipment installation delays, production ramp-up issues, or unexpected costs, our manufacturing timelines and operating results could be adversely affected.
Bollinger has been placed in receivership, which means the Company could lose its entire investment.
On May 7, 2025, in connection with the complaint filed by Robert Bollinger alleging breach of contract by Bollinger Motors under an Amended and Restated Secured Promissory Note for $10.0 million dated October 24, 2024, the U,S, District Court for the Eastern District of Michigan (the “Court”) entered an order (the “Receivership Order”) placing Bollinger into receivership. The court appointed a receiver for the purpose of managing, protecting, preserving, operating, and selling some or all of Bollinger’s assets for the benefit and protection of Robert Bollinger, Bollinger Motors, and Bollinger Motors’ other creditors and stakeholders. Pursuant to the Receivership Order, the receiver’s responsibilities include oversight of all aspects of the management, assets, and operation of Bollinger Motors’ business, as well as the decision on whether to sell Bollinger Motors as a going concern, or to sell any or all of its assets by liquidation. Under the terms of the Receivership Order, all persons and entities with direct or indirect control over any Bollinger Motors assets are restrained and enjoined from directly or indirectly transferring, setting off, receiving, changing, selling, pledging, assigning, liquidating, or otherwise disposing of or withdrawing such assets. As a result, the shareholder and board of Bollinger have ceded control of Bollinger’s operations and assets to the receiver.
We acquired a majority ownership of Bollinger Motors in September 2022 for $148.6 million in stock and cash and invested an additional $23.7 million during the period July 2024 through March 2025. We currently own 72.7% of Bollinger Motors. Pursuant to the receivership, we are currently unable to access or control the assets of Bollinger Motors, including the ability to sell Bollinger Motors vehicles. We are also prohibited from obtaining information from Bollinger’s books and records and from making investments or undertaking activities that we would have otherwise pursued to settle certain disputes (including disputes with creditors) without leave of the Court. Since the receiver may seek Court approval to sell all of the assets of Bollinger Motors without our consent, we may lose the entire value of our ownership in Bollinger Motors as a result of such transaction.
Management's Discussion & Analysis (MD&A)
New heading “Increase in equity after the balance sheet date”
Removed heading “Bollinger Motors – receivership after the balance sheet date”
Largest changes
“After the balance sheet date, the Senior convertible notes that remained unconverted on April 15, 2025 (in amount of approximately $35.1 million) and relevant accumulated interest (in amount of approximately $0.8 million) were in cross-default due to the non-payment of portion of the loan that matured. Starting from that date, the interest rate increased from 15% to 20%. As of the date these financial statements were available to be issued, none of the investors demanded immediate payment of the notes and outstanding interest in cash.”see in full comparison
“Due to unfavorable market conditions and decline of market prices of the Company’s common stock, we test noncurrent assets for recoverability. For the nine months ended June 30, 2025, impairment of intangible assets amounted to $12.3 million (Bollinger Motors segment). During the nine months ended June 30, 2024, impairment of the intangible assets was $73.5 million (mainly Bollinger Motors segment, and $15.1 million recognized by Bollinger Commercial segment). …”see in full comparison
“Due to unfavorable market conditions and the decline of market prices of the Company’s common stock, we tested Patents acquired in September 2022 as part of the Bollinger segment (see Note 21 - Segment information) for recoverability on March 31, 2025 and recognized impairment loss in amount of $12.0 million mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization. During the three months ended March 31, 2024, impairment of the intangible assets was $73.4 million, plus impairment of goodwill amounted to $28.8 million).”see in full comparison
“Due to unfavorable market conditions and the decline of market prices of the Company’s common stock, we tested Patents acquired in September 2022 as part of the Bollinger segment (see Note 21 - Segment information) for recoverability on March 31, 2025 and recognized impairment loss in amount of $12.0 million mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization. During the six months ended March 31, 2024, impairment of the intangible assets was $73.4 million, plus impairment of goodwill amounted to $28.8 million).”see in full comparison
Also, in October 2024, Bollinger Motors, Inc., a majority-owned subsidiary ofsee in full comparisonMullentheAutomotive Inc.,Company, received a $10 million long-term loan, providing additional capital to support the production and sale of Bollinger’s Class 4 EV truck, the Bollinger B4.The note bears interest at 15% per annum, with monthly interest-only payments, and principal repayment due by October 30, 2026. It is secured by part of the assets of Bollinger Motors, excluding inventory and certain intellectual property. See also Note 19 - Contingencies and claims for disclosure onAfter a lawsuit from thelender.lender upon alleged default on one of the interest payments, the note was fully repaid by the Company in May 2025 (see Note 7 - Debt for details).
