# Bollinger Innovations, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Bollinger Innovations, Inc.](/companies/bini.md) (CIK 1499961)
- Form: 10-Q
- Filed: 2024-05-14
- Accepted by EDGAR: May 14, 2024, 12:39 ET
- Period: 2024-03-31
- Accession: 0001437749-24-016668
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1499961/000143774924016668/muln20240331_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1499961/000143774924016668/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $33.3k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-10-01 to 2024-03-31 | $33.3k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $13.4k | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-10-01 to 2024-03-31 | $13.4k | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $19.9k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-10-01 to 2024-03-31 | $19.9k | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $24.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-10-01 to 2024-03-31 | $40.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$177.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-10-01 to 2024-03-31 | −$236.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $259.7k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-10-01 to 2024-03-31 | $517.7k | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$2.2m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-10-01 to 2024-03-31 | −$3.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$132.4m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-10-01 to 2024-03-31 | −$193.8m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$19.39 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-10-01 to 2024-03-31 | −$35.83 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 6 months, 2023-10-01 to 2024-03-31 | −$108.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-10-01 to 2024-03-31 | $12.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-31 | $22.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $88.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $214.1m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $83.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $96.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $0 | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-31 | $2.7m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-31 | $95.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,136 characters.

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

### Cautionary Note Regarding Forward-Looking Statements

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

### Basis of Presentation

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

### Components of Results of Operations

We are an early-stage company, and our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.

### Comparison of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023

The following table sets forth our historical operating results for the periods indicated:

*(dollar amounts, except percentages)*

| Revenue | Three Months Ended March 31, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Vehicle sales | $33,335 | $— | $33,335 | —% |
| Cost of revenues | (13,440) | — | (13,440) | —% |
| Gross profit / (loss) | 19,895 | — | 19,895 | —% |
| **Operating expenses:** |  |  |  |  |
| General and administrative | 47,903,692 | 47,412,338 | 491,354 | (1)% |
| Research and development | 24,023,526 | 20,478,971 | 3,544,555 | (17)% |
| Impairment of goodwill | 28,846,832 | — | 28,846,832 | —% |
| Impairment of right-of-use assets | 3,167,608 | — | 3,167,608 | —% |
| Impairment of intangible assets | 73,447,067 | — | 73,447,067 | —% |
| **Loss from operations** | **$(177,368,830)** | **$(67,891,309)** | **$(109,477,521)** | **(161)%** |
| **Other income (expense):** |  |  |  |  |
| Gain/(loss) on sale of fixed assets | (449,855) | 385,031 | (834,886) | (217)% |
| Gain (loss) on extinguishment of indebtedness | 34,625 | (40,000) | 74,625 | (187)% |
| Gain/(loss) on derivative liability revaluation | 3,622,758 | (48,439,415) | 52,062,173 | (107)% |
| Other income, net | 893,692 | 482,405 | 411,287 | 85% |
| Interest expense | (259,700) | (1,888,169) | 1,628,469 | (86)% |
| Total other income (expense) | 3,841,520 | (49,500,148) | 53,341,668 | (108)% |
| **Net loss before income tax benefit** | **$(173,527,310)** | **$(117,391,457)** | $(56,135,853) | **(48)%** |
| Income tax benefit | 2,165,062 | 482,922 | 1,682,140 | 348% |
| **Net loss** | **$(171,362,248)** | **$(116,908,535)** | $(54,453,713) | **(47)%** |
| Net loss attributable to noncontrolling interest | (38,930,288) | (1,995,217) | (36,935,071) | (1,851)% |
| **Net loss attributable to stockholders** | **$(132,431,960)** | **$(114,913,318)** | $(17,518,642) | **(15)%** |
| Accrued accumulated preferred dividends | (22,043) | 8,039,612 | (8,061,655) | (100)% |
| **Net loss attributable to common stockholders after preferred dividends** | **$(132,454,003)** | **$(106,873,706)** | $(25,580,297) | **(24)%** |
| Net Loss per Share | (19.39) | (1,167.18) |  |  |
| Weighted average shares outstanding, basic and diluted | 6,829,415 | 91,566 |  |  |

### Revenues

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

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

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

The tables below disclose information on deliveries of vehicles, revenue recognized, and payments received from our customers over the recent periods.

