Bollinger Innovations, Inc.: Form 10-Q for the period ended Mar 31, 2025

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

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, significant losses we have incurred since inception, and we expect that we will continue to incur losses for the foreseeable future; our ability to raise the substantial additional financing needed to execute our business plan, and a on acceptable terms, or at all, 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; our vehicles may 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, 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, or otherwise, 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 our actual results of operations, financial condition, and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition, liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods.

Basis of Presentation

These interim condensed 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, Mullen Advanced Energy Operations LLC, a California corporation and a majority ownership in Bollinger Motors, incorporated in 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.

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, 2025 to the Three Months Ended March 31, 2024

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

(dollar amounts, except percentages)

(*) Adjusted retroactively for reverse stock splits, see Note 1 - Description of Business and Basis of Presentation

Revenues

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 return provision, allowing unsold vehicles to be returned after one 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, or 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.

Cost of Revenues

The costs of revenues primarily include vehicle components and parts, labor costs, and other relevant costs and expenses applicable to sales and revenues. The cost of revenues exceeds revenue mainly due to recognition of indirect manufacturing expenses in periods when production was temporarily suspended, labor and overhead variances to standard cost, as well as due to write-down of certain raw materials to net realizable value.

Research and Development

Research and development expenses decreased by $13.7 million, or 57%, from $24.0 million through the three months ended March 31, 2024, to $10.4 million through the three months ended March 31, 2025. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping, and other expenses related to preparation for the production of electric vehicles 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

General and administrative expenses include all non-production expenses incurred in a given period. This includes professional fees, salaries, rent, repairs and maintenance, utilities and office expenses, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses, and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $6.5 million, or 14%, from approximately $47.9 million in the three months ended March 31, 2024, to approximately $41.4 million in the three months ended March 31, 2025, primarily due to decrease of settlements and penalties, professional fees, promotion costs, etc.

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).

Other gains and losses

The Company recognized other financing costs on initial recognition of warrants during the three months ended March 31, 2025 in the amount of $21.1 million due to additional notes with detached warrants issued during the three months ended March 31, 2025 (no investments during the three months ended March 31, 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, the interest expense increased by $7.3 million in comparison to the three months ended March 31, 2024 due to a higher volume of debt outstanding during the three months ended March 31, 2025, see Notes 7 to the financial statements.

Net Loss

The net loss attributable to common stockholders (after preferred dividends) was approximately $47.1 million, or $489.24 net loss per share, for the three months ended March 31, 2025, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $132.5 million, or $12,041,273.00 loss per share, for the three months ended March 31, 2024 (giving effect to reverse stock splits, see Note 1 - Description of Business and Basis of Presentation to the financial statements).

Comparison of the Six Months Ended March 31, 2025 to the Six Months Ended March 31, 2024

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

(dollar amounts, except percentages)

(*) Adjusted retroactively for reverse stock splits, see Note 1 - Description of Business and Basis of Presentation

Revenues

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 return provision, allowing unsold vehicles to be returned after one 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, or 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.

Cost of Revenues

The costs of revenues primarily include vehicle components and parts, labor costs, and other relevant costs and expenses applicable to sales and revenues. The cost of revenues exceeds revenue mainly due to recognition of indirect manufacturing expenses in periods when production was temporarily suspended, labor and overhead variances to standard cost, as well as due to write-down of certain raw materials to net realizable value.

Research and Development

Research and development expenses decreased by $18.5 million, or 46%, from $40.2 million through the six months ended March 31, 2024, to $21.6 million through the six months ended March 31, 2025. Research and development expenses are primarily comprised of external fees and internal costs for engineering, homologation, prototyping, and other expenses related to preparation for the production of electric vehicles 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

General and administrative expenses include all non-production expenses incurred in a given period. This includes professional fees, salaries, rent, repairs and maintenance, utilities and office expenses, employee benefits, depreciation and amortization, advertising and marketing, settlements and penalties, taxes, licenses, and other expenses. We expense advertising costs as incurred. General and administrative expenses decreased by approximately $13.3 million, or 15%, from approximately $91.1 million in the six months ended March 31, 2024, to approximately $77.9 million in the six months ended March 31, 2025, primarily due to reduction in employee related compensation due to reduction in force, decrease of settlements and penalties, professional fees, promotion costs, etc.

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 six months ended March 31, 2024, impairment of the intangible assets was $73.4 million, plus impairment of goodwill amounted to $28.8 million).

Other gains and losses

The Company recognized other financing costs on initial recognition of warrants during the six months ended March 31, 2025 in the amount of $37.2 million due to additional notes with detached warrants issued during the six months ended March 31, 2025 (no investments during the six months ended March 31, 2024).

Net gain on revaluation of warrants obligations was $63.6 million during the six months ended March 31, 2025 vs $3.1 million loss during the six 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 six months ended March 31, 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 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, the interest expense increased by $25.7 million in comparison to the six months ended March 31, 2024 due to a significantly higher volume of debt outstanding during the six months ended March 31, 2025, see Notes 7 to the financial statements.