To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, warrants, convertible preferred stock and common stock. During thesee in full comparisonsixnine months endedMarchJune31,30, 2025, wereceived approximately $33 million andissued Senior secured convertiblenotes,notes with an aggregate principal of approximately $68 million, bearing 15% interestand(20%maturingafterin 4 months,default), and warrants with terms further described in Note 7 - Debt and Note 8 - Warrants and other derivative liabilities and fair value measurements to the condensed consolidated financial statements. Furthermore, in October 2024, the Company received $1 million proceeds in accordance with the equity line of credit (see further in Note 9 - Stockholder'sEquityequity).
Full comparison: every changed paragraph (58)
The following discussion and analysis are intended to help the reader understand Mullen’sthe Company’s results of operations and financial condition. You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes included elsewhere in this Report.
This Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,continue” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties includeinclude, but are not limited to,to: significant losses we have incurred since inception, and we expect that we willto continue to incur losses for the foreseeable future; our ability to raise the substantial additional financing needed to execute our business plan, and aplan on acceptable terms, or at all, which failure to do so could force us to delay, limit, reduce or terminate our production operations; our ability to continue as a going concern; our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market; reliance on OEMs, suppliers and service providers for parts and components; the potential for our vehicles mayto fail to perform as expected; risks and uncertainties related to litigation, regulatory actions and government investigations and inquiries; changes in laws and regulations (domestically or internationally) that may materially adversely affect our business, prospects,prospects financial condition and operating results; and other risks and uncertainties described under the section titled “Risk Factors” herein and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “2024 Annual Report”), which was filed with the Securities and Exchange Commission on January 24, 2025. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation (and expressly disclaim any obligation) to update or revise any forward-looking statements, whether as a result of new information, future events,events or otherwise,other reasons, except as may be required under applicable securities laws. These risks and other factors described in this Report and 2024 Annual Report under the section titled “Risk Factors” may not be exhaustive. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that ourthe actual results of operations, financial condition, and liquidity, and developments in the industry in which we operate and our actual results of operations, financial condition and liquidity may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if ourthe results of operations, financial condition, liquidity, andactual developments in the industry in which we operate and our actual results of operations, financial condition liquidity are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.
These interim condensed consolidated financial statements include the accounts of the Company andCompany, its wholly owned subsidiaries Ottava Automotive, Inc., a California corporation, Mullen Indiana Real Estate, LLC.,LLC, a Delaware corporation,limited liability company, Mullen Investment PropertiesProperties, LLC, a Mississippi corporation,limited liability company, Mullen Advanced Energy OperationsOperations, LLC, a California corporationlimited liability company and aits majoritymajority-owned ownership insubsidiary Bollinger Motors, incorporatedInc., ina Delaware.Delaware corporation. Intercompany accounts and transactions have been eliminated, if any. The financial statements reflect the consolidated financial position and results of operations of Mullen,the Company, which have been prepared in accordance with GenerallyU.S. Accepted Accounting Principles in the United States.GAAP.
Comparison of the Three Months Ended MarchJune 31,30, 2025 to the Three Months Ended MarchJune 31,30, 2024
(*) Adjusted retroactively for reverse stock splits, see Note 1 - Description of business and basis of presentation
We recognize revenue from the sale of electric vehicles upon the transfer of control to the dealer/customer. Normally, control transfers at the point of delivery when the dealer/customer has possession of the vehicle and bears the risks and rewards of ownership. However, a contract with one of our dealers includes a return provision, allowing unsold vehicles to be returned after one year;year, and contracts with a few other dealers include provisions allowing unsold vehicles to be returned upon contract termination. For these arrangements, due to limited historical data on returns, we defer revenue recognition until the dealer sells the vehicles to end customers,customers or until there is sufficient evidence to reasonably estimate the consideration to which we expect to be entitled. In January 2025, one of the customers waived their right of return for 60 vehicles (Mullen Commercial segment), and the Company recognized revenue in amount of $3.7 million.