*Invoiced during the 3 months ended March 31, 2024 (in thousand dollars)*

| Type | Units invoiced | Amount invoiced | Cash received | Revenue recognized |
| --- | ---: | ---: | ---: | ---: |
| Urban Delivery (UD1) | 131 | 4,405.9 | 33.3 | 33.3 |
| Total | 131 | $4,405.9 | $33.3 | $33.3 |

### Cost of Revenues

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

### Research and Development

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

### General and Administrative

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

### Impairment

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

### Other losses

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

### Interest Expense

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

### Net Loss

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

### Comparison of the six months ended March 31, 2024 to the six months ended March 31, 2023

The following table sets forth our historical operating results for the periods indicated:

*(dollar amounts, except percentages)*

| Revenue | Six Months Ended March 31, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Vehicle sales | $33,335 | $— | $33,335 | —% |
| Cost of revenues | (13,440) | — | (13,440) | —% |
| Gross profit / (loss) | 19,895 | — | 19,895 | —% |
| **Operating expenses:** |  |  |  |  |
| General and administrative | 91,137,744 | 112,408,349 | (21,270,605) | 19% |
| Research and development | 40,193,493 | 29,100,980 | 11,092,513 | (38)% |
| Impairment of goodwill | 28,846,832 | — | 28,846,832 | —% |
| Impairment of right-of-use assets | 3,167,608 | — | 3,167,608 | —% |
| Impairment of intangible assets | 73,447,067 | — | 73,447,067 | —% |
| **Loss from operations** | **$(236,772,849)** | **$(141,509,329)** | **$(95,263,520)** | (67)% |
| **Other income (expense):** |  |  |  |  |
| Other financing costs - initial recognition of derivative liabilities | — | (255,960,025) | 255,960,025 | —% |
| Loss on derivative liability revaluation | (3,106,223) | (89,221,391) | 86,115,168 | 97% |
| Gain/(loss) on extinguishment of debt | 34,625 | (6,452,170) | 6,486,795 | 101% |
| Gain/(loss) on sale of fixed assets | (373,865) | 385,031 | (758,896) | 197% |
| Gain on lease termination | 50,000 | — | 50,000 | —% |
| Interest expense | (517,723) | (4,716,258) | 4,198,535 | 89% |
| Other income, net | 1,439,108 | 1,128,286 | 310,822 | (28)% |
| **Net loss before income tax benefit** | **$(239,246,927)** | **$(496,345,856)** | **$257,098,929** | **52%** |
| Income tax benefit | 3,891,300 | 976,576 | 2,914,724 | 298% |
| **Net loss** | **$(235,355,627)** | **$(495,369,280)** | **$260,013,653** | **52%** |
| Net loss attributable to noncontrolling interest | (41,528,769) | (4,180,176) | (37,348,593) | (893)% |
| **Net loss attributable to stockholders** | **$(193,826,858)** | **$(491,189,104)** | **$297,362,246** | **61%** |
| Accrued accumulated preferred dividends | (43,346) | 7,400,935 | (7,444,281) | (101)% |
| **Net loss attributable to common stockholders after preferred dividends** | **$(193,870,204)** | **$(483,788,169)** | **$289,917,965** | **60%** |

48

### Revenues

*Invoiced during the 6 months ended March 31, 2024 (in thousand dollars)*

| Type | Units invoiced | Amount invoiced | Cash received | Revenue recognized |
| --- | ---: | ---: | ---: | ---: |
| Mullen 3 (UU) | 131 | 8,543.8 | 652.2 | — |
| Urban Delivery (UD1) | 231 | 7,769.4 | 33.3 | 33.3 |
| Total | 362 | $16,313.2 | $685.5 | $33.3 |

### Cost of Revenues

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

### Research and Development

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

### General and Administrative

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

### Impairment

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

### Other losses

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

### Interest Expense

Interest expense decreased by approximately $4.2 million, or 89%, from approximately $4.7 million through the six months ended March 31, 2023, to approximately $0.5 million through the six months ended March 31, 2024, primarily due to a decrease in convertible debt that has was fully converted by March 31, 2023 and repayment of a $5 million note in January 2024.

### Net Loss

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

### Operating segments

The Company is currently comprised of two major operating segments:

- Bollinger Motors. The Company acquired the controlling interest of Bollinger Motors Inc. (60% on a fully diluted basis) in September 2022. This acquisition positions Mullen into the medium duty truck classes 4-6, along with the Sport Utility and Pick Up Trucks EV segments.
- Mullen/ELMS. By November 30, 2022, Mullen acquired ELMS’ manufacturing plant in Mishawaka Indiana and all the intellectual property needed to engineer and build Class 1 and Class 3 electric vehicles.