Net Loss

The net loss attributable to common stockholders (after preferred dividends) was approximately $162.0 million, or $3,338.65 net loss per share, for the six months ended March 31, 2025, as compared to a net loss attributable to common stockholders after preferred dividends of approximately $193.9 million, or $21,493,370.73 loss per share, for the six months ended March 31, 2024 (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. in September 2022. This acquisition positioned Mullen into the medium duty truck classes 4-6, along with the Sport Utility and Pick Up Trucks EV segments
• Mullen Commercial. In November 2022, Mullen acquired from ELMS a manufacturing plant in Mishawaka Indiana and all the intellectual property needed to engineer and build Class 1 and Class 3 electric vehicles.

See Note 4 - Segment information for the main financial information pertaining to the segments.

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.

Reverse Stock Splits and Nasdaq listing rules compliance

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.

On February 14, 2025, the Company filed 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) reverse stock split of its common stock. The reverse stock split became effective on February 18, 2025. As further described in the Note 20 - Subsequent events, the Company also implemented a 1-for-100 reverse stock split on April 11, 2025, which was applied retroactively to these consolidated financial statements.

In addition to the reverse stock split 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. 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 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 were rounded up to the next whole share.

Liquidity and Capital Resources

We have only recently started to generate significant revenue from our business operations. To date, we have funded our capital expenditure and working capital requirements primarily by selling debt and 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 $2.3 million as of March 31, 2025. During the six months ended March 31, 2025, the Company used approximately $48.6 million of cash for operating activities. The net working capital deficit on March 31, 2025 amounted to approximately $156.1 million, or $56.7 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 six months ended March 31, 2025, the Company incurred a net loss of $172.7 million, and as of March 31, 2025, our accumulated deficit was approximately $2.5 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 six months ended March 31, 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.

These unaudited interim condensed consolidated financial statements do not include any adjustments to the carrying amounts of assets or liabilities that may result from the outcome of these uncertainties.

Debt

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 six months ended March 31, 2025, we received approximately $33 million and issued Senior secured convertible notes, bearing 15% interest and maturing in 4 months, 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 Equity).

Also, in October 2024, Bollinger Motors, Inc., a majority-owned subsidiary of Mullen Automotive Inc., received a $10 million long-term loan, providing additional capital to support the production and sale of Bollinger’s Class 4 EV truck, the 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 on a lawsuit from the lender.

During the six months ended March 31, 2025, a significant part of Senior secured convertible notes, 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), have been 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 March 31, 2025 and of transactions during the six months ended March 31, 2025:

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Cash Flows

The following table provides a summary of our cash flow data for the six months ended March 31, 2025 and 2024:

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 $48.6 million in the six months ended March 31, 2025, a 55% decrease from $108.5 million net cash used during the six months ended March 31, 2024.

Cash Flows used in Investing Activities

During the six months ended March 31, 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 million in the six months ended March 31, 2025, a 69% decrease from $12.5 million used in investing activities during the six months ended March 31, 2024.

Cash Flows provided by Financing Activities

Through March 31, 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 vehicles (for further details, see section Debt above). Net cash provided by financing activities was $44.0 million for the six months ended March 31, 2025, as compared to $4.9 million net cash spent on financing activities for the six months ended March 31, 2024.

Contractual Obligations and Commitments

The following tables summarize our contractual obligations and other commitments for cash expenditures as of March 31, 2025, and the years in which these obligations are due:

Operating Lease Commitments

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Scheduled Debt Maturities

The following are scheduled debt maturities as of March 31, 2025 (see also note Debt above):

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

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.

Impairment tests for other long-lived assets

We identified Bollinger and Mullen 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, 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 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 as of March 31, 2025, the Company recognized impairment loss in amount of $12.0 million in respect of Patents (Bollinger segment). No impairment in respect of other noncurrent assets was recognized, primarily because of significant impairment that reduced carrying amount of long-lived assets in previous periods.

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

Net realizable value of inventory

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, 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, and transportation. In determining net realizable value, we consider several factors, including:

• Market Demand and Pricing Trends – The EV industry is highly competitive, with frequent price adjustments based on consumer demand, regulatory incentives, and competitor pricing strategies.
• Technological Obsolescence – As battery and vehicle technology evolves, older inventory may require discounting or write-downs to remain competitive.
• Production Costs and Cost Absorption – Given supply chain fluctuations and raw material pricing (e.g., lithium, nickel, and other battery components), production costs may exceed expected selling prices.
• Other Factors – Changes in government incentives, infrastructure development, and interest rates may affect consumer adoption and, consequently, inventory valuation.

As a result of the tests performed by the management during the six months ended March 31, 2025, the write-down to net realizable value in amount of $0.8 million was recorded by the Mullen Commercial 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. Should actual sales prices or demand decline, 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.

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 interim condensed consolidated financial statements.

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.

Evaluation of Disclosure Controls and Procedures

As of March 31, 2025, being the end of the period covered by this Quarterly Report, our management conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d15(e) under the Exchange Act.

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of March 31, 2025, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting as discussed in Item 9A. Controls and Procedures – in the Company’s 2024 Annual Report, under the heading “Management’s Annual Report on Internal Control Over Financial Reporting”.

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 management must apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Risk factors are discussed in Part I, Item 1A. “Risk Factors” in our 2024 Annual Report, and could materially affect our business, financial condition, or future results of operation. 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, or future results of operations, other than the following:

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.