Research and development expenses decreased by $13.7$2.7 million, or 57%,19%, from $24.0$14.3 million through the three months ended MarchJune 31,30, 2024, to $10.4$11.6 million through the three months ended MarchJune 31,30, 2025. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping,prototyping and other expenses related to preparation for the production of electric vehicles and batteries. The Company recently began cost reduction initiatives, thereby reducing research and development expenses in order to continue as a going concern.
General and administrative expenses include all non-production expenses incurred in a given period. This includes professional fees, salaries, rent, repairs and maintenance, utilities and office expenses, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses,licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $6.5$11.3 million, or 14%,24%, from approximately $47.9$47.5 million in the three months ended MarchJune 31,30, 2024, to approximately $41.4$36.2 million in the three months ended MarchJune 31,30, 2025, primarily due to decrease of settlements and penalties, professionaladvertising fees,and promotionpromotions costs,and etc.compensation to employees.
Impairment
Due to unfavorable market conditions and the decline of market prices of the Company’s common stock, we tested Patents acquired in September 2022 as part of the Bollinger segment (see Note 21 - Segment information) for recoverability on March 31, 2025 and recognized impairment loss in amount of $12.0 million mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization. During the three months ended March 31, 2024, impairment of the intangible assets was $73.4 million, plus impairment of goodwill amounted to $28.8 million).
The Company recognized other financing costs on initial recognition of warrants during the three months ended MarchJune 31,30, 2025 in the amount of $21.1$33.2 million due to additionalhigher value of notes with detached warrants issued during the three months ended MarchJune 31,30, 2025 (noversus investments$17.9 million during the three months ended MarchJune 31,30, 2024). Net loss on revaluation of warrants obligations was $4.8 million during the three months ended June 30, 2025, in comparison to $2.3 million gain during the three months ended June 30, 2024.
Net gain on revaluation of warrants obligations was $98.2 million during the three months ended March 31, 2025 vs $3.6 million during the three months ended March 31, 2024 with the gains recorded primarily during periods when closing bid price of the Company's common stock was lower than conversion floor of the relevant warrants (after reverse stock splits). During the three months ended March 31, 2025, pursuant to the warrant exchange agreement (the “Warrant Exchange Agreement”) whereby the Company and certain investors agreed to issue new warrants in exchange for existing warrants, the Company and investors exchanged the warrants to fix conversion floor at $0.01 (not subject to reverse stock splits), which increased the fair value of warrants (calculated as number of shares issuable upon cashless exercise) and corresponding loss in amount of approximately $57.8 million was presented in the line item “Loss on exchange of warrants” of the consolidated statement of operations. For further details on accounting for warrants, see Note 8 - Warrants and Other Derivative Liabilities and Fair Value Measurements to the financial statements.
Similarly, theThe interest expense (mainly amortization of original issue discount (see Notes 7 - Debt to the financial statements) increased by $7.3$17.4 million in comparison to the three months ended MarchJune 31,30, 20242024, due to a higher volume of debt outstanding during the three months ended MarchJune 31,30, 2025, see Notes 7 to the financial statements.2025.
The "Loss on settlement (GEM case)" in the amount of $14.3 million represents excess of carrying values of transferred fixed assets over liabilities to GEM during settlement in May 2025 (see Note 19 - Contingencies and claims for further details).
The net loss attributable to common stockholders (after preferred dividends) was approximately $47.1$129.8 million, or $489.24$11,231.39 net loss per share, for the three months ended MarchJune 31,30, 2025, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $132.5$96.0 million, or $12,041,273.00$95,987,912 loss per share, for the three months ended MarchJune 31,30, 2024 (giving effect to reverse stock splits, see Note 1 - Description of Businessbusiness and Basisbasis of Presentationpresentation to the financial statements).