### Reverse Stock Splits and NASDAQ listing rules compliance

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

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

### Liquidity and Capital Resources

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

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

If the Company does not secure adequate funding to fulfill its current liabilities, it anticipates seeking bankruptcy protection in various jurisdictions within 30 days of publishing these financial statements. The Company anticipates that its available funds will be insufficient to cover its obligations for at least the next twelve months from the date this Form 10-Q was filed. Consequently, there is significant uncertainty regarding the Company's ability to continue operating. The Company is actively pursuing additional funds (see *Note 21 Subsequent Events* - $50 Million Note and Warrant Financing, $100 Million Financing Arrangement, and First Tranche of $50 Million Financing Payable on Execution). As part of its cost-cutting measures, the Company plans to further reduce its workforce and streamline operations, including downsizing its physical locations. However, there is no guarantee that the Company will be able to restructure its debts and/or secure the necessary financing on favorable terms.

### Debt

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. 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 a summary of our debt as of March 31, 2024:

| Type of Debt | Net Carrying Value Unpaid Principal Balance | Current | Long-Term | Contractual Interest Rate | Contractual Maturity |
| --- | ---: | ---: | ---: | --- | --- |
| Matured notes | $2,385,004 | $2,385,004 | $— | 0.00 - 10.00% | 2019 - 2021 |
| Loan advances | 332,800 | 332,800 | — | 0.00 - 10.00% | 2016 - 2018 |
| **Total Debt** | **$2,717,804** | **$2,717,804** | $— |  |  |

The Promissory Note issued to NuBridge Commercial Lending LLC for a principal amount of $5 million (with carrying amount, net of debt discount, of approximately $4.9 million as of December 31, 2023) was repaid by the Company on January 31, 2024, further reducing the overall debt of the Company to approximately $2.7 million.

### Scheduled Debt Maturities

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

|  | Year Ended September 30, 2024 (6 months) | 2025 | 2026 | 2027 | 2028 | Thereafter | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| **Total Debt** | $2,717,804 | $— | $— | $— | $— | $— | $2,717,804 |

### Cash Flows

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

| Net cash provided by (used in): | Six Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | $(108,472,976) | $(67,567,385) |
| Investing activities | (12,470,001) | (97,420,097) |
| Financing activities | (4,945,832) | 167,359,660 |

51

### Cash Flows used in Operating Activities

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

### Cash Flows used in Investing Activities

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

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

### Cash Flows provided by Financing Activities

Through March 31, 2024, we have financed our operations primarily through the issuance of convertible notes and equity securities.

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

### Contractual Obligations and Commitments

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

### Operating Lease Commitments

| Years Ended September 30, | Scheduled Payments |
| --- | ---: |
| 2024 (6 months) | $1,609,937 |
| 2025 | 6,255,302 |
| 2026 | 4,823,283 |
| 2027 | 4,765,083 |
| 2028 | 4,555,178 |
| Thereafter | 7,212,541 |
| **Total Future Minimum Lease Payments** | **$29,221,324** |

52

### Off-Balance Sheet Arrangements

We are not a party to any off-balance sheet arrangements, as defined under SEC rules.

### Critical Accounting Policies and Estimates

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

In preparation of these financial statements, management applied critical estimates and assumptions while performing impairment test for goodwill and other noncurrent assets. We identified Bollinger and ELMS/Legacy Mullen (refer 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, or a current expectation that an asset group will be disposed of before the end of its useful life. Recoverability of noncurrent asset groups to be held and used is measured by a comparison of the carrying amount of the asset group to future undiscounted net cash flows expected to be generated by the asset group. If the asset group is considered to be impaired, the impairment recognized is the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Due to a prolonged decrease in our market capitalization, including a significant decline in stock price and budgeted performance targets not achieved as compared to acquisition date budgets, we assessed noncurrent assets for impairment.

### Critical accounting estimates for impairment of assets of the Bollinger segment

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

The impairment has been recognized primarily due to present uncertainty of availability of future funding required to support this segment and decrease of Company's market capitalization.

### Critical accounting estimates for impairment of assets of the ELMS/Mullen segment

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

The primary reasons for the impairment of these assets were sales slower than expected and decrease of Company's market capitalization.

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

### Recent Accounting Pronouncements

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

## Controls and procedures

As filed, 8,121 characters.

### Evaluation of Disclosure Controls and Procedures

We are responsible for establishing and maintaining disclosure controls and procedures (“DCP”) that are designed to ensure that information required to be disclosed by us in the reports filed by us under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is: (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (b) accumulated and communicated to our management, including our principal executive and principal financial officer, to allow timely decisions regarding required disclosures.