Comparison of the SixNine Months Ended MarchJune 31,30, 20252025, to the SixNine Months Ended MarchJune 31,30, 2024
(*) Adjusted retroactively for reverse stock splits, see Note 1 - Description of business and basis of presentation
We recognize revenue from the sale of electric vehicles upon the transfer of control to the dealer/customer. Normally, control transfers at the point of delivery when the dealer/customer has possession of the vehicle and bears the risks and rewards of ownership. However, a contract with one of our dealers includes a return provision, allowing unsold vehicles to be returned after one year;year, and contracts with a few other dealers include provisions allowing unsold vehicles to be returned upon contract termination. For these arrangements, due to limited historical data on returns, we defer revenue recognition until the dealer sells the vehicles to end customers,customers or until there is sufficient evidence to reasonably estimate the consideration to which we expect to be entitled. In January 2025, one of the customers waived their right of return for 60 vehicles (MullenBollinger Commercial segment), and the Company recognized revenue in amount of $3.7 million.
Research and development expenses decreased by $18.5$21.3 million, or 46%,39%, from $40.2$54.5 million through the sixnine months ended MarchJune 31,30, 2024, to $21.6$33.2 million through the sixnine months ended MarchJune 31,30, 2025. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping,prototyping and other expenses related to preparation for the production of electric vehicles and batteries. The Company recently began cost reduction initiatives, thereby reducing research and development expenses in order to continue as a going concern.
General and administrative expenses include all non-production expenses incurred in a given period. This includes professional fees, salaries, rent, repairs and maintenance, utilities and office expenses, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses,licenses and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $13.3$24.6 million, or 15%,18%, from approximately $91.1$138.6 million in the sixnine months ended MarchJune 31,30, 2024, to approximately $77.9$114.0 million in the sixnine months ended MarchJune 31,30, 2025, primarily due to reduction in employee related compensation due to reduction in force, decrease of settlements and penalties, professional fees, promotion costs, etc.
Due to unfavorable market conditions and decline of market prices of the Company’s common stock, we test noncurrent assets for recoverability. For the nine months ended June 30, 2025, impairment of intangible assets amounted to $12.3 million (Bollinger Motors segment). During the nine months ended June 30, 2024, impairment of the intangible assets was $73.5 million (mainly Bollinger Motors segment, and $15.1 million recognized by Bollinger Commercial segment). In addition, impairment of goodwill amounted to $28.9 million (carrying value of goodwill was zero as of both June 30, 2025, and September 30, 2024). The impairment was recognized in the financial statements mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization.
Due to unfavorable market conditions and the decline of market prices of the Company’s common stock, we tested Patents acquired in September 2022 as part of the Bollinger segment (see Note 21 - Segment information) for recoverability on March 31, 2025 and recognized impairment loss in amount of $12.0 million mainly due to the uncertainty of future fundings required to support the business and decrease of Company's market capitalization. During the six months ended March 31, 2024, impairment of the intangible assets was $73.4 million, plus impairment of goodwill amounted to $28.8 million).
The Company recognized other financing costs on initial recognition of warrants during the sixnine months ended MarchJune 31,30, 20252025, in the amount of $37.2$70.4 million (versus $17.9 million during the nine months ended June 30, 2024) due to additional notes with detached warrants issued during the sixnine months ended MarchJune 31,30, 2025 (no investments during the six months ended March 31, 2024).2025.
Net gain on revaluation of warrants obligations was $63.6$58.8 million during the sixnine months ended MarchJune 31,30, 20252025, vsversus $3.1a $0.8 million loss during the sixnine months ended MarchJune 31,30, 2024 with the gains recorded primarily during periods when closing bid price of the Company's common stock was lower than conversion floor of the relevant warrants (after reverse stock splits).2024. During the six nine months ended MarchJune 31,30, 2025, pursuant to the Warrant Exchange Agreement, the Company and certain investors agreed to issue new warrants in exchange for existing warrants, the Company and investors exchanged the warrants to fix the conversion floor at $0.01 (not subject to reverse stock splits), which increased the fair value of warrants (calculated as number of shares issuable upon cashless exercise) and corresponding loss in amount of approximately $57.8 million wasas presented in the line item “Loss on exchange of warrants” of the consolidated statement of operations. For further details on accounting for warrants, see Note 8 - Warrants and Otherother Derivativederivative Liabilitiesliabilities and Fairfair Valuevalue Measurementsmeasurements to the financial statements.
Similarly, the interest expense (mainly amortization of original issue discount (see Note 7 - Debt to the financial statements) increased by $25.7$43.1 million in comparison to the sixnine months ended MarchJune 31,30, 20242024, due to a significantly higher volume of debt outstanding during the sixnine months ended MarchJune 31,30, 2025, (see NotesNote 7 - Debt to the financial statements.statements).
The "Loss on settlement (GEM case)" in the amount of $14.3 million represents excess of carrying values of transferred fixed assets over liabilities to GEM during settlement in May 2025 (see Note 19 - Contingencies and claims for further details).
The net loss attributable to common stockholders (after preferred dividends) was approximately $162.0$291.8 million, or $3,338.65$74,887.88 net loss per share, for the sixnine months ended MarchJune 31,30, 2025, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $193.9$289.9 million, or $21,493,370.73$289,858,116 loss per share, for the sixnine months ended MarchJune 31,30, 2024 (giving effect to reverse stock splits, see below).
Bollinger Motors – receivership after the balance sheet date
After the balance sheet date, on May 7, 2025, the U.S. District Court for the Eastern District of Michigan entered an order placing Bollinger Motors, Inc., a majority-owned and material operating segment of Mullen Automotive Inc., into court-appointed receivership. This action followed a legal complaint filed on March 21, 2025, by Robert Bollinger, who alleged a breach of contract related to a $10.0 million secured promissory note executed on October 24, 2024. The court order appointed a receiver with full authority over Bollinger Motors’ operations, governance, and assets, including the ability to operate or sell the business, in whole or in part, for the benefit of creditors.
Following the appointment of the receiver, Mullen no longer retains decision-making authority or operational control over Bollinger Motors. The Company is not required to fund ongoing operations, settle liabilities, or guarantee obligations of the discontinued business. The promissory note at issue was not guaranteed by Mullen, and no current legal proceedings or court orders impose an obligation on Mullen to fund any shortfall if the assets of Bollinger Motors are insufficient to cover its liabilities.
The Company does not expect the loss of Bollinger Motors to have a material adverse impact on its liquidity or capital resources. Bollinger Motors was not generating positive cash flow and had been incurring significant operating losses. Removing this business from the consolidated results is expected to reduce ongoing losses and simplify the Company’s operating structure.
On FebruaryJune 14,2, 2025, the Company filedeffected a Certificate of Amendment to its Second Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to affect a one-for-sixty (1-for-60)1-for-100 reverse stock split of its common stock.stock, Theand on August 4, 2025, the Company effected a 1-for-250 reverse stock splitsplit, became effective on February 18, 2025. Asas further described in the Note 20 - Subsequent events, the Company also implemented a 1-for-100 reverse stock split on April 11, 2025, which waswere applied retroactively to these consolidated financial statements.
In addition to the reverse stock splitsplits referred to above, the Company previously effected a 1-for-25 reverse stock split on May 4, 2023, a 1-for-9 reverse stock split on August 11, 2023, a 1-for-100 reverse stock split on December 21, 2023, and 1-for-100 reverse stock split on September 17, 2024.2024, 1-for-60 reverse stock split on February 18, 2025, and 1-for-100 reverse stock split on April 11, 2025. The Company retroactively adjusted its historical financial statements to reflect the reverse stock splits.
The reverse stock splits did not change the authorized number of shares or the par value of the common stock nor did it modify any voting rights of the common stock. No fractional shares were issued in connection with the reverse stock splits and each fractional share resulting from the reverse stock splits werewas rounded up to the next whole share.
The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $2.3$0.9 million as of MarchJune 31,30, 2025. During the sixnine months ended MarchJune 31,30, 2025, the Company used approximately $48.6$69.4 million of cash for operating activities. The net working capital deficit on MarchJune 31,30, 2025 amounted to approximately $156.1$144.1 million, or $56.7$41.6 million,million after excluding derivative and other warrant liabilities and liabilities to issue stock, that are supposed to be settled by issuing common stock without using cash. For the sixnine months ended MarchJune 31,30, 2025, the Company incurred a net loss of $172.7$304.4 million, and as of MarchJune 31,30, 2025, our accumulated deficit was approximately $2.5$2.6 billion.