We conducted an evaluation pursuant to Rule 13a‑15 of the Exchange Act of the effectiveness of the design and operation of our DCP as of March 31, 2024, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our DCP were not effective at the reasonable assurance level as of March 31, 2024 because of material weaknesses in the Company’s internal control over financial reporting described below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

While preparing the Company’s unaudited interim consolidated financial statements, our management concluded that the following material weaknesses in internal control over financial reporting disclosed in our Annual Report filed on Form 10-K for the year ended September 30, 2023 are not fully remediated:

- Based on management’s review of key accounting and information technology policies and procedures, we have determined that although such policies and procedures exist, they are not all formalized in a written procedure format that is up to date.
- As a result of absence of formalized review of key controls across several business processes and/or insufficiently formalized documentation evidencing such review, management’s ability to evaluate the design and monitor the effective operation of these preventative and detective internal controls is limited. Accordingly, management’s ability to timely detect, prevent and remediate deficiencies and potential risks has been assessed as inadequate.
- The Company identified certain design deficiencies in its controls associated with the financial close process. These deficiencies, individually or in the aggregate, combined with inadequate compensating controls, created a reasonable possibility that a material misstatement to the consolidated financial statements might not be prevented or detected on a timely basis.
- The Company lacks in-house accounting expertise to identify rights and obligations reflected in non-standard agreements, requiring specialized accounting for complex transactions.
- The Company’s internal control system as well as disclosure controls and procedures failed to ensure the Company properly presents certain related party disclosures in the financial statements for the year ended September 30, 2022, as discussed in the *Note 20 - Related Party Transactions* to the financial statements for the year ended September 30, 2023.

During the six months ended March 31, 2024, these control deficiencies did not result in identified material misstatements in our consolidated financial statements; however, the control deficiencies described above created a more than remote possibility that a material misstatement in the consolidated financial statements would not be prevented or detected on a timely basis. Therefore, our management concluded that the deficiencies represent material weaknesses.

Based on the performance of additional procedures by management designed to ensure reliability of financial reporting, the Company’s management has concluded that, notwithstanding the material weaknesses described above, the consolidated financial statements, included in this Form 10-Q, fairly present, in all material respects, the Company’s financial position, results of operations, and cash flows as of the dates, and for the periods presented, in conformity with U.S. GAAP.

### Remediation Efforts to Address the Material Weaknesses

While the Company has significantly improved its internal control over financial reporting, the material weaknesses remain un-remediated as of March 31, 2024, and the Company’s remediation efforts will continue to take place in 2024.

During the six months ended March 31, 2024, the management continued implementing actions in accordance with the remediation plan, including:

- Improvement of accounting policies and procedures.
- Development of systems and IT tools to enable the effectiveness and consistent execution of controls over timely and accurate accounting for certain transactions.
- Consulting with independent accounting firm on accounting and valuation matters.

### Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2024, the Company has been implementing internal control improvements in accordance with remediation plan which currently includes:

- Revising and enhancing effectiveness of the controls put in place during previous periods, including those mentioned above.
- Continuing to implement processes and controls to better manage and monitor our financial reporting risks, including enhancing the usage of technology and tools.
- Continuing professional training and education on accounting subjects for accounting staff.
- Enhancing management review controls related to our financial statement close and financial reporting involving estimates, judgments, and assumptions.
- Augmenting the design of the financial statement closing and financial reporting process including documentation of accounting treatment of significant and unusual transactions.

The actions that we are taking are subject to ongoing management review and audit committee oversight. We believe these measures will aid to remediate the control deficiencies that gave rise to the material weaknesses, but the material weaknesses will not be considered fully remediated until controls have been designed and implemented for a sufficient period of time, and properly tested for our management to conclude that the control environment is operating effectively.

We are committed to continuing to improve our internal control processes, and, as we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and processes as well as internal control over financial reporting, we recognize that any controls and procedures, no matter how well designed and implemented, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Because of its inherent limitations, any internal control system, no matter how well designed and operated, is based upon certain judgments and assumptions, and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

## Risk factors

As filed, 5,397 characters.

As a smaller reporting company, we are not required to provide this information in this Report; however, set forth below are certain material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the year ended September 30, 2023 (the "2023 Form 10-K"). You should also read and consider the risk factors discussed in Part I, Item 1A. “*Risk Factors”* in our 2023 Form 10-K, which could materially affect our business, financial condition, or future results of operation. The risks described herein and in our 2023 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to have a material adverse effect on our business, financial condition and/or future operating results.

***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 six months ended March 31, 2024, the Company used approximately $108.3 million of cash for operating activities.

The Company's principal source of liquidity consists of existing cash and restricted cash of approximately $29.8 million as of March 31, 2024. 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.

***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:

- third parties’ confidence in our ability to develop and manufacture explore and produce electric vehicles, which could impact our ability to execute on our business strategy;
- it may become more difficult to retain, attract or replace key employees;
- employees could be distracted from performance of their duties or more easily attracted to other career opportunities; and
- our suppliers, vendors and service providers could renegotiate the terms of our arrangements, terminate their relationship with us or require financial assurances from us.

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.

Filed May 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-016668. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.