The Company believes that its available liquidity will not be sufficient to meet its current obligations for a period of at least twelve months from the date of the filing of these unaudited interim condensed consolidated financial statements. Accordingly, the Company has concluded there is substantial doubt about its ability to continue as a going concern. During the sixnine months ended MarchJune 31,30, 2025, the Company made the decision to temporarily shut down key production facilities due to short-term liquidity constraints. This action directly impacts our ability to produce vehicles. Should this shutdown continue, our cash flows from operating activities are expected to be further negatively impacted, which would further worsen the Company’s cash position. Management is pursuing several strategies to address liquidity concerns, including equity or debt financing and cost reduction and operational restructuring. Despite these efforts, there is no assurance that these initiatives will be successful. Without additional funding, the Company may be unable to continue operations and could be required to seek bankruptcy protection within 30 days of the issuance of these financial statements.
Increase in equity after the balance sheet date
Subsequent to the balance sheet date, the Company and certain investors entered the following agreements with respect to outstanding notes and warrants (as described in the Note 20 – Subsequent events in further detail). On July 29, 2025, the Company and investors exchanged all then-outstanding warrants (with a carrying amount of approximately $114 million) for newly designated shares of Series G Preferred stock, and secured senior convertible notes with a principal and accumulated interest in amount of approximately $25 million for newly designated shares of Series F Preferred stock. Additionally, on August 14, 2025, the Company and investors exchanged all then-outstanding warrants (with a carrying amount of approximately $5 million) for shares of Series G Preferred stock, and secured senior convertible notes with a principal and accumulated interest in amount of approximately $5 million for shares of Series F Preferred stock. On August 14, 2025, the Company and investors also agreed to amend the conversion floors in the cashless exercise formulas of the warrants issuable upon future possible exercise of additional investment rights from $0.01 to $0.07. If the price of shares of common stock decrease to or below $0.07, the Company agreed to reduce the floor of the cashless exercise formula to $0.01 and seek stockholder approval.
As a result of these transactions, the Company believes that as of August 14, 2025, the stockholders' equity of the Company exceeds $2.5 million.
To date, our current working capital and development needs have been primarily funded through the issuance of convertible indebtedness, warrants, convertible preferred stock and common stock. During the sixnine months ended MarchJune 31,30, 2025, we received approximately $33 million and issued Senior secured convertible notes,notes with an aggregate principal of approximately $68 million, bearing 15% interest and(20% maturingafter in 4 months,default), and warrants with terms further described in Note 7 - Debt and Note 8 - Warrants and other derivative liabilities and fair value measurements to the condensed consolidated financial statements. Furthermore, in October 2024, the Company received $1 million proceeds in accordance with the equity line of credit (see further in Note 9 - Stockholder's Equityequity).
Also, in October 2024, Bollinger Motors, Inc., a majority-owned subsidiary of Mullenthe Automotive Inc.,Company, received a $10 million long-term loan, providing additional capital to support the production and sale of Bollinger’s Class 4 EV truck, the Bollinger B4. The note bears interest at 15% per annum, with monthly interest-only payments, and principal repayment due by October 30, 2026. It is secured by part of the assets of Bollinger Motors, excluding inventory and certain intellectual property. See also Note 19 - Contingencies and claims for disclosure onAfter a lawsuit from the lender.lender upon alleged default on one of the interest payments, the note was fully repaid by the Company in May 2025 (see Note 7 - Debt for details).
During the sixnine months ended MarchJune 31,30, 2025, a significant part of Senior secured convertible notes,notes with a principal of approximately $26 million, as well as relevant accumulated interest (notes with a carrying amount of approximately $24.8 million and interest with a carrying amount of approximately $1.5 million),million, have beenwere converted into shares of common stock. Also, the Company reached an agreement with holders of matured notes and loan advances in amount of $2.7 million, as well as accumulated interest in amount of approximately $1.8 million, that the liabilities would be settled pursuant to Section 3(a)(9) of the Securities Act by issuance of shares of common stock of the Company worth of $3 million. The liability was fully settled by December 2024, and the transaction resulted in recognition of gain on extinguishment of $1.5 million.
After the balance sheet date, the Senior convertible notes that remained unconverted on April 15, 2025 (in amount of approximately $35.1 million) and relevant accumulated interest (in amount of approximately $0.8 million) were in cross-default due to the non-payment of portion of the loan that matured. Starting from that date, the interest rate increased from 15% to 20%. As of the date these financial statements were available to be issued, none of the investors demanded immediate payment of the notes and outstanding interest in cash.
The following is a summary of our indebtedness as of
June March 31,30, 2025 and of transactions during the six
nine months ended MarchJune 31,30, 2025:
The following table provides a summary of our cash flow data for the sixnine months ended MarchJune 31,30, 2025 and 2024:
Our cash flow used in operating activities to date has been primarily comprised of costs related to research and development, payroll and other general and administrative activities. Net cash used in operating activities was $48.6$69.4 million in the sixnine months ended MarchJune 31,30, 2025, a 55%52% decrease from $108.5$145.2 million net cash used during the sixnine months ended MarchJune 31,30, 2024.
During the sixnine months ended MarchJune 31,30, 2025 and 2024, our cash flows used in investing activities have been comprised mainly of equipment purchases. Net cash used in investing activities was $3.9$4.2 million in the sixnine months ended MarchJune 31,30, 2025, a 69%70% decrease from $12.5$14.1 million used in investing activities during the sixnine months ended MarchJune 31,30, 2024.
Through MarchJune 31,30, 2025, we have financed our operations primarily through the issuance of convertible notes and warrants, as well as by receiving a long-term loan for production of Bollinger Motors vehicles (for further details, see section "Debt" above). Net cash provided by financing activities was $44.0$63.8 million for the sixnine months ended MarchJune 31,30, 2025, as compared to $4.9$7.5 million net cash spent on financing activities for the sixnine months ended MarchJune 31,30, 2024.
The following tables summarize our contractual obligations and other commitments for cash expenditures as of MarchJune 31,30, 2025, and the years in which these obligations are due:
The following are scheduled debt maturities as of MarchJune 31,30, 2025 (see also notesection "Debt" above):
In preparation of these financial statements, the management applied critical estimates and assumptions while performing impairment tests for long-lived assets and while determining net realizable value of inventory.
We identified Bollinger Motors and MullenBollinger Commercial (refer to Note 4 - Segment information) as our reporting units for the purposes of assessing impairments.
We review our noncurrent asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of such asset groups may not be recoverable. Such conditions could include significant adverse changes in the business climate, current period operating or cash flow losses, significant declines in forecasted operations,operations or a current expectation that an asset group will be disposed of before the end of its useful life. The recoverability of noncurrent asset groups to be held and used is measured by a comparison of the carrying amount of the asset group to future undiscounted net cash flows expected to be generated by the asset group. If an asset group is considered to be impaired, the impairment is recognized in the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
Due to a prolonged decrease in our market capitalization, including a significant decline in stock price and budgeted performance targets not achieved as compared to acquisition date budgets, we assessed noncurrent assets for impairment. As a result of impairment tests performed by management asduring ofthe Marchnine 31,months ended June 30, 2025, the Company recognized impairment loss in the amount of $12.0$12.3 million in respect of Patentspatents (Bollinger Motors segment). No impairment in respect of other noncurrent assets was recognized, primarily because of significant impairment that reduced the carrying amount of long-lived assets in previous periods.
In accordance with applicable accounting standards, we value inventory at the lower of cost or net realizable value. Our assessment of net realizable value is a critical accounting estimate due to the inherent market volatility, evolving technology,technology and competitive landscape of the EV industry.
The net realizable value of inventory is determined based on the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal,disposal and transportation. In determining net realizable value, we consider several factors, including:
As a result of the tests performed by the management during the sixthree and nine months ended MarchJune 31,30, 2025, the write-down to net realizable value in amount of $0.8$8.9 million and $9.7 million, respectively (whereas $6 million was recorded by the MullenBollinger Commercial segment.segment, and remaining part - by the Bollinger segment). These adjustments were recorded as a component of cost of goods sold.
The net realizable value assessment considered the current expected selling prices of Mullen One, Mullen Three, and Bollinger B4 vehicles, based on recent sales and current market demand.demand, as well as expected additional costs required to sell the vehicles. Should actual sales prices or demand decline, or selling costs increase, additional write-downs may be required in future periods. Additionally, if the Company is unable to secure sufficient funding to continue operations as planned, inventory may need to be sold at further discounted prices, which could negatively impact future financial results.
BINI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding BINI (13F)
None of the 59 investors we track reported a position in their latest 13F.